How to keep clients after an accounting practice sale

Written by promotiondept

November 12, 2018

How to keep clients after an accounting practice sale

Risk is inherent to any business activity, including the sale of a CPA practice. From the seller’s perspective, minimizing the major transitional risks after selling a CPA practice should be considered as important as maximizing the sales and terms.

A failure by the er or seller to execute a successful transition after the closing of the sale can be detrimental to client retention. The following fictional narrative, based on actual events, sets the stage for discussion.

Imagine that you own a growing and successful multimilliondollar business. Your family and your business have been the clients of a CPA in the local community for more than 15 years. You now rely on the CPA to provide significant tax, accounting, and business expertise. In fact, you are not quite sure what you would have done without this CPA’s valuable advice for the last 15 years.

Your CPA calls you to set up an unanticipated meeting at your office. At the meeting, he introduces you to a CPA you have never met before. It becomes apparent that your valuable adviser has sold his CPA practice to the individual he just introduced you to. At the end of the meeting, the er of the accounting practice hands you an engagement letter related to services to be provided to you personally and for your business. You tell your CPA and his er that you will look at the agreement in the next couple of days.

As you consider whether you should sign the er’s engagement letter, you begin to compile a list of the factors that would likely make or break your relationship with the person who may soon be your new CPA.

Let us assume for a moment that the er in the example above is a great fit for the practice in every respect including professional qualifications, people skills, firm culture, and the capacity to perform the seller’s work after closing. Even with a great er, what happens within the first few weeks or months of a transition can have a significant effect on client retention.

From the perspective of both the er and seller, many potential issues could lead to the loss of this hypothetical client. Some of the factors important to ensuring a successful transition and minimized client attrition are as follows.

As indicated in my November 2015 JofA article “Maximize Proceeds in Accounting Firm Sales,” the most important aspect of any deal from a seller’s perspective should be whether the er has the qualifications, ability, capacity, desire, and incentive to provide quality service to the seller’s soontobe former clients. A prudent seller will go to great lengths to meet with multiple ers in the interest of selecting the best er who meets all of these criteria.

It is crucial to effectively communicate to clients that the seller has invested extensive efforts to find the right er—as well as the reasons this particular CPA (the er) was the best qualified for the practice. When clients are uninformed, they may erroneously conclude that the only criterion used in selecting the seller’s replacement was finding the highest bidder. Such incorrect assumptions can prove detrimental to establishing the preliminary footing necessary for good relationships to materialize for the er.

When first discussing the transition with clients, the seller should take steps to reassure them about the er. Inform them about the extensive search that was undertaken to find a highly qualified CPA who would be the best fit for the firm’s clients. An affirmative statement should be made that the CPA er was selected because he or she was the most outstanding of several under consideration. The seller and er should also highlight any unique aspects of the er’s experience that may be relevant to the clients’ needs. Explain that the er will begin taking the reins of the firm while the seller begins to reduce his or her involvement.

The seller should explain to the clients why he or she needs to slow down or retire. The seller should also provide further reassurance that he or she will be assisting the new owner for some time during the transition to in any way necessary. The seller should also indicate whether he or she intends to work part time for the er and for how long.

When the seller is retaining a small ownership interest in the firm being sold, it is often beneficial to announce that the firms of the seller and r have merged or that the seller has admitted a partner.

In all communications with clients, be mindful that an accounting practice is as much a “people” business as it is a “numbers” business. Do not lose sight of the fact that clients are people. People often need communication and reassurance during a time of change.

CPAs must remember that good client service does not include making things difficult for their clients.

Imagine again that you are the client of the CPA seller in the example above. You sign the er’s engagement letter for your business and personal accounting and tax work. Within the first month you find that the er will only communicate via email while the seller previously conducted extensive phone consultations. The er is almost impossible to reach on the phone. In addition, when you want a meeting, you realize that the er has moved the office 30 miles from your former CPA’s office. You further ascertain that the new CPA has changed almost every policy of the firm including when your work will be prepared, client interaction, organizers, billings, and collections.

Based on my experience with hundreds of successful CPA practice transitions over the years, it is clear that the fewer changes made to the practice, the easier the transition is on clients. Too many changes too soon in the relationship could drive many clients to start looking for another CPA. In light of this fact, I typically recommend the following:

During the first couple of years after closing, the er should make every effort to minimize change for the clients. If clients meet in the seller’s office, the er should try to keep that location of the seller open at least through the first busy season. If the office is to be moved, the er and seller should agree on a reasonable distance for the new office location before closing. Employees and clients alike would not relish the idea that their fiveminute drive to the former CPA’s office has been replaced by an hourlong trek across town.

The er should attempt to keep most if not all of the client and employee policies and procedures the same as those of the former owner. A client who was allowed 30day payment terms after completion may not appreciate having to pay a 50% retainer before the work is performed with the remainder due on delivery.

It is important for the er and seller to consider each potential policy change from a strategic perspective by asking the following question: What positive or negative effect would this change have on clients?

Most clients will give the er the benefit of the doubt early in the process, especially when a seller offers a glowing recommendation that explains why this particular er was chosen. The primary goal of minimizing change during the transition is to avoid giving clients an overwhelming reason to terminate their new relationships with the er in favor of another CPA.

In my November 2015 article, I make the case that an earnout deal with a large contingency based on collections is tantamount to no real commitment from the er. Such a deal may actually produce an incentive not to perform if the er is understaffed or underestimates the amount of work to be performed.

A seller must determine whether an otherwise qualified er has the capacity to perform the work that the seller will no longer perform after the sale. The er must also have significant “skin in the game” in the form of a large down payment to ensure performance. If the er has made an earnout offer with a small down payment and large contingency, the seller should consider another deal with significantly more cash and more er incentive to perform.

If the er lacks excess capacity and the seller has accepted an earnout deal, the er may cherrypick the best clients while not providing services to a significant portion of the client list. Alternatively, the er may rely on the seller to do all of the work after selling the accounting practice. No seller wishes for a large percentage of his or her client list to vaporize after a sale due to er nonperformance. In addition, most sellers who must perform all of the work for the er find that they will earn significantly less money working for the er than by continuing to work on their own. Most rational sellers would want to avoid both of these outcomes when selling an accounting practice.

Assuming that a qualified er has the capacity and a deal structure that provides incentive for er performance, the following is a list of things that ers can do to retain clients after the of a CPA practice:

The seller of an accounting practice should be prepared to a er for at least the first few weeks or months of the transition and to be available for occasional phone calls afterward. Highly complicated practices may require a longer transition for the seller. Transition time should be agreed upon in writing but should not include the free billable work of the seller.

To maximize client retention, a seller of a CPA practice should be ready to do the following:

Overt seller unwillingness to assist in the transition will most often have a detrimental impact on client retention. This is one of the many reasons it is important to include seller transition time in the signed agreement for the and sale of a CPA practice.

One exception to this rule relates to a CPA firm owner who is having major health issues or who is recently deceased. Clients are usually much more amenable to working with the er when it is known that the former owner is deceased or otherwise physically unable to be involved in the transition—despite the fact that such transactions will involve little or no transition time. If such a sale contains even a small contingency, the er and the CPA’s family should disclose to all clients verbally and/or in writing that the proceeds from the sale to be received by the family are contingent on client retention.

Full disclosure by a widow or widower (or his or her representative) of the contingent financial arrangement coupled with an appeal to the better aspects of the clients’ nature will most often elicit sympathy for the CPA and his or her family—thus facilitating client retention. The appeal should indicate urgency while gently tugging at the clients’ hearts. Any such appeal made to clients should be warmhearted, passionate, and sincere while maintaining a high level of professional decorum.

The transition plan is not commonly part of the closing documents, but it is just as important.

The transition plan should be one part of an overall business plan developed by the er with the seller’s input prior to closing. The seller and er should have extensive discussions regarding everything that should be contained in the transition plan. This should include, but not be to, major goals and milestones, firm name and identity, announcements to clients, computer systems and software, assimilation of client work, internet presence, advertising, time and billing procedures, key target dates for major aspects of the plan, and which parties will be responsible for certain aspects of the transition plan.

The plan should be in writing, outline specifics, and be communicated to all parties involved in the transition. The plan should be referred to often over the course of the transition. The plan also needs to be fluid, as unforeseen circumstances are likely to arise.

Leaving the transitional plan to or memory could be detrimental to client retention. The adage “if you fail to plan, you plan to fail” is just as relevant to the transition of a CPA practice as it is to any other aspect of business or life.

It is important to seek legal counsel prior to announcing a sale or merger to clients—or employees, for that matter. Not all “mergers” are mergers, and not all “sales” are sales.

It is imperative to make certain that the nature of the announcement corresponds with the legal structure of the transaction.

The announcement should comply with all laws and the requirements of the state’s board of public accountancy. In addition, a good attorney can be a sounding board for what a seller should and should not communicate to clients about the er and the transaction.

After the sale has closed, the er and seller should keep in mind that clients are, first and foremost, people—they should not be treated as pawns in a business transaction. The transition should focus as much attention on the human dynamic of the client relationships as it does on the technical aspects of client service.

A good transition should not involve clients jumping through hoops to benefit from the er’s services. The more hoops they have to jump through, the more likely the firm will lose them. Even the best CPAs can lose a client due to inadequate communication or if the transition makes it too difficult to do business with the er.

Effective communication and proactive implementation of a wellwritten plan by both the er and seller can make the transition virtually effortless from the clients’ perspective. Thus, key relationships of a CPA practice can be successfully transferred from seller to er.

About the author

Harry L. Olson is president of Accounting Broker Acquisition Group (

To comment on this article or to suggest an idea for another article, contact Jeff Drew, senior editor, at or 9194024056.

AICPA resources


Maximize Proceeds in Accounting Firm Sales,” Nov. 2015


CPE selfstudy

Financial and Strategic Implications of Mergers and Acquisitions (#165325, oneyear access)


Practitioners Symposium and Tech+ Conference at AICPA Engage, June 12—15, Las Vegas

For more information or to make a or register, go to or call the Institute at 8887777077.

Succession planning resources webpages

Private Companies Practice Section and Succession Planning Resource Center

The Private Companies Practice Section (PCPS) is a voluntary firm membership section for CPAs that provides member firms with targeted practice management tools and resources, including the Succession Planning Resource Center, as well as a strong, collective voice within the CPA profession. Visit the PCPS Firm Practice Center at The Succession Planning Resource Center is available at



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