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How to have the tough conversations: when clients need to close shop

By Meagan Wood

2 min read

How do you tell someone it’s time to let go of their dream, or that their life’s work has run its course?

For some business advisors, telling a client that it’s time to close up shop is all in a day’s work.

But for those tax advisors, accountants, and bookkeepers who aren’t used to being the bearer of bad news, there are a few rules of thumb to follow when delivering unhappy news.

Don’t delay

Most small business owners and entrepreneurs are pragmatic, so they’ll appreciate a practical approach to winding up their business – straight talk, real action, and hard facts and figures.

Some will already be thinking about their next foray into business. They’ll want a quick result so they can get on with next venture, and close the business with their reputation and dignity intact.

In most cases, delays are counterproductive, so be honest, decisive, and as precise as circumstances allow. It’s in no one’s interest for the business to have a prolonged demise.

Present the facts

Give an unembellished, yet empathetic presentation of the business case that explains to your client why it’s time to close. Use your industry experience to outline the complex financial analysis in a matter-of-fact way.

It’s your job to help your client see that a business closure is the best course of action. So, no emotion, just the facts.

Be prepared with advice on what’s next

Having been frank about the condition of the business and its prospects, now it’s time to find some constructive words about options for the near-, mid-, and long-term future.

Your client pays you for your financial, legal, or management advice, so they will expect you to guide them through the process of the closure, explain how this affects their current financial situation, and come prepared with next steps.

Talk about money from the start

Money can be an uncomfortable subject for people, but a business closure is no time to get shy about finances. Discuss with your client as early as possible what the financial consequences of their business closure will be.

Think about the bigger picture

A business closure doesn’t just have implications for its owner; employees, customers, and suppliers aligned to the business will also be affected.

Be aware of how the closure will impact others inside and outside the business. This could include staff entitlements, unfilled orders, and money owed to creditors.

You will need to advise your client of their legal obligations to all other parties affected by the business closure. Your client may also still have responsibilities to their employees even after they close their business, such as PAYG, fringe benefits tax, superannuation, and final termination payments.

Honesty can be difficult, especially when you need to pass on bad news. However, as a business advisor, your first obligation is to put emotion to one side. Small business owners are resilient by nature and they deal in straight talk. Pay them the professional courtesy of getting to the point.

For more advice on running your accounting firm, check out these helpful resources.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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