This series of blogs will give you an insight into selling an accountancy practice, one of the biggest decisions of your professional career, certainly financially and most likely emotionally too.
For many accountants it heralds a new era in their life, often ushering in retirement or part-time flexible working as a consultant.
Whatever your reason for selling it is all too easy to turn what should be a fairly straightforward transaction into a nightmare.
Even if you are not a retiring accountant but wish to remain in practice to some extent much of these blogs is still relevant.
Remember, no two deals are the same and everybody seeks something different from an accountancy practice disposal, so it pays to be flexible and maintain an open mind where possible, especially as the landscape of a deal can change during the buyer’s due diligence and negotiations.
This second blog looks at selling an accountancy practice to the staff.
Staff understand how the practice operates, know the clients and hopefully get on well with each other.
Often some or all of your staff members will be harbouring a secret yearning to take over your practice, so it pays to engage with them early on.
If you are nearing or past retirement age, or if they believe the time is ripe for you to close your ledgers and retire from accountancy practice, the fireside chat with them is highly recommended as the removal of uncertainty or speculation is always in the best interest of the practice.
But what if they all want a share of the action but only some can raise the funds or perhaps some are risk averse and are unwilling to take on the financial burden – would they still work together as a happy team after your departure?
Selling to staff is seamless aside of course from certain regulatory and legal matters.
It can be potentially problematic when your do not believe that the eager to purchase staff members are capable of organising a stag night in a brewery let alone running a business as complex as an accountancy practice.
They may be detached from the harsh realities of bringing in new business, onboarding, keeping clients sweet, scheduling job with deadlines, collecting debt and managing staff. It’s exactly the same challenge as any other business but often accountancy practices are seen as different – a professional organization rather than a business, when in reality it is both.
If they’ve never run a business what makes you believe they can run yours?
You need to be wary of staff who express an interest but simply cannot raise the necessary funds as you don’t want to be strung along pointlessly for many months nor do you wish to alienate them when selling to a third party after discovering they have no funds.
Beware of being the funder yourself unless you really want to do it – you are not a bank and you need to ensure that the risk is not being unwittingly transferred to you until they pay you of over several years, usually out of profits – if there are any!
Selling and accountancy practice to staff on easy payment terms may be a delayed reward for a key worker who has shouldered a lot of the burden in a smaller practice - perhaps they kept it running during a period of your enforced absence. So, it’s important to cognisant of your motivation for treating buying staff in a more benevolent manner than a strictly commercial arrangement may warrant.
Staff should play a prominent part in your initial planning, both from the aspect of their own welfare and also because they are an important and integral aspect of your business with the ability to derail the deal prior to completion or create serious problems after the deal is sealed – this should not be underestimated, even in what appears to be the most favourable relationship. When it come to money or there is a feeling of inequality among staff, people are capable of the most selfish and irrational behaviour.
No two situations are the same and choosing which staff members to advise of your intentions and at what stage to do so is a delicate balancing act that needs considered judgment.
Typically, key staff members would be brought “on board” at an early stage and kept appraised of developments throughout.
You may consider somebody not be key, and would probably be right, but have you considered how they feel about their seniority or importance in the firm? It’s hard to determine if this is more of a problem in a larger or a smaller practice.
In a small practice they could feel that they contribute more than they actually do or might simply feel left out, but in a larger firm it is easier to restrict your plans to managerial staff without causing upset further down the food chain.
Many sellers still engage a broker even though there is brokerage required as such, but they work on a consultancy basis to ensure that everything is dealt with properly as it is a business transaction that is complex with mistakes having potentially catastrophic consequences.
This is highly advisable as the cost is insignificant within the context of the deal and there’s nothing like experience to guide both parties and avoid expensive pitfalls. If you have never sold a business you’ll not know where to start let alone know where you might end up!