This seems like an obvious point to me, but I am coming up on the end of my 14th year in this business and I should know better than to think anything is obvious. Yes, the buyer, the owner, the person with their name on the company, should be active with the seller, the clients and the staff through transition if the acquisition is to be successful. Following are three examples of insufficient involvement:
- In 2018… Prior to closing the sale, the buyer and seller go over transition and seem to have a pretty clear plan. However, when it comes to implementation the buyer is not involved. The buyer’s focus is on all of his clients and he relies on his office manager to work with the seller on the seller’s clients.The office manager is not really on board with the addition of new clients and what it means for her workload so she immediately requests the seller change all the processes and minimize interaction with clients. This is not what was agreed and the seller knows it will hurt retention of clients, so she tries to discuss with the buyer but he is too busy and sends her back to the office manager. Left with no good alternative, she refuses to change processes and instead of working the agreed 20 hours a week starts putting in 60 to 80 hours per week, since she has no support from the buyer or the staff at this point.By the end of the busy season, she has done what she could but with limited support quite a few clients are extended. More importantly, a real opportunity for the clients to get to know the owner and staff of their new tax preparation team has been lost forever and it will be that much harder for the buyer to retain the clients when the seller stops working for him.
- About 10 years ago… The buyer of the practice is a bit of an introvert and really loves the technical side of tax preparation, but is not too excited by all the client interaction. He buys the practice of a pretty gregarious extrovert who enjoys the client interaction the job requires. So, right out of the gate we have a bit of a misfit of personalities and client interaction style. Nevertheless, the parties hit it off and decide to move forward with the transaction and it closes.As you might suspect the transition plan evolves and is implemented with the seller meeting with every client and the buyer doing all the tax returns. The buyer did not meet with a single client. A year later, the seller is no longer involved and the buyer loses a bunch of clients. Again, a real opportunity for the clients to meet the buyer and get to know him was neglected. The clients did not leave because the seller was no longer around; they left because they didn’t know the buyer and in the prior year the buyer let them know he was not interested in meeting them, regardless of whether that was his intention.
- A few years ago… The sellers and buyer close the sale. I actually attend a meeting at the buyer’s office about transition and the parties structure a very good plan with several steps to insure all the clients come in and see the buyer.All moves forward as expected until the seller’s clients start to call to set up appointments. At this point the buyer’s staff rebels and refuse to take any appointments with the new clients because they are already overworked and overwhelmed.The buyer lacked of involvement in this transaction as a service provider, as a business manager, and as an owner. Despite a very good transition plan, the owner either under estimated his staff’s workloads or overestimated their ability to take on new business. Instead of stepping in to solve the issue, he let them dictate how things would or in this case would not proceed with the acquired business. Working with his existing staff might have lead the team to come up with solutions. Bringing in new staff is never easy, but it would have been a short term solution that would have kept him out of breach of contract. Unfortunately, he did nothing and let the staff make the determination. Sadly, it turned out to be a practice devoid of management and leadership.
So, as these three examples illustrate it is very important for the buyer to take a direct role in interacting with the clients and ensure that they or their staff are providing good, timely service to the seller’s clients. If issues arise, the buyer needs to take an active management and leadership role in working through those issues whether they be between the seller and staff, staff and clients, a shortage or staff or other circumstances that arise. It also important for a seller to be aware of these potential issues so they can be discussed with the buyer prior to closing and a clear understanding of roles, responsibilities, and involvement can be developed.
ProHorizons is a West Coast brokerage and consulting company focused on tax and accounting practice sales and acquisition services.
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