At Draper Hinks we take great pride in the work we do. We care about our clients and we go the extra mile to help wherever we can. We take people at their word and have built up some very good relationships with buyers over the years.
Some of our buyers buy from us on a regular basis. They know what we do and how we do it and we often hear that the service we give is the best on the market. I tend to agree with them but then again, I am totally biased of course. If you can’t wave your own flag, what is the world coming to?
Caveat Venditor means let the seller beware. One would think that all buyers of accountancy practices are honest and up front. Well, I can tell you that 99.99% of them are and are a pleasure to work with. However you do get the odd one that will plough their own furrow and not comply with any of the norms.
I don’t think buyers understand how difficult it is for a seller to let go of their client base. Often these clients have been dependent on the advice given by the vendor for many years and in some cases for generations. Then along comes a buyer, promises to take care of the clients, pay some money and expect the seller to be happy with that.
There has to be a huge amount of trust built up between both parties in a very short space of time for the deal to work. The seller has to trust the buyer to keep all the clients and the buyer has to trust that the seller’s practice is run properly, compliantly and competently. The buyer can carry out due diligence to check what is being sold, but there is no equivalent due diligence for the seller to check that the buyer will look after their clients.
We had a case where we sold a practice in the Midlands. The vendor had a choice of offers and decided on the buyer that was local, qualified, came over well and promised to service all the clients in a similar way to that done by the seller. All was looking good up to the point of completion. The buyer paid the first tranche payment to the seller and the ownership of the clients was then transferred to the buyer.
The vendor had gone to great pains to make sure all clients were told about the imminent sale because he was going to be retiring and putting his feet up. The clients all understood the reason for the change and were 100% supportive.
However, the buyer did not contact any of the clients to introduce himself after completion. Why would you not do that? The buyer promised he would let all the clients know that he was their new accountant and he would look after them, but he just did not contact any clients at all, not even one! The vendor was inundated with complaints from unhappy clients. The vendor tried to book meetings for clients to meet with the new accountant but could not get through on the phone. The vendor was tearing his hair out. This is not how things should be done.
The buyer said that the clients would find him eventually, when they wanted him. The attrition rate was through the roof. The vendor, who had worked on the practice for over 30 years was denied the full amount of what he was owed due to the clawback provisions of the agreement. It was unjust, unfair and very upsetting to witness.
How can you avoid this happening? If the buyer has bought before and is still in touch with their previous vendor, you can ask to for the contact details of the previous vendor and call them up to ask what the buyer was like, how did they look after the clients, what was the retention like, did the vendor get paid as promised etc etc.
Please remember this kind of instance is very very rare. We have brokered over 400 deals and can only recount this happening twice. We absolutely do our best to minimise any kind of problems with buyers. We will explain all potential pitfalls to you if you want to sell. You are best off talking to a broker that has many years of experience in this field that help and guide you.
If you would like to have a chat then please get in touch with me, Nicola Draper, on 01788 816440 or book a time to speak to me using this link:- https://calendly.com/draper-hinks/q_a. You can always email any questions you may have using email@example.com. Let me see how I can be of assistance. I look forward to talking to you.