In the Slipstream – Episode 23 – Interview with a gun lawyer – Adrian Lynch

 

 

Scott Charlton:
Hello and welcome to another episode of In The Slipstream FM, the podcast produced specifically to help accountants and financial planners in practice. The aim of this show is to empower practitioners to make better business decisions. My name is Scott Charlton and I’m the Director of Coaching here at Slipstream Coaching. Today we’re going have a chat with a practitioner whose practice is heavily connected to the world of financial services but is neither an accountant nor a financial planner. Then after the main interview is finished I’m going share a few observations about how some practitioners, maybe it’s you, are voluntarily putting their head in a noose and giving that rope a good yank. It’s the noose of indispensability and to my way of thinking it’s largely avoidable. But more on that later. Let’s get this episode started.

Recording:
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Scott Charlton:
My guest today is Adrian Lynch who is a lawyer and director at Nicholas O’Donahue, a legal firm based in the Melbourne CBD. Adrian specializes in many of the methods that accountants and financial planners typically refer to lawyers. He also acts for accountants and planners themselves in areas such as partnership entry and exits. It’s an interesting discussion because we explore not just what Adrian specializes in but why he chooses to specialize. In this coach’s humble opinion there is also a compelling business case for accountants and financial planners to specialize. Listen out for when Adrian talks about shelling peas. It sounds so much more profitable than the inventing of the wheel that occurs when accountants are called upon to perform that 35th bullet point service proudly displayed on their website.

I think you’ll find his tips in the areas covered in the discussion, JVs, succession, trade restraints and preparing for exit to be extremely practical. Come and meet Adrian. So Adrian, welcome to the show.

Adrian Lynch:
Thank you Scott. Thanks for having me.

Scott Charlton:
It’s a pleasure. I’ve been looking forward to this for a while actually. So perhaps we could kick things off by you giving us a short version of your career to date. Were you always destined to be a lawyer?

Adrian Lynch:
Look, as a third generation lawyer I suppose there is a sense of destiny there. But it wasn’t inevitable. Look, I had a fair view that I’d be involved in professional services throughout school and chose the subjects accordingly. But when I got to uni I hedged my bets in a way. I studied commercial subjects, I thought being a lawyer was a good idea, good first option. But if that didn’t work out or I grew tired of it that having the skillset that comes with being a lawyer would be able to be applied in other aspects. I’m not one of those people you often hear that goes into the law with the specific purpose of helping out in human rights causes or some global rights or like that. I was always going to be a commercial lawyer. As long as it continues to give me personal and professional satisfaction I think I’d still be here.

Scott Charlton:
I just think because you’re so good at it that will be your destiny. Cool, all right. There’s absolutely no cause for concern here when I ask you this next question because it’s just a conversation between two friends on a podcast available for all time. What’s something which isn’t on your LinkedIn profile that will reveal to listeners something about you?

Adrian Lynch:
Look, shared with my inner circle Scott is that I was the Victorian runner-up air guitarist in 2004. That was a pastime that kept me busy in the early years of my career but something I did after hours.

Scott Charlton:
Fine. Are there any particular musical genres that really lit your fire?

Adrian Lynch:
Look, probably 70’s glam rock was conducive to getting good scores from the judges. In fact Brian May was one of the judges at the event so it had a high profile at the time but it wasn’t a career that I pursued in any great detail.

Scott Charlton:
Judged by rock royalty. That is a claim to fame. If that were me I’d definitely have that on my LinkedIn profile.

Adrian Lynch:
We’ll see.

Scott Charlton:
Listen, I’m going to put you to work now and I’ve got some very definite topics to explore today because the way in which your firm rolls and you in particular is something of interest to me and I’m sure will be of interest to others who are listening today. I’m going to start out with the area of winning new work and I think it’s fair to say that a lawyer, and then you might have someone you consider a good client but there may be years pass before you actually interact with them. Unlike say accountants and planners who would expect to see their client at least once a year if not more frequently. That’s more of a challenge I think and I know that from hanging out with you you’ve made a niche for yourself amongst financial service professionals, planners and accountants. Was this by accident or design you think?

Adrian Lynch:
Probably more circumstantial I think. At the time, early on in my career I worked at a firm that was providing legal services to ACSA as they then were. We provided most of their business support legal services and that actually grew to the point where they needed some in-house support. I was seconded from my general commercial practice to work exclusively for that organization which just happened to be a financial services organization. I was on a fairly steep learning curve with them. They’ve got to know the ins and outs of what it is to be a listed licensee dealing with everything from licensing issues to general commercial procurement issues. Computer systems for the organization and HR issues. I was forced fairly early on then to specialize, to get to know exactly what that client needed as far as legal services go.

I needed to understand the environment that they were working in to abide them well. That knowledge has stayed with me and it just became a logical step for me to then seek out other financial services clients that I could apply the same knowledge to or others that found me through associations that I developed while working with ACSA.

Scott Charlton:
Correct me if I’m wrong but I see a number of similarities between the planners and the accountants who refer work to you and your own practice. That is that there’s a reliance on referrals as a major marketing strategy. As a coach I’m really quite keen on that as a means of building one’s practice and I guess I’d see it’s possible to be quite proactive in doing that. Other than just doing a flat-out good job for the brief that you receive how do you go about fostering referrals?

Adrian Lynch:
At this time of year I send them a Christmas card.

Scott Charlton:
That’s powerful marketing that is.

Adrian Lynch:
Look, I think that that’ll be one of the last of the snail mail paper that I use in my office. Writing personal thank yous to good referrers is something that I’ll take the time to do. Whether it’s a Christmas card or a thank you, for me it’s about being grateful and showing gratitude. I’m extremely grateful, if it weren’t for the referrers that introduce their clients and entrust them with me to give them advice I certainly wouldn’t have the successful business that I enjoy now. I’m hugely grateful to them and expressing that in a simple way is something that I try to do. I equally make sure that I’m available and contactable for those people. I’m grateful for the introductions that they give. From time to time they will call me for advice that may lead to work but it may also just be a curb side comment or query that helps guide them in the right direction.

It’s definitely a two-way street. They refer me clients. If I can’t refer work directly back to them what I can give them is advice and assistance to help them with an issue that they’re dealing with now as I say that may or may not lead to work in the future. But as far as finding new contacts and attracting them and encouraging them to trust me with their relationships I think the best thing that I’ve done has been to engross myself within the industry that I’m working within be it financial planning or accounting and by understanding the industry of the people that refer work to you it just becomes easy for them to give work to you because they don’t have to explain the context of the business or generally the parameters within their work within which they’re working. I think just having that industry knowledge gives them a familiarity and the comfort.

And equally just on a social level if you join industry associations, I’m a member of the AFA, I see these people in person and it may be that they … We haven’t worked together for six months, just having that common contact I think breeds familiarity and leads to future referrals down the track.

Scott Charlton:
Very good. There’s a couple of gems that I’ve picked up here that I’ll highlight for listeners. One is the power of the thank you. It cannot be underestimated and so much the better if there’s a handwritten note that goes with that. The fact that there is so little mail these days makes it actually a killer strategy that stands out. The second one, something that I try and integrate into the coaching work I do with firms is to pose the question, “Well who else services my target market or my target referrer?” In this case industry association, you make a point of going to the AFA conference where you’re deliberately exposing yourself to the people that you’ve worked with or who progressively get to know you. I think that that’s a wonderful form of marketing and it’s directly related to the people that are the most likely to refer your work.

Adrian Lynch:
No, I agree. One other aspect that I offer to good clients and referrers is the giving of knowledge, more commonly through website content and downloadable documents and forms. But also if there is an advisor who let’s say is wanting to communicate the importance of a business succession plan to his or her clientele then I’m happy to come and speak to their clients on premises in a boardroom setting to assist them with their own business. The fact that it might have some residual benefit for me is secondary. The primary purpose of that service is a form of gratitude for the referrer, giving them back some content and some expertise and helping them with their own business. But for me that’s a clear win-win.

Scott Charlton:
Cool. One of the interesting things I think about the way that you roll and I’m not sure that you realized is that I think you’re a case study in specialization. If I look on your firm’s website and your LinkedIn profile there’s no reference to you or your firm doing criminal law, insolvency or matrimonial matters. Instead there’s quite a lot of business-related content which indicates quite a depth of expertise. I just highlight the difference between that and a typical accountant’s website which generally has a statement that, “We do everything …” There’s a bullet point list of all the industries that an accountant might traverse and a bullet point list of all the services that potentially the accountant might do. I think there’s an inherent concern on the part of accountants who have such websites about missing out on something or passing by because they just missed off one bullet point that a potential client might slip through their fingers.

But you’ve opted to work in a specialized niche and I’m just wanting to probe that a little bit further. Was this an evolution in terms of how your marketing evolved or was it always reflecting the preference for commercial work?

Adrian Lynch:
I think there’s a sense of evolution. As a third generation family law firm we’ve been around for the long term. We have always been a small to medium-sized law firm which has been in one sense a full, “service” firm to provide most of the services that you would expect to be offered to a small business. That’s not to say that we do everything that a small business might require, nor does it mean that we work in areas of law that sit outside the commercial realm. Like you’ve mentioned we don’t do family law, we don’t do criminal law. There’s an evolution aspect to how it is that we found ourselves in this niche. But I’m very happy to encourage it and to continue that focus because there are … It’s a crowded marketplace as you say and what we try to do is to try and be the best small business lawyers for the small business clients that we act for.

That’s not to say that we don’t do some work. Yes, we do do some work for ASX-listed companies but we don’t do their listings for example. That for us would involve a team of lawyers on such a short-term basis that it wouldn’t be economical and I’m really happy not to do that. I think from that evolutionary perspective we’ve found ourselves in this niche and from a professional satisfaction point of view it just makes my life so less complex. It means that I can focus on the things that I’m really good at which are these small business issues day-to-day, whether it’s leasing, employment or a transactional major. I do these things on a daily basis so when I get a query about them they’re familiar to me, I can price them confidently and I can do them efficiently. Occasionally there’s a temptation to do some work that’s outside the spectrum.

I’ll resist the temptation to do that work. What I do and this is where I have great confidence that the people who ask me to do something that sits outside the spectrum of what would constitute my core service, they’ll trust me to find them a service provider that can do that work for them. An example of that might be some specialist tax advice and quite commonly in transactions there is some specialist tax advice required. The most common or the most logical person to go to for that advice is their accountant and if there’s an accountant involved in the transaction we will collaborate and work on that. If there’s not then terrific, that’s an opportunity for me to refer work back to one of the good accountants who’s referred me work and I’ll find someone who’s suitably appropriate. We will collaborate to work with that client to solve that problem but I won’t try and do it all myself.

Scott Charlton:
There’s far from any angst about saying, “I’m not the lawyer to help,” you’ll actively do that if it’s outside your scope.

Adrian Lynch:
Yeah absolutely. Because look, we’re not pretending to be the firm that can solve all of your legal problems but we want to be known as a firm that can be effectively a trusted general counsel to solve the small business problems that you would ordinarily expect to pop up in a business. If we can’t solve the problems that you encounter in your business then we will be the gateway to find you someone within the legal profession who can do it. A good example is the director of a listed company who will remain nameless whose son got into trouble in schoolies week last year. We don’t do criminal law but I do have contacts that were able to source him a barrister based on the Gold Coast to look after his son. We don’t provide the work but we do have the networks to assist with a solution.

Scott Charlton:
Very wise. Any other benefits of specializing do you think?

Adrian Lynch:
Yes. There’s two kinds of specialization. I have undertaken further training to become an accredited business law specialist and then there’s the service specialization to focus on small business. Maybe if I can just address them separately and I think they both have benefits. The CPD qualification in specializing has been beneficial for me in a small business because it’s exposed me to other candidates who also own small business, small businesses. We together collaborate as professionals when we come up with head scratchers that we need to collaborate and talk on to bounce ideas off. I think that’s been one of the greatest benefits for me in attaining that specialization qualification is the network that it’s exposed me to. Also just the forced discipline of the higher CPD threshold and to stay sharp with legal matters that I need to be on top of with my clients.

That has been something that I strongly endorse. If there is an opportunity for further training to distinguish you from your peers, subject to family commitments, I’d encourage you to do it. I think we’re always too busy at work to say that you’ve got time for extra training but the effort has been rewarded in my experience. I can’t give you statistics on how many people choose me because of my qualification but it certainly gives me more confidence to attack the matter that I’ve gone there. That’s the qualification aspect. With the service aspect of specialization I think the main advantage that that comes back to what I was saying before about having the confidence to price and complete work efficiently because it’s familiar and because you have developed that expertise. The kind of issues that, if you were doing them on a one-off basis are quite complex, become like shelling peas once you’ve done 18 transactions involving the sale of client lists from one licensed advisor to another licensed advisor.

For me the familiarity delivers value to the client and also satisfaction to me because I know what I’m doing.

Scott Charlton:
Yep, a lot of confidence comes from that I’m sure. Very good. Let’s change it up now and I’d like to talk about collaborations between accountants and planners which is something fairly close to my heart. These collaborations come in different shapes and sizes from say a simple referral agreement right through to JVs and even multidisciplinary services under the one banner. What is it that you’re seeing out there at the moment in terms of these collaborations?

Adrian Lynch:
It’s a combination of all that you’ve described. If there was any trend in what’s coming across my desk is an increase in the smaller firms that are adopting a multi-disciplinary holistic service offering. It’s not just the big boys that have a planner in-house now. It seems to be your suburban, one or two business owner accounting practice that has a full-time or part-time planner on the books. It’s not unusual for me to see that now whereas five years ago they would have been quite distinct operations linked by an informal referral arrangement, less commonly through a documented JV or similar.

Scott Charlton:
Sure. Just on the subject of a documented JV or a documented anything I guess there’s an observation that if the agreement is overly complex or onerous then accountants tend to be very wary or they might even back away. Then also if the process drags on that that’s another reason for them to stall and just for all momentum to be lost. What’s your experience and do you have any tips perhaps for planners wanting to get through this agreement phase and onto the actual giving of referrals phase?

Adrian Lynch:
At its simplest it’s about communication. I think with both JV partners, the planner and the accountant, being clear about the relationship and what you want to get out of it is fundamental. Quite often that may not be something that’s readily able to be articulated because they haven’t done it before. You might not even get to that phase. What I volunteer to anybody is to say, “Well I can give you a set of dot points which is a framework in which planners and accountants can work together and you can use as much or as little of that as you feel comfortable.” Have a discussion over a cup of coffee and once the two parties are comfortable then they sign or email the rough terms of the agreement to someone who can document that arrangement. That then becomes my role then to keep those core terms simple and to honour the spirit of what’s been agreed in principle.

My role as advocate is obviously to protect the interests of one of the party and it’s interesting in a JV situation, who is the client? Are you acting for the accountant or the planner? In limited circumstances it’s possible to act for the JV entity and to act for … And then to encourage the other parties to get advice separately. Where I’m going to with this is it’s not the lawyer’s role to make things more complicated than they need to be. I think if the participants for the JV are firm and clear about how the referrals will work, who will own the goodwill, how the revenue is to be split, how expenses are to be shared. Then it would take a very poor lawyer to stuff that up I think. It shouldn’t be derailed if you can get those half dozen core things agreed on the back of a napkin then they should be the fundamentals of the agreement. The rest of the stuff in the agreement is really just incidental.

Scott Charlton:
Two things there that I picked up. Firstly, love a good framework. That could actually add a lot of clarity so I think there’s value in that. Secondly the desire not to complicate things legally. That all sounds like a bit of fresh air so that’s great. Just before we leave this topic Adrian have you seen anything since the introduction of the FOFA rules affecting accountants? Has there been any increase in the number of these collaborative arrangements, has there been any sort of difference or has it just been business as usual do you think?

Adrian Lynch:
To be honest business as usual. There was talk in the lead up that this might result in an avalanche of accounting practices taking up limited licenses and the like but it hasn’t changed markedly for me and it hasn’t made a material difference in the way that these arrangements have been structured. There hasn’t been a radical change in the way that the revenue is shared or the way that the clients have been invoiced. Particularly with the obviously fee for services businesses, nothing has changed. But in my experience with accounts it hasn’t been a big deal. It hasn’t impacted my business in what I’ve seen.

Scott Charlton:
Yes, I think that’s pretty similar to my own. I don’t know whether the whole thing is just a beat up or this is just an uneasy sort of truce in things or there’s the further developments. We’ll see.

Adrian Lynch:
I’m aware that there are accountants out there with limited licenses that are doing good things in-house and are enhancing the offering that they can do themselves. I think there’s a good reason I don’t see a lot of those practices involved in the deals that I’m involved with is because most of the planners that are attracted to a particular accounting practice to either acquire or JV with more the unenlightened that haven’t actually taken that step. Because they will effectively raise the accountant’s book and bring those clients in-house with them rather than collaborate with them because the accountants who are already self-licensed are off doing their own thing. They don’t necessarily need the planner as much.

Scott Charlton:
Cool.

Adrian Lynch:
That’s a theory I’ve got anyway.

Scott Charlton:
That’s a good theory. I’d like to turn our attention to buy/sell agreements here and the related insurance policies. Do you have a sense as to the proportion of accounting and financial planning or even any sort of multi-principle firm in the financial advisory space that have a document in place and dare I say a document that you’d consider satisfactory?

Adrian Lynch:
Look, it’s a very small minority. I remember there was a statistic produced I think by Small Business Victoria or similar that suggested less than 10% of SMEs have any form of documented succession or exit plan. I think the uptake of professional services would be slightly higher anecdotally. I’d say 20 to 25% of the businesses I talk to would have some form of written arrangement in place. It’s still not a great number, no.

Scott Charlton:
Why is it that so many otherwise switched on practitioners avoid this issue to such an extent do you think?

Adrian Lynch:
I think it’s like the prenuptial agreement Scott. People who are in a good relationship don’t think they’ll ever have an argument or things won’t work out. It’s considered rightly or wrongly to be an unnecessary waste of time for a lot of people.

Scott Charlton:
Right, okay. You could that one at your leisure I’m sure. Are there any particular aspects of these arrangements that you particularly zero in on? For example any problem areas or aspects that commonly get overlooked? I’m thinking particularly of professional practices here.

Adrian Lynch:
Sure. And look, I think in poorly drafted agreement … And I should say a poorly drafted agreement’s still better than having nothing in place. My litigation partner has put his kids through private schools on the back of professional advice firms that don’t have these agreements in place because they argue instead of spending a couple of grand upfront they spend hundreds of thousands of dollars arguing about exit issues when things go pear shaped. When you do have an agreement in place I think it’s really important to have a look at the provisions that deal with exits, be they planned exits or unplanned exits. The typical unplanned exit is where the business partners fall out of love, not through injury or illness. They just want to go their separate ways. Finding a mechanism to value the practice is challenging unless it’s scripted carefully in the contract.

Obviously if you’ve got partners in dispute they will have different views on what the realistic price of the interest is and how and where it should be paid. I think just throwing something in there with the fee in off-the-shelf agreements it’s so that if X happens the business will be valued by an independent value at share market value. That sounds good in practice in theory, but in practice you’ve really got to sympathize with the poor valuer whose job it is to determine what their market value is. One option which gives some certainty to that is for the principles themselves to come up with an agreed value on a semi-regular basis be they a six or 12 month basis. At least then there can be no argument that the number that’s struck during that exit time is very reasonable. Of course the challenge then is during a period of disharmony when that time for valuation comes up you encounter the same issue of a difference of opinion.

That then throws you, in our contract it’ll throw you to an independent valuation mechanism which will step through the process of what is to be considered. I think that’s the tough conversation that I think you need to have when you’re drafting these documents or when you’re talking about entering into one. The time to have that discussion is before you have the dispute. Here’s a mechanism that will get us out of a fix if in the unlikely event in the future we cannot work together. I think that’s one thing that’s not particularly well done frequently is dealing with the triggers for exit and the mechanism for determining price when there’s a disagreement following that exit event. Be that a voluntary exit or an involuntary exit through death, disablement or disagreement.

Scott Charlton:
Very good. As far as the related insurance goes because that’s integral to some of these arrangements, as long as I can remember there’s been different schools of thought as to who holds the policy and who the insurance monies get paid to. I’ll give you the opportunity to give a massive disclaimer that you’re just giving general advice here. But is there any current thinking that you’ve got on this vexed issue?

Adrian Lynch:
I don’t think it’s that complex. Thank you for the free ticket on the disclaimer. I’ll tell clients we don’t give tax advice but fortunately we work with some excellent tax advisors. I think there is unanimity on the view that it makes sense for business continuity or key person-type policies, for those policies to be owned by the business because the business is the one that is the beneficiary of that payout. That’s the instance where I get hit by a tram and the business is going to suffer a loss while I’m off work but there’s compensation to the business for that loss. With others like loss and trauma policies it tends to be recommended that those policies will be owned by the individual so they can access CGT-free benefits of the insurance payout itself rather than the receipt of cash in their hand in consideration for shares that are transferred.

That tends to be the way that it’s recommended. And again, I’m not going to step in front of a tax advisor who makes a specific recommendation for a particular product to do it otherwise but that tends to be the common sense approach.

Scott Charlton:
Sure, okay. Can we now progress onto protecting the intangible assets of one’s firm. Both in accounting and financial planning firms there is a collection of IP and client lists, et cetera that becomes quite valuable after a period of time. I guess I’m thinking that the main concern as a former employee who becomes a competitor what sorts of things that one can reasonably do to protect the secret source of the firm from that new competitor situation?

Adrian Lynch:
It’s an issue that’s not going to go away. It’s nice to have clauses in contracts that stop people from doing things and absolutely, you have rights as the owner of that information. I think the first principle to recognize is as the employer of someone who has created something the employer owns the works that are created in the course of that person’s employment. The business owns your secret source as you say. It is protectable. The challenge is actually protecting it in practice. How do you find out if somebody’s taken a template and turned it into something that they can use for their own benefit or their new employers? Finding out that it’s happened is the first challenge and the second is drawing a link between their document and yours to the extent that you can show they’ve breached your copyright.

I don’t want to be unhelpful with this but your recourse is you’re limited in practice. You do have the ability to stop it but in practice finding out that it’s been done and actually the remedies that you can access are challenged by … The difficult thing is actually finding out that it’s actually gone. The baseline provision is that it’s confidential information that’s created, be that a client list that the company owns or be that a particular precedent that’s personal to your firm. That will always be protected and protectable. It’s just the challenge in practice of doing it tends to be beyond the resources of most small business operators unless you chance upon somebody and say, “Hey, that checklist looks familiar.” It’s unlikely that you’ll be able to see that it’s been done.

Scott Charlton:
What about the situation where the employee is taking clients away from the firm in general and then if there is some sort of employment contract that the employee was subject to how does that play out in practice do you find?

Adrian Lynch:
That’s more clear-cut Scott. Having a restraint provision in an employment contract isn’t essential for all professional services businesses. If it’s worded sensibly there’s every chance that that will be enforceable. Quite sensibly the courts don’t particularly like … Or in actual fact actively discourage employers from over-reaching as far as the restraint goes. For a rank-and-file employee they’re still able to work as a financial planner or an accountant once they leave work with you. But what they can’t do is they can’t abuse their position of trust and the access to the knowledge and clients that they’ve gained while in employment with you to the detriment of the employer. In general terms an employer is allowed to do what is reasonably necessary to protect the goodwill of its business.

Best principles suggest that what will be enforceable will be a restraint that prohibits the employee from contacting or receiving work from any person that that particular employee worked for or came into contact with in the past 18 to 24 months. You’ve got a defined segment of clients that are on the no-go zone. If that’s in your contract, in your employment contract and the term of the restraint is reasonable, anywhere from six months to two years in that scenario, then it will stand up and it will be enforceable.

Scott Charlton:
Is it over-complicating things to contemplate a situation where a departing employee actually in full agreement and full openness actually purchases those clients? Would you have that in a side agreement to the employment agreement or is that over-complicating things?

Adrian Lynch:
No, not at all. It happens very frequently. As you can imagine you’ve got the scenario where one of your best and brightest hands in his or her resignation and say, “Look, I’d love to stay here but I’ve got a better offer. I’m going across the road.” The principle will know in his heart of hearts which clients are more likely to go. A deal will be struck. The benefit for the employer is that they’ve got strong leverage under the employment contract. They know that the employee cannot access those clients without being penalized. Generally speaking a deal will be struck on commercial terms and it will look like a normal client sale. On your point in the agreement itself what we’ve often put in the employment contract is a liquidated damages clause which is like a default sale agreement.

What that says is that if I in full knowledge of the restraint in my contract choose to accept the approach from the client that I’m restrained from advising then I know that there is a pre-determined price I will pay my former employer for that client. Usually it’s a little bit above market because otherwise there’s no real incentive for employees to stay. But it’s at or around the market price.

Scott Charlton:
That makes sense. Cool. Any other salutary lessons in this area that you have to share?

Adrian Lynch:
I don’t know if it’s a salutary lesson but something that’s a little salacious is an aggressive stance taken by a client of mine recently who’s in the HR recruitment industry where stealing a client list and information is rife. These people are far more aggressive with the use of contacts in any event. A clause which I’ve included in the contract which hasn’t been tested yet but they require their departing employees to sit down with their manager with their computer on and their LinkedIn account open and the HR manager will go through their LinkedIn contact list and delete every one of the clients of that firm. They’ve taken a proactive step to further protect their client list. That’s an interesting one because the use of LinkedIn as a means for employees to circumvent these confidentiality rules is an old chestnut but some of these firms were getting so sick of it that they now are introducing this type of heavy-handed clause.

Scott Charlton:
Wow. That’s a new one on me so thanks for that. The final area I’d like to cover is the sale of one’s firm or for a younger practitioner listening to this investing in a firm. This is something that we’ve covered on previous podcasts but not so much from a legal perspective. Perhaps starting with an outgoing practitioner side of things if you’ve got half an eye on the finish line when should somebody start talking to an appropriately skilled lawyer such as yourself and presumably is not after the deal has done but when would be appropriate without jumping the gun do you think?

Adrian Lynch:
Talk to your legal advisor before signing anything. I think disagreement can occur between the contracting parties but commonly they’ll need some guidance I find. But when you’re selling your life’s work I think some guidance is of value regarding what are the reasonable terms that I should be putting for the purchase of a … Particularly for an internal succession? I’d be surprised if a business owner could competently and confidently put together a deal that was gift-wrapped for a lawyer to prepare. I think trust your legal advisor to check that you’re on the right path or if you don’t know what you should be asking for or requiring they’ll help you to fill in those gaps. Certainly before and ideally quite a long time before. I think it’s a very rare circumstance where a practitioner decides that they’re going to sell and then instantly they find the buyer and the document all at once.

I think that it’s more of an organic process than having at least the rough terms on sell being clear in their own mind and possibly documented in draft form gives them greater confidence to solicit offers and to commence negotiations.

Scott Charlton:
Great. I’d like to go to the other side of the fence now and this is talking about incoming partners to a firm. I’m asking this particularly on behalf of people who are new to the whole equity thing. Perhaps they’re great technically but really very inexperienced in terms of actually what … How the equity and all the other arrangements of ownership in a professional practice work. What tips and advice would you venture for people in this position that their partners elect to increase their knowledge of this whole area?

Adrian Lynch:
Look Scott, I’d encourage those people to recognize that they possibly have more leverage than they expect. I think in my experience internal successions have some of the greatest win-win outcomes of any transactions that I’m involved with. We’ve got stability of clients in service, we’ve got similar culture, it’s an easy deal for the seller because the purchaser is involved in the business and won’t be asking a million and one difficult due diligence questions. They’re a ready-prepped buyer. I think some of these best and brightest advisors undersell themselves a little bit regarding the opportunities they have to acquire an interest in the firm that then employs them. I’d just encourage them to know that they’ve got, as I say, a bit more leverage than they might realize and to use that to demand a fair deal.

Also to understand that they should have ready access to finance on the back of the business that they’re about to invest in. There are plenty of financiers there that will assist them.

Scott Charlton:
That’s great advice. I think if I was such a practitioner listening to this I would be greatly encouraged from that. Regular listeners to the podcast will know my fascination with bold and being bold as a practitioner. Adrian I’d like to open this up now to perhaps if you could think of a situation where you as a practitioner have actually had to take a deep breath and be bold. Perhaps you could share with us the circumstances that you were confronted with and the decision that you made and the outcome, good, bad or indifferent, what actually transpired? Is there anything that comes to mind in connection with bold?

Adrian Lynch:
What I’d consider a commercial advocate. I try to be conservative and commercial but on a personal level the bold decision that I’ve made recently was to take equity in my own firm. I’ve bought my father out and the business had probably been stagnating for some years as my father and his business started to transition to retirement and deciding if this was going to be the place that was going to be able to be the most appropriate place for me to continue my career. I think having to draw a breath and decide that I’m going to commit to this firm, that was something that is a new experience for me. To take on ownership and to take ownership of this particular practice with its long history with a bunch of known partners but people that I haven’t owned a business with as well. It was bold to the extent that I haven’t done it before.

To commit to the kind of relationship that I’ve seen my clients do every day and to sign up to my own shareholder agreement has been an experience for me. It’s been a positive experience and one that I’ve learned some lessons that I can pass on.

Scott Charlton:
Hopefully you were the-

Adrian Lynch:
Good and bad.

Scott Charlton:
Were you that young buck who didn’t undersell himself at the moment of truth?

Adrian Lynch:
Look, it wasn’t without its bumps. I think particularly, I’m sort of a case study in what is typically a train wreck scenario. Family businesses have some of the highest attrition rates for inter-generational business succession. There’s a long history of famous Australian brands that have failed in trying to transition equity to the next generation because you’ve got family and you’ve got non-family. I’ve just grateful that common sense and commerciality managed to get through that and the business is now flourishing again.

Scott Charlton:
Fantastic.

Adrian Lynch:
I’m happy with the result.

Scott Charlton:
Very good, very good. Now Adrian regretfully time has just flown by and we’ll need to wrap up our discussion today. But before we finish up what’s the best way for people to get in touch with you? What’s your social media of choice these days?

Adrian Lynch:
I’m probably old-fashioned email and phone. I love talking to people but they can find me on LinkedIn or through our website or through your website, I have confidence Scott. I have no preferred line of communication. If you’re in Melbourne on the corner of Bourke and William Street come and have a cup of coffee.

Scott Charlton:
Very good. I’ll put all your contact details in the show notes which accompanies this podcast. Adrian I’ve really, really enjoyed today’s chat as I knew I would. On behalf of the listeners thanks very much for your participation.

Adrian Lynch:
Pleasure. Thanks for having me Scott, really appreciate it.

Scott Charlton:
Well that concludes my interview with Adrian Lynch. I’m sure at least some of the topics we covered are relevant to a client matter or two that you’re working on at the moment. Either that or a client you should be getting back to. Or perhaps it might even be time to review your own shareholder’s agreement. Speaking of which I have an interesting postscript about such agreements. You’ll recall that Adrian referred to the benefit of having a framework with which to formulate what you want to have happen in a range of situations. Adrian and I were chatting offline after the interview and between the two of us we came up with something that you might find valuable. Adrian has kindly offered to make some resources available to assist with shareholder’s agreements, be this for clients or for your own firm.

Firstly there’s a terrific article on the subject which Adrian suggests should be read before the second item which is a very thorough data collection form that works its way through what you want to have happen under various potential scenarios. To get both of these resources all you have to do is send Adrian an email and ask for them. It’s that easy. I put Adrian’s email address in the show notes which accompany this podcast. It’s a pretty important coach’s corner segment today. My topic selection has been sparked by a number of conversations I’ve had with practitioners of late and particularly today by an accountant who was at a workshop I attended. This practitioner volunteered that the ethos in his firm is that senior team members are to be available at all times for clients. I was just thinking about how insane that sounded when he went on to say that he was fielding calls from clients while in the hospital where his wife was giving birth to their second child.

That to my mind is seriously bizarre. It’s important to note that one shouldn’t blame the clients for making these calls. Instead in some situations the blame should fall squarely on the people who orchestrated this to happen. In recent episodes we’ve had several guests, Phil Little, Gary Tupicoff and Ray Miles who have painted a vastly different picture which respectively entailed them taking lots of time, all of it uninterrupted, away from work. It doesn’t seem to have compromised their careers. In fact they each would argue that having quality time away from the business enhanced what they achieved when back at work. A great place to start this journey is to introduce your clients to your 2IC or an assistant, someone that they can contact when you are unavailable. So much the better if your clients get to interact with this person perhaps have them sit in on a meeting or two so that the client knows your deputy is across their file.

Clients are actually very astute in judging when they can have their query dealt with by an assistant versus when they need to speak with you. They actually don’t want to bother you in whom they have such respect when it’s just a tax file number or a copy of an SOA that they’re after. So what arrangements are you going to have in place for the next time you go on holiday? A tender conference or dare I say when you’re in a hospital and need to be totally in the moment with a loved one? It’s so much better to work this one through ahead of time. Thanks so much for listening to this podcast. If you’re a regular listener, love your work. If you’re new to the show you may care to have a look at what we’ve covered in past episodes. Might be something there which captures your interest. Until then onwards and upwards.