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Buying fees from larger practice

Has anyone done it before?

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Ive been contacted by a larger local firm who are looking to sell a block of fees, firm is well established and has a good reputation as far as I know.  They have stated that they looking to align their client base and find a new home for those that dont fit.  Having had a quick phone call they claim that its not a case of wanting to offload a load of Z grade clients but some that they cant justify their new pricing structure to.  Theyve signed up with Go Proposal and by the sounds of it put the prices up accross the board.

Has anyone done this before and how did it work out?  How was the deal structured?  Im sceptical that I would be buying a load of useless clients they dont want...

 

Thanks.

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By Paul Crowley
22nd Sep 2020 10:37

On a conference had a chat with someone from a large firm, following a lecture along the lines of get rid of clients that cost time and stress.
That is what they had done. Got rid of unwanted clients by selling to smaller firm.

Their existing fee structure may be higher than yours, so may not be a problem, but clearly they think these clients will resist fee increases.

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By DJsy
22nd Sep 2020 10:58

Yes.

Expect to pay between 0.8 to 1.2 times recurring fees if doing upfront and depending on client base. If they are dumping the clients I would expect lower end.

Last time we did it it was a retiring sole practitioner. We paid 25% of the fees for four years. This means we were able to pay out of cashflow and it reduced risk.

Some blend might be appropriate. Always try to defer some consideration so you have some power if things go wrong (e.g. to not pay for duff clients).

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Replying to DJsy:
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By Paul Crowley
22nd Sep 2020 11:07

Deals are done a lot cheaper than that.
But the clients come without staff.

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By I'msorryIhaven'taclue
22nd Sep 2020 11:11

A good number of my clients - not to mention the firms round about the office - are on the verge of going bust. Rishi's handouts have delayed their demise.

Are you being flogged a dying parrot?

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Red Leader
By Red Leader
22nd Sep 2020 14:13

Your due diligence will flush out any nasties. When I sold a block of fees, the buyer went through a year's email history of the largest client I was selling. By doing that sort of investigation, you would soon see any indications of trouble.

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By ireallyshouldknowthisbut
22nd Sep 2020 16:39

It sounds like they have worked out who take more time than they are worth keeping on by doing some better "time and costs" metrics, and figured they cant tripple the fees on some clients so it would be better to sell 'em off than lose them by trying.

Their muck might be your gold, but I reckon you got a lot of clients with more time than fee coming. I'd be highly selective.

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Jennifer Adams
By Jennifer Adams
22nd Sep 2020 18:46

Remember the 80:20 rule .... 20% of your clients generate 80% of your business.
They sound as if they have spent the lockdown working out which clients are worth keeping - which will generate the most income for them. A good idea- we should all do it.
But that doesnt mean that it wont be a good deal for you.
They are a larger firm and have probably done a due diligence of themselves and importantly their staff and found that there are some clients the margins for which arent worth their while acting for. Their fees are prob higher than yours.
Just do due diligence. You neednt take on all of the clients.

Have a look here for advice - read the newletters in particular.
http://draperhinks.com/

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By turchyna582
22nd Sep 2020 18:51

If you have not signed up to anything with anyone, and this firm's intentions are already well known in the locality - why not simply increase your market exposure (and by default potentially improve the knowledge/awareness of those clients who probably know they are at risk of being 'sold off').
It is a free market - many clients are not even aware of the existence of other firms. Why pay anyone for 'new clients', who are legally free to approach you anyway?

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Slim
By Slim
22nd Sep 2020 20:09

Perhaps they are not profitable for them but will be for you, if you have smaller costs. I wouldn't be paying the standard multipliers.

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