In the last couple of months I have been asked a few times, by sole practitioners looking to retire, about the feasibility of taking on a new partner(s) who will eventually buy out the practice allowing them to retire.

This all looks fine on paper but I would seriously warn against anyone doing this.  I have heard horror stories where this scenario goes terribly wrong.  In one case a sole practitioner brought into his practice two new partners with a view to passing over his client base over a period of a few years in order that he could start to reduce his workload and his time commitments to the practice.  He was to be paid over a number of years, by the new partners, when he finally retired.  These two partners were known to him.  The clients were introduced to the new partners, the staff got to know them well and the retiring partner was very happy.  What could go wrong?

Just before he retired and before any payments were made, the two partners left the practice.  They set up on their own and they took the majority of the clients with them.  They did not pay for the client base and they left the original partner with very little in the way of recurring fees.  He had built up the practice over many years and just at the point when he was going to receive his first payment, he got no money and his practice was decimated by people he thought he could trust.  He now has to work for another ten years to build his practice back up to allow him to have sufficient money to retire on.

Now, not every accountant would do this but I have heard of it happening a few times, in fact it is probably happening right now to someone.  A sole practitioner close to retiring is very vulnerable to someone coming in, learning the ropes, taking the clients and no payment being made.  Selling the practice outright is also risky but will give a better return than having most of your clients taken away with no monies received.

If you want to talk about this, or any other matter please email me at n.draper@draperhinks.co.uk quoting reference 140513

I recently had a phone call from an accountant who wanted to sell his fees.  He was in his mid sixties and thought it was about time he did something about it.   He had been to a seminar, run by his institute, who told him that there was not a ready market for fees of £60,000 or below.  He started the conversation with “I may be wasting your time”….

I found out from him that he works from home and has no staff.  We are often asked by buyers if we have any fees that are portable that do not have staff or office premises.  I was able to let the vendor know that his fees could be of interest to a number of buyers.  This is one of the simplest types of deal that can be done, which means it can be one of the quickest.

However, it can be a deal breaker if the vendor, who works from home, does not charge a market rate for his advice.  Many vendors pass on the saving of not having an office to the clients, which means their charge out rates can be very low.  If the buyer has an hourly rate twice that of the vendor – then a deal is not going to work.  It is always good for the vendor to keep the charge out rates high so that they do not limit the number of buyers when they come to sell.

Luckily this vendor charged a realistic rate for his time and we will soon be finding some buyers for him to meet, who will be keen to make him a good offer to buy his fees.

If you want to contact me about this blog please email me at n.draper@draperhinks.co.uk and quote reference 140429.