NT Moving forward

[mcb39]

22 hours ago, Medlin Software, Dennis said:

I plan to live to 100 or even more. Plenty in my family have, with being able to drive and work close to that age too.

Longevity is hidden somewhere in my genes as well.  However, I am off to the Forest for a week to draw some renewal from the trees and flower garden.  I will be in touch daily.  Have a wonderful week all.

[jklcpa]

Marilyn, I'm sorry about the worsening of your eyesight. You clearly still enjoy the work and have a level of care and concern for your clients and your trainee that many in business lack. Your client base is stable and large enough to have substantial value, so perhaps now is a good time to reevaluate your plan while you have time to implement some changes so that you remain in the controlling position "for [when] whatever comes."

Our core group here has been around here for many years and are possibly seeing a future that includes retirement, but I wonder how many of us truly have a clear and workable plan in place.  I've been out of the office recently and am late to the party, so I've tried to filter through to boil down to focus on some of the issues, some of the conflict, and the questions it raises that more than a few of us possibly should consider for our own practices.

• The trainee: very knowledgeable, could be successful, stagnant, complacent, no preparations to take over or move on.
• Your practice: 279 clients this year, a mixed practice including many Sch Cs, no payroll or other entities. RTRP, office in home.
• Comments you've made about the plan: Previously set at 80, will be 85 soon, still like the work, ~five years preparing [the trainee], not going to hand it over on a platter, made things too easy for her, clients would go with her willingly, preparing for whatever comes, will never willingly walk away until I have to.

I don't expect answers, but the questions and considerations that immediately came to mind are below. Certainly there are more - 

* With your having exceeded the original age 80 goal, have you set a new age goalpost?

* How does "will never willingly walk away until I have to" jive with a clear plan of succession for any new owner?

* How would you handle a transition period to any new owner considering you operate from home?

* Have you actually discussed terms of a buyout with your trainee?

* Does she think she can wait you out and step in with little to no investment other than the time she has already put in? Did she sign a non-compete agreement?

* Is it possible that her complacency or apprehension stems from perceived or real conflicts or difficulties in future? :  your shifting retirement age goal; relocating out of your home office; fears of being a business owner, financial commitment, client retention, proficiency or personal insecurities, of failure in general.

* Does the trainee truly have the desire and motivation to be a sole business owner in this line of work?  Some of the best employees or most technically proficient aren't cut out to be business owners.

Have you thought about possibly shifting to a sale/merger with a firm or someone other than your trainee that may be a better solution work-wise and financially for both you and your trainee?  It would allow you to move the practice out of your home and possibly scale back on hours or hands-on work as the load shifts to others while being a familiar face to clients in the transition.  It may also provide continued employment for your trainee if seen as a valued employee also known by your clients, and a solution that the trainee may be more comfortable with as well.

 

Sorry this is so long. It isn't an easy business to be in and is being made more difficult every day with the added challenges of health, aging, technology, security, ever changing tax laws, and long hours. I wish you well in going forward.

 

[BulldogTom]

^^^^^ What Judy said. 100%.

Another thought....did you ever consider swapping roles with your trainee and working for that person for a couple more years?

None of my business how you run your business...just talking out loud.

Tom
Longview, TX

[mcb39]

23 hours ago, BulldogTom said:

^^^^^ What Judy said. 100%.

Another thought....did you ever consider swapping roles with your trainee and working for that person for a couple more years?

None of my business how you run your business...just talking out loud.

Tom
Longview, TX

Yes, that has been a consideration.  However, she has nowhere to go and no equipment.  I will not allow her to continue working from my office and using my equipment since it is attached to my home.  She has good work ethics; is a quick learner and could move forward to being very successful in work that she loves, as I do.  The present problem is that she has no location in mind yet and I am urging her to make a plan (just in case).

Other preparers that I have considered selling or merging my business to, have gotten big heads and the larger they grow, the more expensive they become.  I don't want that for my clients.  I plan on working as long as I am able. It is definitely time for a Conversation with my Assistant.

[Lee B]

There is a direct relationship between your fee structure and the value of your practice.

If your fees are below average then the value of your practice will be below average.

[mcb39]

19 hours ago, Lee B said:

There is a direct relationship between your fee structure and the value of your practice.

If your fees are below average then the value of your practice will be below average.

So be it!  At my age, I am not as interested in value as I am in quality and the trust that my family of clients has built up over the years.

[Medlin Software, Dennis]

20 hours ago, Lee B said:

There is a direct relationship between your fee structure and the value of your practice.

If your fees are below average then the value of your practice will be below average.

Depends. Some can use below average fees but keep their results higher quality by limiting customers (for instance). The real value on sale would be how many stick. A higher priced but less happy customer base may not stick compared to a lower priced but very happy set of customers. The value depends on the buyer though as a lazy buyer may only look at price per customer, not potential retention rate.

[BrewOne]

had a colleague across the hall from my office who was getting out and wanted to refer all his clients to me.  Money was never brought up until the last minute, when he inquired as to his compensation.  I said I'd pay him 20% of the fees I collected from his clients who had me prepare their taxes (first year only).  Funny moment when I provided him with a spreadsheet, he wanted to know why I hadn't charge this particular client more--I said that it was a really simple return and he responded, "Yes, but he was USED TO PAYING MORE." 

[Lee B]

If you only had to pay 20 %, you received quite a bargain.

[BrewOne]

yes, deals I've seen involved multiple years.  I like the premise of paying a percentage of the revenue the new clients brought in, but it does involve trust.

I inherited another practice from an office mate at no charge; they were only concerned with where their clients would land.  However, I ended up paying rent on extra space for a year as they gradually moved their stuff out. 

[Patrick Michael]

19 hours ago, BrewOne said:

had a colleague across the hall from my office who was getting out and wanted to refer all his clients to me.  Money was never brought up until the last minute, when he inquired as to his compensation.  I said I'd pay him 20% of the fees I collected from his clients who had me prepare their taxes (first year only).  Funny moment when I provided him with a spreadsheet, he wanted to know why I hadn't charge this particular client more--I said that it was a really simple return and he responded, "Yes, but he was USED TO PAYING MORE." 

I had the opposite problem with a practice I purchased several years ago.  She was charging less than the going rate.  I figured I would raise those rates by 15% every year until they aligned with what I charged.  I lost some clients in the first and second years but it didn't matter since I only paid her for returning clients.  The third year came around and many of the clients that had left returned when they didn't like the cheaper preparers. 

[Catherine]

There is another piece here, that can be made worse by working for the practice buyers. Some may think they can continue to "request" (i.e., thinly veiled demand) you to work on their returns. I've had several of those instances since I sold of 3/4 of my practice about 7 years ago now. 

Two of those are going to be told (once their returns are filed for this year; both on on extension for reasons related to events outside their control) this year that for next year they either have to work with the guys who bought my practice, or go elsewhere. Not wanting to let go of me I can understand at some level, but I also want to have fewer, not more, clients. I've been letting it slide not wanting to be hard-nosed about it, but it's time.

Yet another issue is that a new owner/practitioner - even if you have trained them! - is going to do some things differently. Checklists instead of organizers. Letters sent out later in January, or only by email, or paper copies of returns only to those who ask. They won't take checks, or Amex, or want payment up front instead of upon delivery. That will feel "wrong" to the retiring practitioner. It's not wrong; it's just different. Don't bad-mouth them for it, don't try to change it, just back off and let them deal. It can be surprisingly hard at first!