Retirement, while a celebratory milestone, presents unique challenges for accountants. Successful transition demands a precise strategy to secure the value built up over a lifetime of professional practice.
Over the past six months, we have witnessed two cases where profound timing errors led to substantial reductions in goodwill value, underlining the critical role of timing in retirement transitions.
The Consequence of Delay
In one recent case an accountant, out of unwavering dedication to his work, elected to defer his retirement decision in favour of more immediate concerns.
Regrettably, by the time he made the decision to sell it was too late and he actually died before he was able to find a buyer.
The result was the loss of the entirety of the goodwill value of the practice he spent his lifetime building, leaving it to go unclaimed.
Putting off retirement indefinitely (or even putting it off temporarily and later on repeating the decision to delay) can yield undesirable outcomes, including reduced financial returns or, as in this extreme case, total loss of goodwill value.
It's imperative to approach retirement as a well-earned commemoration of your career and take decisive steps to ensure that your practice's goodwill value is actualised in time.
The Consequence of Poor Execution
The second case involves a practice owner who did actually execute his retirement plan but who made a poor decision regarding the timing of disclosure to his own staff, resulting in a 60% decrease in his goodwill value at sale.
Thinking he was doing the right thing, he disclosed his intentions to his staff prematurely i.e. before a buyer was firmly in place.
The immediate result was that many of his key staff immediately departed leaving significant client work undone and undermining the firm’s ability to undertake both current and future client work.
The decrease in practice value was dramatic and inevitable.
This scenario underscores the significance of a well-orchestrated retirement plan and tactful communication. A prudent guideline is to wait until a prospective buyer has been confirmed before informing your staff. The buyer can then offer genuine reassurances to the staff regarding job security, maintaining practice continuity.
Charting a Smooth Transition
For accountants, retirement planning demands a carefully calibrated approach.
Holding on to your practice too long or not following correct sale process and protocols can both result in dramatic devaluation of goodwill.
It's about recognising the optimal time for transition and adhering to a meticulously structured and proven sale process.
In situations of uncertainty, professional guidance can prove invaluable. Practice Exchange offers dedicated services to help practitioners both prepare for and navigate the intricacies of retirement, aiming to protect and maximise your practice's goodwill value.
Planning and Timing for Success
Effective retirement planning for accountants hinges on timing. With precise timing, professional counsel and the succession marketplace at Practice Exchange, you can help safeguard and realise your practice's value.
If you require guidance on this delicate balance please contact Mark Witt CA. You can schedule a call with him through via Calendly or contact him at 1300 722 452 or mark@practiceexchange.com.au
