It Takes Two: Making the Transition Work
In the purchase of any business there is rarely any guarantee that the customers or clients will continue to come. If you buy a McDonald's franchise today you will not get a warranty from McDonald's that customers would be there eating hamburgers tomorrow. So why then does anyone buy a business knowing there will be risk of keeping the customers?
The answer is simple. Businesses are bought because the buyer believes the present owner has been successful and that the same or better income can result with the buyer in control. That can and does happen in any kind of business and it happens in professional practices all the time. However, buyers and sellers need to be aware that the process does not happen by magic. There are several things to be considered for a successful transition.
1. A good name or "goodwill" is certainly important in client retention but that can only go so far. The buyer has to provide the goods or services the customer wants. And, amazingly enough, the buyer is the only one who can keep the clients happy in the long run. A big mistake buyers sometimes make is that they get in over their heads because they either lack the competence or the experience to run a public practice.
2. People do not like change. In any professional practice sale (assuming the owner is half-way good at what he/she does) the clients will not like the fact. They may even complain to the owner. But most people understand the world never stays the same so, in the end, they will adapt. (If the owner is 55 or older the clients are already aware the owner will be gone at some point.) But what that means for the buyer is that the more you keep things the same the better, at least for awhile. Insensitive buyers that go in and immediately change the location, the software, the rates, the employees, etc. are setting themselves up for failure. Patience is the keystone although the temptation to "do it my way" is strong.
3. When a buyer once asked us how he would retain the clients we answered, "The same way any business keeps customers-treat them right and provide solutions to their problems." Clients don't pay the present owner out of charity; they go because they have needs the practice can help them with. But clients want to feel important and new buyers must work overtime to stroke their feelings. Studies have shown over and over that the number one reason clients leave any professional is because they feel they weren't treated right. We were once personally involved in a sale where the buyer was not very nice to the clients at all and then later complained to us about losing them!
4. It takes both the buyer and the seller to make a successful transition. The biggest reason that transitions fail is because there is either a "bad" buyer or a "bad" seller. It is important that the seller work with the buyer in notifying the clients, probably more than once. More importantly, the seller must make sure the clients understand he/she is no longer in business AND the seller must repeatly talk up the buyer and encourage the clients to give the buyer a try. Sellers have a stake not only because they might be financing the deal but also because they have an ethical responsibility to the clients and to the buyer. Sellers who speak bad of the buyer or are indiffferent about the buyer can really kill the transition.
These are the foundations for a good transition. If the buyer is competent and treats the clients right and the seller is positive and supports the buyer then there is every reason to believe that the change of ownership will be positive for everyone. Such successes happen all of the time.