- Various factors come into play when deciding your practice’s future
- The usual change points are retirement, winding down or starting again
- To get the most from your investment, plan ahead
- Read on for top tips on how to do this
Expand, sell, retire or give up? Accountants often reach a crossroads when decisions need to be made about their practices’ future – but it pays to plan ahead, explains Nicola Draper.
There often comes a time in an accountants’ career when they find themselves at a crossroads, unable to decide whether to try and grow their business by perhaps buying a block of fees, or whether to throw in the towel and sell up. Various factors come into play when deciding which route to go, but whatever your feelings about the future, it’s worth planning ahead to ensure that you get the most from the investment of your qualifications, time and hard work.
Letting go of the practice
The most common ‘change point’ for accountants is retirement. Partners and owner managers should, of course, examine their position and the amount they could get from a sale of the firm. Together with pensions, it’s important to ensure you have enough money to live as you want to in retirement.
If there is more than one partner, a good partnership agreement should state expected dates of retirement, the position on early retirement or leaving, what goodwill payment will be made and how this will be valued. It should also cover the return of any capital invested and interest payments due, as well as the position over property. A multi-partnership agreement may want a retiring partner to stay on part-time or act as a consultant for a while.
In an owner-managed practice, the buyer may also ask the founder to stay on full time, part-time or as a consultant. The term and position is open to discussion and determined during the sale negotiation process. It may be in the seller’s interest to stay on for at least a while, not only to ensure a smooth handover and seamless transition of clients (who may initially be resistant to an abrupt change), but also to ensure the future success of the firm. This is important where there is a claw back clause, which is common in sales agreements.
Winding down your workload
Not everyone chooses to retire straight away. Some may decide on a middle route, winding down over a period of time and selling a tranche of fees each year. This is particularly relevant for sole practitioners or owner-managed practices, where it may be harder to just ‘let go’ of the practice – both for emotional and practical reasons.
Those looking to wind down may also consider outsourcing more work. I know one accountant who works on his own in London but has a clever ‘live’ computer system connected to ten accountants in Sri Lanka. His clients don’t know (and probably wouldn’t care), as long as the work is done properly and on time.
Even those who are in their thirties and forties, thriving on the cut and thrust of building their businesses should have a future plan in mind. Will they feel the same about working so hard when they are 55? It’s worth considering whether you can expand now by getting more business from existing clients, finding new clients or buying a block of fees or other firm. You may also consider bringing in others to actually do the work, leaving you more time to run the business. This won’t necessarily mean less work now but given the right people and systems you should be able to delegate more in time – although make sure you don’t become the bottleneck.
The recession has caused many people to reassess their lifestyle choices. Some accountants are considering a lifestyle change, and this kind of practice sale is on the increase. Not all want to give up accountancy – many simply want a bigger house, a move to the country, less commuting or more time with their family.
You may not be considering such a major move but may simply want to try something completely different – which is not as uncommon as you might think – especially if you are still young enough to start again. Accountants have a broad breadth of knowledge and are more qualified than many to start a non-accountancy business. Some sensibly plan their new venture while still working as an accountant and often choose to sell their firm to fund the new business, at least in part.
If you are considering giving up, for whatever reason, plan ahead for a sale. Don’t just pack it in – get help if necessary to ensure that you use the tools at your disposal to help fund your retirement or brand new career.
Article written by Nicola Draper from Draper Hinks.
To contact Nicola Draper please email her on firstname.lastname@example.org