Maximize Client Retention in CPA or Accounting Practice Acquisition

Most offers to purchase a CPA or Accounting Practice in the last few years have included a clause that ties the purchase price to client retention. For this reason as well as others, a transition plan that maximizes long-term client retention should be carefully considered. Sellers want client retention because the price of the firm is dependent on it. Buyers want client retention because it is with this revenue and profit that they will support themselves, service the debt, and pay the overhead of the business. Below you will find five key factors that should improve the odds of client retention during an acquisition and therefore give the seller a larger payout.

1) Client Letter – A positive and upbeat letter should discuss the nature of the transaction and why the transaction is necessary. In addition, it should answer four questions that clients have:

  1. Will the existing owner still be doing my taxes?
  2. Will the people that I work with still be there after the sale or merger?
  3. Will the location still be convenient?
  4. Will they be raising my fees?

2) Personal Visit – Get out of the office and go to visit the top 5% -10% of the clients. Calling on a client with current tax preparer and the new tax preparer gives a chance for the client to ask questions, get a feel for the level of expertise, and begin to establish rapport with the new owner. It also lets them know that it will be with great care that the business is transitioned and that they are important to the new practice. The top 10% of clients will generally represent considerably more revenue than 10%. Take the time to make sure this business transitions smoothly.

3) Phone Calls – Both buyer and seller should be making calls. The seller makes calls to key clients and talks about why this is best for the client, why the new principal is qualified, and why they should consider staying with the new firm. The buyer is making introduction calls right behind him with a day or two delay. The message should be consistent with the message in the client letter, positive, and upbeat.

4) Stay – If an option, the existing seller should remain with the firm for at least one tax season. For complex practices, the seller should consider staying more than one year. While there are exceptions, it is generally best if the prior owner stays on. They can be either a preparer working part time or full time for the new firm or a consultant/contractor. The role can range from someone to help do the taxes to someone to shake hands and kiss babies. Depending on the size of the firm, the cash flow of the firm, and the complexity of the clients, this method can be highly successful.

5) Pick the Right Buyer – While this is the last in the top five, it is certainly not the least. This is the most important item related to the transition. You need a buyer that can relate to you, your clients, and one that has the technical know how and business acumen needed to impress clients. Without this confidence in the buyer, the client will see through any attempt at retention. If the seller can pick the right buyer and follow some of the other steps above, retention will be maximized.

Client retention is valuable for both the seller and the buyer. Knowing what steps to take to retain clients and how to implement those steps are important. For more information on how to maximize your retention in a CPA or accounting firm, speak to a professional business broker to avoid making costly mistakes.

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