Transition of ownership of a firm is a complex process that involves not only financial management, but also cultural integration and awareness, which in turn requires an understanding of people as well as process.
Ifat Jhugroo FCCA and Jonny Stead FCCA, the new owners of West Yorkshire-based accounting practice Sleigh and Story, provide a case study in how to get it right.
‘We’re paying them out of profits over the next 10 years – we didn’t have to provide any funds up front’
Despite being relatively young, at 35 and 33, they saw a huge opportunity when the previous owners, approaching retirement, said they would like to pass the business on internally. For Jhugroo it was an obvious decision.
‘Jonny and I had strong client portfolios, we had our clients’ trust, and we knew that our values aligned with the firm,’ she says. ‘Taking ownership was the next logical step.’
The two had already been working well together for five years before the opportunity arose. ‘We realised that we complemented each other because we have different interests and focuses. This diversity in thinking is a real advantage,’ says Jhugroo.
The financing for Jhugroo and Stead to buy the firm is being provided by the previous owners in the form of deferred consideration. ‘We’re paying them out of profits over the next 10 years – we didn’t have to provide any funds up front,’ says Stead. ‘This meant we didn’t have to source external financing with banks or other lenders, and avoided the administrative burden that would come with that.’
This agreement was made with flexibility in mind, allowing the new owners to take up to 10 years to complete the buyout, but able to pay the debt off sooner if they can. ‘Ideally we will clear the debt in five years, but this depends on the performance of the business,’ says Stead.
‘Or we may decide that the debt is a relatively economical source of financing and decide to invest in another area of the business rather than paying down the debt – all decisions that will be made with the passing of time,’ he says.
The previous owners gradually stepped back, handing over more responsibility for decisions over a two-year period until Jhugroo and Stead were entirely in charge.
From small acorns…
Jhughroo and Stead’s career experience is entirely rooted in small firms. Stead has been with Sleigh and Story since graduating from the University of Nottingham with a degree in finance, accounting and management in 2009. Jhugroo worked with two small firms before joining in 2016.
While studying for her MSc in finance in 2009, Jhugroo received some advice from a mentor who had worked in the Big Four. ‘He told me to apply to a small firm because I’d be able to get experience in all sorts of different areas and with different clients. I’d get the whole picture.’
‘We have real passion for creating relationships, with staff, clients and the local business community’
She followed his advice and hasn’t looked back. ‘I’ve ended up loving it, especially the amount of control you have in building up a relationship with your clients. You don’t get that in a bigger practice.’
Their experience in helping clients run their businesses has also helped significantly with running their own. ‘I have learned what it’s like to be in their shoes,’ says Stead. ‘This also includes the softer, wellbeing side of our work, the importance of understanding how both our clients and our staff are coping and feeling.’
Jhugroo agrees it takes some adjustment to extend client care to your own team. ‘We are not just managing our workload. We have to stop what we’re doing to support colleagues,’ she says. ‘As an owner you must ask people how they are getting on and are they OK? Taking over the firm means you have much more to consider.’
Stead adds that you have to fully commit. ‘As we see in our clients and have personal experience of ourselves now, you have to have the drive and passion to run your own business,’ he says. ‘For us it was a real passion for creating relationships, with staff, clients and the local business community.’
The culture in their office is to help each other out and collectively address any problems. Jhugroo says that having a relaxed, open-plan office and flat organisational structure help engender this collaborative culture. ‘One of the unique things about the firm is that we all face each other on a single level, physically and hierarchically, and it works really well.’
Sleigh and Story are based in Brighouse, near Bradford in West Yorkshire. The firm has had close ties with local businesses since it was established as Sleigh & Co in October 2004 (it was incorporated as Sleigh & Story Ltd in December 2007). They decided to keep the existing branding. ‘Our name and reputation are renowned in the area,’ says Stead.
He points to the camaraderie among the business community, which has lately been further strengthened by a common problem: flooding. The notorious River Calder has a tributary running within yards of the firm’s office.
‘We have been flooded twice, and we and many of our clients can no longer get flood insurance,’ says Stead. On occasion this has meant hurriedly stacking up the furniture and ‘being on the environmental agency emergency call list’.
‘We’re going to acquire new clients, fill up our existing capacity and then look to take on more staff’
The new owner-managers have little in the way of spare time. Jhugroo had a baby in 2020, who of course absorbs all her time and attention outside of work, while Stead tries to get out for a run whenever he can and, occasionally, plays his ukulele.
But the pair still have plenty of energy for the business. ‘We never wanted to just carry on with the status quo,’ says Jhugroo. ‘We want to change and grow the business further.’
‘We’re going to acquire new clients, fill up our existing capacity and then look to take on more staff,’ adds Stead. They also want to keep on developing relationships with clients and across the local business community and, as Stead puts it, ‘to be part of something bigger’.