“Can the seller of a firm guarantee the retention of the clients within the practice being purchased?” My response is: “Can you guarantee the retention of your current client base?”

At this point, the buyer should reflect on client retention of their present firm. From the view of the acquisition-minded owner or the experienced employee who has entrepreneurship aspirations, the question should be the same: Why is client retention high at our firm?

The answer usually revolves around the following:

  • Client’s respect for the accountant’s technical ability
  • Timeliness of the services provided
  • Professional relationship with the client
  • Personal relationship with the client
  • Cost of the services
  • Client perceived value of the services received (which is influence by the prior bullet points)

It is easy to understand reservations in an acquisition. The buyer usually is going to increase their debt in making the purchase. The buyer (and the lender) want to feel comfortable that clients of the firm being acquired will stay after the purchase. Client retention will affect the sales growth, profitability, and ability to service the acquisition debt.

Why would a buyer assume that they cannot retain the new client base if they exercise the successful methods that have resulted in high client retention of their existing practice? Who has the most influence in implementing these successful methods? The seller or the buyer?

Obviously it is the buyer who has the most influence. This is not to say the seller has no influence, but such influence is limited generally to influencing the client’s perception of the buyer’s technical ability.
Below we take a look at what influences both the buyer and the seller present:

Seller influence:

  • Client respect for the accountant’s technical ability: The seller has influence in that they should have performed their due diligence to ensure the buyer has the technical ability needed to service the client base. As most purchases involve some seller transition time after closing in which the seller introduces the clients to the new owner, the seller must influence the introductions in such a way as to inform the client of the new owner’s technical ability. There are various techniques to accomplish this that are beyond the scope of this article. But, suffice it to say that the seller can influence the client’s perception of the new owner’s technical ability.

Buyer influence:

  • Client respect for the accountant’s technical ability: This begins with the proper introduction by the former owner. The fact that the seller has picked this buyer transfers technical respect somewhat automatically. This is further enhanced if the seller, during the introduction, choreographs the introduction to highlight the new owner’s technical ability.
  • Timeliness of the services provided: This is entirely influenced by the new owner. The seller is usually gone after the sale and has absolutely no control of the new management’s priority and/or efficiency in producing the work.
  • Professional relationship with the client: After seller introductions, it is the responsibility of the buyer to develop the professional relationship with the client. Regular, meaningful client contact is a must!
  • Personal relationship with the client: People do business with people (as opposed to machines or entities). If one is successful in any business, one cannot ignore the importance of personal relationships. This doesn’t mean you have to take the client to dinner every week or go play golf with them (although that is an option). The personal touch in these relationships can be as easy as making good notes about the things that personally interest the client. What do they like to do? What are some family activities of the client? Does their son play little league? Any notes you can make should be reviewed before talking with a client. If the buyer can effectively and sincerely take the time and effort to impress the client that they take a personal interest in them by talking about things in which the client is interested, this not only improves client retention, it improves the quality of one’s own life in developing such personal relationships. Of course this cannot stand on its own. You must properly execute the other client retention factors.
  • Cost of the services: Don’t immediately raise the fees of the new clients. Knowing the fee structure prior to the acquisition should have been part of due diligence. Knowing that a buyer cannot increase prices immediately after the sale should be built into any post-acquisition business plan. First one needs to build the professional and personal relationships that is enhanced by providing accurate and timely work for the client. After successfully implementing the client retention techniques to the extent that the client has a positive perceived value for the services rendered, price increases can be addressed.
  • Client perceived value of the services received (which is influence by the prior bullet points): If the buyer has executed the aforementioned client retention points, they should have positively influenced the perceived value of the services provided by the new owner of the firm.

People (including clients) resist change. My experience in personally acquiring firms is that, if you successfully execute client retention techniques, the clients will stay. Will 100% of the clients stay? That would be unusual indeed! My experience has been that client turnover in a newly acquired firm will be no more than normal attrition of the existing firm.