Maximising the Value of Client Retention

Business Brokering Wednesday 20th of January 2021

Whether you are a vendor or buyer you will have a vested interest in ensuring you maximise the value of your transaction when it comes to handling client retention.

For vendors it means maximising your retention payment which can amount to tens of thousands of dollars in your pocket (or out of it).

For buyers it means getting what you’ve paid for – the client relationships and the ongoing fees from those clients – and hence reinforcing the ongoing value of your new acquisition.

Historically, just about every practice acquisition involves some form of earnout based upon the retention of clients and the associated ongoing fees. This means that the success of a transaction often rests on the success of the transition.

Every transition is different, but there are some common factors to consider that can have a real impact on success.

Here’s our top 5:


Client engagement, technical and service level need to match.

No two firms are identical. Different firms possess different technical capabilities and a different balance of service offerings. That’s a natural consequence of the variety in management styles, skill sets shared by professionals and the requirements of the client base. When a firm changes hands there may be an impact on the available services.

This isn’t necessarily a problem... but if a valuable client is expecting a particular service level or has a need for a specific skill set that is no longer deliverable (e.g. highly complex tax advice) then it is a problem.

It’s important that the client perceives no reduction in the service level as a result of the acquisition. The guiding principle we apply when matching buyers with vendors is that services to clients should be continued at an equivalent or greater level than was the case prior to the sale.


Buyer needs to commit the necessary resources to transition the clients.

As a buyer you will need to commit the appropriate amount and type of resources to the process of client transition. You need to show the love.

Assessment of client needs and expectations is the key here. The starting point is technical skills required to service the client work, but often the style of delivery is as important as the quality of the work. You are, after all, attempting to build a long-term relationship to secure steady billable hours.

Determine if the client is accustomed to a particular kind of service. Not every client expects direct and frequent contact at partner level, but for the ones that are accustomed to it you can be sure that they’ll buck if that changes suddenly.

Consistency is the key – the level of service must be at least equal to what they’ve experienced in the past.


Vendor has and provides clear and uncontested title to the client relationships.

It is important that the vendor has control over the relationships that are being transferred.

It’s not uncommon for a vendor at the time of sale to discover that they have a senior manager who would prefer to depart the firm rather than transfer to a new owner. If this manager is not subject to a restraint clause that would survive sale, and if the manager has a closer relationship with the clients than the principal then there can be genuine concerns that the buyer will not be as successful in retaining these clients.

Under these circumstances the buyer will understandably raise the risk profile assigned to your practice, with consequential impact on both the principal sale terms (I.e. price)  and the rate and period of the retention agreement.

Vendors may seek to avoid this complication by having well drafted restraints in employment agreements and by maintaining close working relationships with clients.      


Vendor needs to take the lead on formulating the transition plan.

Vendors know their clients and are best positioned to make recommendations pertaining to transition. This process can start well in advance of the arrival of actual buyers.

You can start by segmenting your client base with transition strategies in mind e.g. by grouping clients with specific technical requirements, or those who require attention by partners versus those who can be handled by senior managers or senior accountants.

It’s time well spent – it will certainly make the buyer happier during transition, and that will make for a happy vendor as well. The clients will also be reassured by the perception that the vendor is on the front foot during what can be an uncertain time.


Don’t die before selling.

This might seem a little grim, but it’s at top of mind for us because two of the sales we’ve completed in the last six months have been on behalf of departed vendors who waited just a bit too long.

In financial terms, the impact is severe. Your estate can expect to lose as much as 50% of the value of a practice as compared to a warm handover where the vendor is still around to assist the transition process.

In both our recent cases the vendors could have sold three years earlier and lived off the proceeds of sale and been much further ahead to the benefit of their dependents.

We’ve written about this topic elsewhere – have a read of our article Thoughts on the Empty Chair if you are interested.    


Paying attention to these points can help assist a smooth transition, and a smooth transition is definitely in the best interest of all parties concerned including your clients and employees.

Receiving the full retention amount meand the vendor receives the full purchase price and the buyer gets the full value of what they’ve paid for and when well executed gives all parties an excellent return on investment time wise.

Mark Witt CA

Mark is the Head of Brokering at Business Exchange with over 20 years experience and 400+ completed transactions

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