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Retirement and succession: what small practitioners need to know

If you are thinking about retirement from your practice, there are important steps that need to be considered. In the first of a two-part series, Vicky Andrew, Vice Chair of South East London Area Society of Chartered Accountants, sets out what you need to know.

"Victoria
Vicky Andrew

January 2020

During the course of my work as an LSCA committee member and office holder, and also while doing my “day job”, I frequently come across members who have been in practice for many years and may be thinking about retiring. This is a huge topic which cannot be fully covered in the space available, but I hope to be able to give readers some pointers and an initial checklist of things to consider.

This is the first of two articles; in the second, I will deal with implementation.

Preparation and planning are key to a successful handover

Your practice has a value, which you have built up, and it would be nice to benefit from this.

However, this is not the only reason for good planning; you have a professional responsibility as a practitioner not to leave your clients in the lurch, and to leave them with a good feeling about the profession.

Handing over a practice, or a share in a partnership, is usually a long and stressful process. Before you embark on this journey, be clear about whether you are ready to go, and why you are retiring now.

Considering your options

All of the following can work for sole practitioners. In the case of an individual retiring from a partnership, the wishes of the continuing partners will also need to be taken into account:

  1. Tell clients to go elsewhere: simple retirement/cessation; ideally, you will be able to suggest other local chartered accountants who are willing and able to take on the work.
  2. Handover without money changing hands (driven by desire to ensure continued good service for the clients).
  3. Internal sale to a staff member who has been trained for the role, or to continuing partners.
  4. External sale to a buyer identified by a broker or through your own network. 
  5. Merger 
  6. Pay someone to manage the practice and continue to take the profits.
  7. Outsource the admin.
  8. Gradual downsizing/piecemeal sale of “blocks of fees.” 

Carry out a practice makeover; maximising value before exit 

Going through the following process will make the practice more marketable. In addition, you will enjoy the benefits of a well-run practice before you step down.

In an ideal world, this would be an ongoing process, updated regularly as part of efficient practice management. Unfortunately, many practitioners are, to coin a well-worn phrase, “too busy fighting alligators to drain the swamp”. I speak from experience!

The first step, if you do not have this information already available, is to segment your clients, analysing them by fee size, location, age and business type. This information will highlight whether you need to change the balance of your clients.

Other areas for review & improvement would be:

  1. Profitability, cashflow, debtors, work-in-progress;
  2. Staff performance & morale;
  3. Public image (premises, staff, website & social media, stationery and literature, reputation);
  4. Client care; satisfaction survey; opportunities for additional work;
  5. Administrative efficiency;
  6. IT (clients and in-house).

This article will provide additional insight. 

Vicky Andrew is an ICAEW Chartered Accountant and director of Millcove Solutions Ltd, trading as Vicky Andrew and Associates.

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