My partners are near retirement age, and we’re discussing what to do about the fact that we now have more clients than I can handle alone.
I work out of my home so hiring an employee or finding another partner aren’t options (for home insurance reasons).
They are of the mind that we can just choose a couple hundred clients and sell the list to another firm (notifying the clients first of course). Is this a thing? It sounds crazy to me. Have any of you sold off clients or bought clients in this way? It’s not like we’re in a traditional office where someone takes over the whole space like selling a franchise.
Its a thing. I went through the same situation when I was in a practice with both of my parents. When they retired there was no way I could handle it all.
We sold the majority of the client list on a % basis of clients who stayed over a three year period. We receive a % of total billings of the clients who stays with the new guys over a three year period. We got a higher % on those who stayed on in year 3.
There are a variety of ways to work out a payment structure depending on retention period and other factors.
Ok, thank you both for responding. Working a retention period into this makes way more sense to me. Part of my thought process was why would anyone do this when I can’t guarantee the clients will go to them just because I gave them a list.
Obviously, there would be more retention if I can find a firm close to our own location.
It was a long time ago and I don’t quite remember the percents.
What I can remember was that there was a payment each year for 3 years based on the clients retained and the third year precent was higher. The percent was paid out based on the base fee we charged to the client the year before the sale. This way the buyer was not paying a percent based on any fee increase they implemented. It was pretty complicated each year to calculate the payments to us. We also had a restriction stopping us from providing services in the area over the same period.
I had a friend who sold to the same company, and they were paid a lower % on all the sales in that location regardless of if they were from before or new clients or increase fees. They also did not have any restrictions place on them. That would be a lot simpler to calculate.