I spent nearly two decades running my previous practice with my co-director. When the day came that my co-director said he wanted to retire and asked if I could take over, I agreed. However, when I looked at the existing staff, there was nobody who could replace my co-director. I didn’t have the budget to recruit an entrepreneurial co-owner at that level, and the existing staff were not interested in buying the practice. 

Looking back, I realised we had a plan for starting the business and a plan for growing it. But we did not have a proper plan for exiting the business or a succession plan. We had a shareholder’s agreement that covered continuity in the event of something happening, and we had an agreement about what would happen if one of us wanted to retire – including value distribution - but we hadn’t actually discussed the mechanism of how that would happen. We hadn’t thought it through - you can have agreements in place but the reality of it is that the practice cannot necessarily replace the person who is leaving.

I looked at the options – I could go to an agent and ask them to sell my practice and leave them to it. But the reality is that you care about your clients – some of these people had been with me for 20 years and felt like part of the family so that didn’t feel like the right exit. Instead, I looked around my network and found an ACCA firm where I knew the people and on the face of it, they mirrored what we did – similar clients and ethos. We agreed a sale with them on a multiplier of recurring fees of 1.2 which was the industry standard at the time. 

However, between the date of the sale and the date of the final payment 12 months later, the new practice turned out not to be that good a fit for our clients and some 15% of them left. Our staff initially transferred to the new firm but then left as it wasn’t a good fit, so our clients did not get the continuity or service levels that we and they were expecting. As a result, the multiplier was only 0.8 in the end. We’d had a 50% payment up front and then 12 months later, the rest of the payment minus the claw-back from the recurring fees that had been lost in that period. 

A sale isn’t always the answer unless you’ve definitely had enough and just want to walk away. But if you care about your practice going forward then it needs to be a gentler and slower process bringing clients into a new world. The more I looked into it after the dust had settled, the more I realised that many practice owners are almost forced into a swift sale – they suddenly find themselves in a difficult situation having not thought about or prepared for any other exit options.

There are other options to a sale. When we were selling the practice, I realised that I still wanted to use my accountancy qualifications and that I enjoyed the multi-faceted business challenges that come with running a small accountancy practice. I did not want to retire completely – just to lighten the load. 

When my son and his friend asked me to mentor them as they set up a cutting-edge practice centered around a digital offering, regular client communications, monthly subscription plans, direct debits, no debtors and no paper, I knew it would be enjoyable to work with them. They would take the burden of the workload and drive an accountancy business forward whilst listening to my sage wisdom. I also wanted to help other practice owners with their exit planning. 

We’ve since collaborated with a few paper-based practice owners on exit planning to help them transition their practices onto the cloud using a model that benefits both sides. We use our systems and knowledge to move their clients from point A to point B, so that the owner can arrive at point C.

And the practice owner needs to take a step back – still owning and controlling the practice but bringing in a new partner or practice (as happened in our collaboration) to implement new systems and back-office operations. Clients can then be transitioned to a new way of working. You might lose some clients in the process, but those clients would probably be lost in a traditional multiplier sale anyway – although they would be hard-pressed to find another paper-based practice to move to. The owner is still there to provide reassurance to clients but no longer bears the brunt of the pressure. 

One model is to create a new company for the collaboration where the owner takes the major shareholding in the new company and the modernising practice takes a smaller shareholding initially. Over time, the shareholdings would swing the other way, and then at the original owner’s chosen exit point they can sell their remaining shareholding and walk, or they may enjoy staying on with their smaller shareholding, taking care of a small number of clients and taking a dividend. It’s a model that would be attractive for certain owners.

If you haven’t done so already, create a viable succession plan and roadmap for your exit – whenever that might be. If that plan reveals that full retirement is not the ultimate goal, then there are other routes you can consider, but planning in advance is crucial and it’s never too soon to start thinking about your exit.