The pitfalls faced by a sole practitioner when selling his accountancy practice

I was contacted by a sole practitioner who wanted to sell his practice.  He had had enough of running his practice and wanted to find a buyer that would look after both his one member of staff and his clients, in that order.  After much research – looking at different brokers – he contacted Draper Hinks to sell his accountancy practice.

Draper Hinks went through the normal procedures and arranged a meeting day for the vendor to interview a number of buyers for suitability.  Of the six buyers he met at the meeting day, one stood out, an offer was made and accepted and both parties looked set to complete.  However, over a matter of months it became apparent that the buyer was procrastinating and so the vendor pulled out of the sale.  The vendor was very disappointed.

Draper Hinks was then requested to find another buyer.  We set up another meeting day for the vendor and three more buyers were found.  One of the buyers came across well, said the right things and the vendor agreed to sell to him.  The sale progressed to completion.  Throughout the process the vendor reinforced the need for the buyer to take care of his one member of staff who had been very loyal and had worked hard.  Completion took place and both parties were looking forward to the future.  The vendor even held a small retirement party for his clients to meet the new owner in a relaxed and informal setting.

On the first day post-completion, the employee handed in her notice to the new owner, saying she had had an offer from another accountancy firm and was going to work her one month’s notice and leave.  Neither the buyer nor the vendor knew anything of this and neither of them could persuade her to stay.  She also informed them that the firm she was going to work for had offered her a much higher salary because she told them she was able to bring clients with her.  The vendor did not realise how vulnerable he was because he had allowed his one member of staff to have significant client contact.  She left after a month.

The buyer was not happy because it looked like she had left because of something he had said or done, which was not the case.  It had all been pre-planned and pre-meditated by the employee prior to the deal going through. The vendor was very upset because his first priority was for his one member of staff to be fairly treated and well looked- after by the buyer. I can vouch for this because I attended all six initial meetings and heard him stress that to each potential purchaser.

It was then decided by both the buyer and seller to put that episode out of mind and concentrate on bedding in the clients to make them happy so that they would not leave.  It was here that the vendor was let down again, this time by the buyer.  At the meeting day the buyer had agreed that straight after completion he would get in touch with all the clients to introduce himself and let them know that he would be their point of contact.  He did not do this.  Four months later – yes I did say four months later – some of the clients had not been contacted by the buyer, so they left and found another accountant.

You can imagine that the vendor was not best pleased and it caused significant stress to him.  He had always run his practice on the premise that clients need to be kept informed at all times, reminded of deadlines etc. He ran a very proactive practice.  The buyer, on the other hand, felt that when the clients’ work was due to be done that was the time to contact them, even if that meant not being in touch with the client for many months.  The vendor had no way of knowing that this was how the buyer was going to react post sale until completion had taken place.  You can only take people on their word.  The buyer was a chartered accountant.

The vendor has described this time as like being on a rollercoaster. Very up and down, but also very stressful. As a result of all the stress the vendor suffered a heart attack six months after the deal had been completed.  He is not the first of our vendors to suffer in this way.  It shows how much he cared about his clients and his staff, and how much the sale of the practice meant to him.  I am pleased to say he has recovered from his heart attack and is looking forward to what the future is going to bring.

We do understand that selling an accountancy practice can be very emotional at the best of times but when things go wrong and people let you down, it can be incredibly stressful as well.  At Draper Hinks we sell a number of accountancy practices each year and offer a personal service throughout the process up to completion.

If you are thinking about selling your practice and want to discuss your situation in confidence please email me at quoting reference Blog 160526