I received an email from an old BNI acquaintance Zafir Ali at Buckie Furniture. He has always been very supportive and emails me now and again. That is how I know that I have at least one reader!
On this occasion, he set me thinking about our experience when taking that “giant leap for mankind” from employment into self-employment. You know the one. You walk off a cliff in the dark, without knowing whether you are going to fall 6 inches or 600 feet. By the way, I usually work in metric but it does not have the same ring.
That seems a long time ago now, but like any experience that impacts you fundamentally, the memories soon come flooding back.
Neil Price and I had decided to go into partnership but both working from home until we could build up sufficiently to take on an office, staff etc. Just before we started, a local accountant died. He was a sole practitioner, but he had a small office and 3 staff. The executor, another accountant, could easily have taken over the office but decided to offer it to us instead on very soft terms, which we could not refuse. So, we started with an office and 3 staff, one of whom went sick and never returned.
That was an interesting time. We had dozens of sets of records in the record store. Some accounts were complete, some in progress and some untouched. We had inherited all these clients and we knew nothing about any of them. The working papers were fine but at the time were all on paper. There was one computer in the office plus a typewriter in reception and a stencil machine in the back office. The first thing we had to do when meeting or telephoning one of our new clients was to introduce ourselves, and, being foreign i.e. English, I quickly learnt to drop into the conversation that I was married to a local girl and “by the way, you’ll probably know my father in law”, a local farmer well known in the area.
The accountant had known what was coming for a while and so had prepared his files for someone else to pick them up. We got used to looking for the green sheet on each file with background notes and tips on how to effectively deal with each client. He had planned ahead. I never met him, but it almost felt like he was speaking to a pair of young inexperienced accountants and encouraging us from the grave.
One of the problems we encountered was his staff payroll. There was a password that nobody knew. In those days there were not many passwords to remember but to this day, this one has stuck in my mind. The password used by this very proper accountant to protect his payroll records was “balz”. Was there a side to him that we had not seen? His wife had died some years earlier, but I did meet one of his daughters so based on that, I think they must have been a very nice family, but “balz”!
Now, he had the advantage of knowing what was coming but I am sure we have all heard of stories of sudden deaths. Many years ago, I heard of a farmer in his 50s, a widower, who was washing up after a meal. It was said at the time that he was dead before he hit the floor. I know this is all a bit gruesome, but it does make you think. What if that happened to you? What would happen to your business? Who would pick up the baton, take up the reins, or would the whole thing become dissipated or end up being sold for a fraction of its value?
When you were planning your business, you probably had one eye on the amount of tax you would be paying, but did you take into account succession taxes like Inheritance Tax? Many business owners do not even have a will and so there is no-one even designated to step in to ensure a smooth and orderly transfer to the new owners and preserve value.
Of course, your demise might not be that sudden. You might go home tonight and be hospitalised the next day. That raises a whole lot more questions about the future of your business. What if you cannot communicate and so everything that you carry in your head is not available to whoever tries to keep the ship afloat in your absence. Remember that you went home “knowing” what you were going to be doing the next day, but all that is swept aside. Who knew what urgent things you were needing to work on.
I realise that I am asking more questions than I am answering but the solutions will be different for each of you. I could write a book about all the possible options in every possible scenario.
We are fortunate in that we have a company and multiple owners with others who could step in and take over all or part of the business in an instant if anything happened. Our interests in the business should qualify for 100% IHT Business Property Relief and the office premises that we own are held within our company SSAS. However, the business owners should still perhaps be discouraged from travelling in the same car or plane, just in case.
So, what to do. Life is uncertain but you can put structures in place “just in case”. At the very least, either in your will or in some other form, nominate who will take up the reins if anything happens to you. You’ll sleep better at night knowing, if something happens to you, your children will not be dropped into the middle of a business nightmare, struggling to secure some value out of your life’s work.
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Alan E Long
The Long Partnership