5 Dos & Don’ts To Transitioning Tax & Accounting Practice Clients To A New Owner

The long and fast-growing trend of growing your tax & accounting practice by buying an existing firm or book of business, rather than growing one from scratch or organically, relies on one of a couple important elements. The most important being successfully transitioning the seller’s clients over to the buyer / new owner and retaining them over time.

The buyer’s biggest concern on his or her mind is, “what if I buy the clients and a big chunk of them leave after the sale?”. The answer is obviously that would be a big problem. But the good news is that a properly planned and executed transition plan by the outgoing seller & the incoming buyer, can minimize client loss to almost nothing or even zero.

Here at ABA Advisors having worked with hundreds of buyers of firms over the last 20+ years and especially repeat buyers, we’ve come up with what you might call best practices or 5 dos and don’ts to follow for sellers to successfully transition their firm & clients, over to a new owner.

  • 1) Not Moving the Office – You’ve heard the saying that people are creatures of habit and don’t like change. The psychology of this works in your favor as both buyer and seller.

If the seller has a physical office that clients are used to coming to in order to meet you or drop off work, we recommend a buyer should NOT physically move the office during the 1st year after the acquisition, or at least not move it ‘across town’. Moving the office (and any staff) a long distance where the clients have to drive a lot farther, potentially gives them a reason to look for a different or closer accountant.

What’s a long distance you ask? Depending on your location staying within 5-10 miles is probably a safe move. If you’re a rural practice 15-25 miles or more could be reasonable. However, zero miles is always best if you can work it for that 1st year / tax season. After that period, the buyer has likely established a relationship with these new clients and any move at that point is much more understandable and palatable.

Caveat – as a seller if you’ve already trained the majority or all of your clients to send in their information to you by mail or electronically (email, portal, data room, cloud, etc.) this issue is much less importance if at all, because your clients don’t have to or want or need to (Covid accelerated this trend) meet with you or your staff in the first place.

  • 2) Not Raising Fees – No one likes to pay more for the same product or service if they’ve consistently paid less in the past. That said the timing and/or positioning can make a fee increase more acceptable. In this case we’ve found that during that first year of owning this new client base, having NO fee increase helps to maximize client retention for the new owner. Like not moving the office, having no fee increase helps to not introduce a reason for the client to start looking for a new accountant.

Buyers should save any fee increase for year number 2 after you’ve serviced these clients, know them and have that new relationship established and working in your favor.

  • 3) Not Telling Staff – If you have one or more staff members in your firm the very best strategy for any seller is to NOT tell them that you’re selling the practice until the day of, or after closing on the sale, with your buyer. Here’s 3 reasons why.
  1. If you tell staff about any potential sale before you list or sell the firm, even if you think your people are accepting of the idea and can keep a secret, the likelihood is they will start looking for a new job themselves and possibly tell / let it slip to your clients that you’re selling. In the current job market, most buyers will look to keep the sellers staff so risking staff starting to look for new jobs is a bad move and invites problems.
  2. If the above happens and now a staffer lets it slip to one or more of your clients, then you also run the risk of your clients starting to look for a new accountant. This is a disaster waiting to happen and all it takes is a competitor to catch wind of the situation and start to approach some or all of your clients and ‘pick them off’ for themselves.
  3. We’ve also seen several instances where the seller has signed a letter of intent or purchase agreement with a buyer, tells the staff person about the pending sale (before the sale has closed) and suddenly the staff person thinks they have a vote or say in whether or not this buyer/new owner is the right person to buy the firm. Or in a worst-case scenario secretly downloads the firm client list and decides to go out on their own.

The best strategy for a seller (and any buyer who thinks there’s some advantage to talking to staff prior to closing) is to avoid all of these scenarios is to again, NOT tell any staff of your plans and only after the closing the sale do you make that announcement to any and all employees.

  • 4) Inbound Customer Service – When the sale of the firm is finally done as a buyer/new owner you want to make sure that you continue to respond to and answer client phone calls, emails, text messages, website inquiries and so on, just as promptly and professionally as the seller and/or current staff did prior.

If you’re the seller and it’s needed, with current technology it is fairly cheap & easy to forward phone calls from the seller’s phone number(s) to your/the buyers’ phone number. This can be done with emails also, and even entire websites can be redirected to the buyers’ website as well as having a special landing page that welcomes the sellers’ clients to the buyers’ website and firm.

Part of any transition plan should obviously also include exporting/migrating the existing client database from any accounting or tax software platforms, to the buyers’ software platforms. If you’re the buyer, and/or your staff, this helps you to be able to ‘pull up’ client information when these newly acquired clients call, email, upload or text you, and respond quickly and intelligently to them.

The goal here is for clients to interact with the buyer/new owner and there be ‘no interruption in service’ level if you will.

  • 5) Outbound Communication to Clients – Last but not least, as a buyer and seller look to a closing date to finalize the transaction, they need to spend a fair amount of time mapping out what you might call the “outbound communication to clients”. Specifically, you’ll want to lay out on paper and even on a calendar, who, what, when and how you’ll be telling clients about the sale of the firm and the new owners who the current clients will be working with.

    WHAT – Most sellers can explain to clients they are retiring and have after an extensive search have found the buyer/new owner that will best service them going forward. We’ve also seen that rather than a sale, a firm has ‘merged’ with another in order to provide more services to their client base. Whatever the case a simple explanation is the best.

    WHO – We recommend identifying or categorizing clients in to 3 lists or your A, B & C clients.A clients might be your best or biggest or highest fee clients. However you slice them, you may want to physically meet with them (both seller & buyer) during the transition period to explain the sale/merger, what is not or is changing going forward, and answer their questions. Early breakfast or late dinner meetings with these top clients are good ways to get everyone to get to know one another.

    B clients may not need a physical meeting but a group or 3-way conference phone call, or Zoom / Teams / WhatsApp / FaceTime call with these clients may be sufficient to let them know what’s happening and answer their questions.

    C clients might be a group of clients that need minimal notification and just using a physical letter mailed to them and/or an email – both explaining the sale/merger along with a FAQ (Frequently Asked Questions) section, will be enough to keep them happy and loyal going forward.

WHEN – We see a lot of acquisitions will close at the end of the week on a Friday or at the end of a month. Whatever that day is, the best practice is that day or at the latest the next business day, any and all communication starts to take place.

Talking with any staff is your first task and getting them up to speed and onboard so they can answer questions from clients is key. Giving them copies of what is being sent out to clients will also help them be prepared.

Then that or the next day, start your outbound phone calls, emails, direct mail letters, etc. going out to your clients. If you’re a one man or one woman show or you have limited resources, best to start with your A clients and work your way down the list.

HOW – Aside from physically meeting with clients in their offices, using technology can help you leverage your time communicating with clients. If you don’t already use video conferencing, most of the well know platforms are either free and/or have a Free Trial plan that should accomplish what you need.

If you’re an older seller that’s not tech savvy and your buyer is younger and is tech savvy, relying on them to help you get up to speed and through this process is a good strategy.

SUMMARY – Having worked with hundreds of sellers and buyers of tax and accounting firms over the years we’ve had the experience of working with ‘repeat’ buyers who have acquired one or several firms over time.

When talking with these repeat buyers it is very common for them to explain that their past acquisitions have gone smoothly and that they’ve lost few if any of the clients they acquired. And when we’ve quizzed them on their transition process, we find they’ve followed the majority if not all of these 5 guidelines in this article.

The rare exception or reason not to follow these guidelines are in situations where the owner of a firm has passed unexpectedly. The word of the owners passing spreads quickly and although there is a short period of time where any staff and clients are in mourning and may not think of ‘what do I do next or going forward’, reality sets in and then quickly executing the other aspects of these 5 dos and don’ts is even more important.

If you have any questions about what has been discussed in this article, feel free to contact our office by phone or email. Our contact information is on our website at www.acctsales.com.

Jeff Bell – Managing Director – ABA Advisors

Copyright: ABA Advisors, LLC