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One client taking up practice

Should we dump a client worth nearly 50% of our practice?

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We have a client worth more than 50% of our practice (128k out of 250k). Each year we try to reduce our reliance on them, but they keep sending us more work (e.g. another group company). It is hands on work - bookkeeping, payroll, supplier payments, month end accounts, year end accounts and liaising with auditors. It is not so much the overall time spent on them, it is the constant disruption to our schedules. Deadlines and priorities are moved all the time. We have to put aside our other client work to attend to their needs. I feel like I am leaving the smaller clients down constantly.

It feels almost like a job rather than running a practice. I was in a supermarket car park at 6pm one evening, picking up supplies for the family dinner, when I get a call from our office saying the client has a deadline for 9am the following morning. I didn't even have my work laptop with me. This kind of thing happens regularly,

Now they have given us 50 hours work to do by Friday, after I had emailed them last week telling them it would be done by the end of the month. There is just a lack of respect. There have been some personnel changes in the last year with this big client and they are not reasonable people. All my other clients are great, which is the reason I set up on my own in the first place.

I have almost made up my mind to walk away (or at leasst when I insist on more reasonable deadlines, to act like I am willing to walk away). In terms of cashflow, we have been billing this client very well and so have been putting this cash aside for a rainy day. It would be tough to let them go, but I am confident that I (and the staff) would be happier and we would be able to grow the practice over time. But the amount of money lost is holding me back.

Has anyone done this before? Did it work out?

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By Maslins
04th Sep 2018 12:01

Wow, that is a BIG chunk of your income.

I think in your shoes I'd send something formal in writing stating things you're unhappy with, giving examples. This will then likely either:
1) lead to them finding someone else, or
2) lead to them behaving a bit better...at least for a while.

If they stick with you and things don't really improve, then you've got better grounds to leave. You'd made a clear request, which they ignored.

I think if you were to just drop them now, they might think that very unprofessional/dropping them in it. Yes you've got your reasons, but possibly they're not aware.

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to Maslins
04th Sep 2018 12:46

Thanks Maslins.

I know. The income just crept up as they added more group companies and related companies. We tried to counteract it by adding other clients but we couldn't keep up.

They are already aware of how unhappy we are with the deadlines, but it would do no harm in putting it formally in writing. I am having a phone meeting with the finance director today.

Once I make the final decision, I was thinking of giving them 2 months' notice. All the annual filings will be completed by the end of this month.

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04th Sep 2018 12:07

Are you a member of a professional body?

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to MissAccounting
04th Sep 2018 12:32

Yes. Chartered.

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to Cardigan
05th Sep 2018 10:33

Cardigan wrote:

Yes. Chartered.

Might be worth checking youre not falling foul of the Code of Ethics? - https://www.icaew.com/membership/regulations-standards-and-guidance/ethi...

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04th Sep 2018 12:14

Do you not think there is a self interest threat here in terms of your firm having undue dependence on fees from this client?

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04th Sep 2018 12:38

If you let them rule your practice then its a problem.

You need to just say "no" a lot more for starters. If I was called at 6pm for a job needed by 9am I would just have laughed and asked if they had a time machine, so they could have asked me last week.

But fundamentally its completely unhealthy to have one client of that size.

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to ireallyshouldknowthisbut
04th Sep 2018 12:51

The deadline was a regulatory one and would have caused huge problems for them if they missed it. If it was a once-off, I wouldn't have minded but it wasn't. They are using us as whipping boys when they forget the deadline is tomorrow.

It feels like a bad relationship. You enjoy the money and expect them to change. And then you are disappointed when they don't.

It is hard to turn away new work when they send it our way but it's got to the point where they are ruling our practice now. It is definitely unhealthy in all sorts of ways.

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By zarar
to Cardigan
08th Sep 2018 15:30

If you are that involved with them, do you not know all the statutory deadlines?

Cardigan wrote:

The deadline was a regulatory one and would have caused huge problems for them if they missed it. If it was a once-off, I wouldn't have minded but it wasn't. They are using us as whipping boys when they forget the deadline is tomorrow.

It feels like a bad relationship. You enjoy the money and expect them to change. And then you are disappointed when they don't.

It is hard to turn away new work when they send it our way but it's got to the point where they are ruling our practice now. It is definitely unhealthy in all sorts of ways.

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04th Sep 2018 12:48

Perhaps you need to sit down with the MD (or whoever) and discuss with them whether they need to be changing their working relationship with you. It seems a bit ridiculous that they're outsourcing such a significant amount of work. Perhaps if e.g. they could appoint internal accountants / bookkeepers, your firm could concentrate more on the month end / year end stuff; and perhaps the payroll if they want to keep that distant.

Such a change would almost certainly benefit both parties.

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to Kevkava
05th Sep 2018 08:49

help them professionally move ahead with a transformation plan- put say a FT interim [yours] FC or have one -or similar- appointed internally
an is situ head . would relieve some of your office and 'personnel' structure /cost base to accomodate a small fee reduction...
if they have a finance function/fd/fc already - they ought to be reviewed !!!!

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04th Sep 2018 12:51

I don't think you necessarily need to dump them, rather you need to stand up for yourself.

When they first give you the work they want done, you tell them when it will be done by. If they subsequently move the goalposts then stick to your guns and tell them "we agreed on xx/xx/xxxx for delivery and I can't move that forward".

If they choose to no longer work with you then so be it, you're not losing anything since you were thinking of dumping them anyway; if they grudgingly agree then you can keep your fee income without suffering your practice being run by your clients.

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04th Sep 2018 13:09

@ Cardigan (OP).

At a time when there is a demand for new clients, from established practices, I believe (without causing offence) that you are perhaps “missing a trick” here.

If you decide to “unload” this client, and there are indeed good reasons for your not wishing to allow the client to cause disruption to your practice, may I suggest that you may have a potentially valuable asset in terms of the goodwill. I believe that you should be seeking out, by various means (including approaching practice disposal agents) potential buyers of the “goodwill” in this client. If you could establish good liaisons with one or more other accountancy practices, who are seeking additional clients, you could be in a position to:-

(i) Sell the goodwill to another accountant,

(ii) Advise the client that you consider that his best interests are best served by his agreeing to henceforth use “Brown and Cooper” as his accountants as you “know Tim Brown very well, and I know that he provides a very good service to his clients and ideally has spare capacity such that he would welcome acting for you, especially as he has great experience of xxxxxxxx (the sort of services which you provide)”. You get my drift, I hope – you are making it as easy as possible for the client to move over.

Even if you have to accept a price for the goodwill of less than the norm, the opportunity to make a capital gain must make it preferable (for all three parties) to a “I can’t act for you any more because of xxxx, so please find yourself another accountant”.

Basil.

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to fawltybasil2575
04th Sep 2018 16:56

Basil, I wonder if there is any goodwill to sell here.

Is there a market for the purchase of a single client that has no loyalty to the buyer and (if they put their act together) no need of the buyer's services in its current form?

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to andy.partridge
04th Sep 2018 23:17

Andy,

I believe that the “50%” factor is unhealthy and, with full respect to other members’ views that the OP could engage other staff, I don’t believe this would solve the problem; as I think the OP would still, having the overall responsibility, find he had to devote material time to the client.

I do however gain the impression that the client IS highly regarded by the client (albeit the client is “putting on” the OP unreasonably).

As the OP and the client are in earnest discussion regarding the client’s requirements, I think that this may be an ideal time to introduce a “third party” into those requirements. Certainly, IMHO the suggestion in my last post of selling the goodwill must be preferable to just “letting go” (even if the sale price is substantially less than the normal “approx. 1 x annual fees”).

Basil.

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04th Sep 2018 13:16

Equally, they must be wondering why they are spending all this money with you when it would be far cheaper to manage it in-house.

You need to extricate yourself from this. It will be more painful for you if the decision is theirs.

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to andy.partridge
04th Sep 2018 13:28

I know. I think about this regularly. It must be cheaper and more efficient to have someone in house to do this. It appears to be their policy for all their operations worldwide. Their finances are in a bit of a mess as a result. No one is taking control.

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By SXGuy
04th Sep 2018 13:29

And this is why I never ever take on work like this. You are basically there personal accountant with jobs on the side.

If 50% of your turnover is based solely on work from them, I'm not suprised they expect you to say how high when they ask you to jump.

Id considered taking on work like this before and realised quite quickly my other clients would lose out. My time would be taken up on these jobs and my other clients would suffer as a result. It wasn't worth it.

With that level of income though why couldn't you employee someone to take most the work load away, that way you can keep your distance and pay someone else to deal with it, while retaining the income.

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04th Sep 2018 13:39

For that sort of fee what not hire another qualified person to deal just with them, leaving you freer to build up the practice.??

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04th Sep 2018 15:09

As said above could you not just employ some people who only look after that company so can deal with the short notice requests and make a margin on it without it impacting on your core business.

Why not outsource it to give you more flexible resources on tap.

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04th Sep 2018 16:10

We were recently in this situation. the client kept growing and putting more and more work our way. It put us under a lot of pressure and we also felt that we were letting down our other clients.
We encouraged them to find another larger accountancy practice.
The relief when they decided to move was wonderful. We are working with their new accountants on a smooth hand over. It remains to be seem how we will deal with the loss of income in the office but we are all enjoying the ability to give more time to our other clients.

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to sally1964
04th Sep 2018 16:22

Thanks so much for this.

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04th Sep 2018 16:31

Thanks for all the replies, everyone. I really do appreciate it. There's a lot to digest there.

I've spoken to the Finance Director and she has promised to change things.

I'll sleep on it tonight and let you know how I get on!

Thanks again.

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By marks
04th Sep 2018 21:06

As said above having 50% of your income dependent on one client isnt healthy. But by the sound of things you would be happy to lose them which most accounting firms wouldnt and is why most end up bending over backwards for clients that they rely on so much for fees.

For this reason our biggest client only accounts for 4% of our income so we arent reliant on them and could survive if they left. If a client accounted for 10% or more of our income I would start to worry that we would concentrate on them to the detriment of others.

Personally I would pursue the following options

1. Selling the client onto another firm for say 50% of their annual fee. There will be firms who will have the capacity and experience to deal with them

2. Hire 3 staff who work exclusively for this client and help you out with other clients where there is slack (say one qualified paying £40k and two assistants paying £25k each). Leave you a profit of £40k and frees up you and your rest of staff who dont need to deal with them any more.

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05th Sep 2018 09:21

I was thinking about this last night, and my approach would be

1. Discuss your concerns (which you have done) whether or not it will make any difference is another thing.
2. Try to impose some discipline on them to get work through in a planned manner. Ie don't be the sort of guy they can ring up at 6pm and expect something done by 9am. Ultimately their failings as a business to not plan properly ought not be your problem, so you need to be much harder on them and say the magic phrase "no I cant do that by then". You probably only need to cost them one or two deadlines before they get the hint. You can also do the "it probably wont get done, but we will try" and send stuff through with 5 minutes to spare to ensure they are sharing some pain and brown trousers even if its been done for a week.
3. Identify which bits of it you want to do. Eg there may be routine transactional work which is fine and profitable
4. Get someone else to do the rest.

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05th Sep 2018 10:22

I was out most of the day yesterday and am consequently coming in very late to this.

Personally, I wouldn't be happy if I had a single client - or client group - which represented more than 20% or 25% of turnover. You just become too reliant on them.

However, in the short term, you would need to assess the effect on your staff. Presumably you'd need to offload a few. How does that sit with you ? Or would you be confident of filling the void with catching up on those jobs you've put to one side, eliminating the need for overtime or whatever ?

I haven't been in quite the situation you describe but I would suggest that you simply tell the client that you cannot meet the unreasonable deadlines they set and, if they continue to make these demands, they'll need to look elsewhere. You've asked them politely not to do it and they've taken no notice. I wouldn't allow myself to be bullied.

So far as goodwill is concerned, another firm might pay an "introduction fee" but, at the end of the day, the client chooses his accountant and that fee would, more than likely, be subject to the client staying for an agreed length of time.

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05th Sep 2018 13:18

May I add my 'twopennyworth'? Showing my age here!
As someone who has tried to buy a block of clients I can tell you that its not the same as buying a pint of milk! It takes time and although the client is taking up a lot of your own and your staff time it is a large fee amount to lose if they go.
Buying via goodwill is only a one off 1:1 value and in any event why do you think the client will go to whoever you suggest? What about 'clawback'?
Poss too much hassle for a one off reward- if you can find someone to buy.
You've other clients to look after as you say.
You also say there is a lack of respect. That is because you have allowed them to run your business life (but then I can talk).
Have a word with them, set some parameters. Tell them that you are reviewing your fee structure and for clients who expect the service you are giving (as in immediate) then they are to be given a 'gold' service and will either get a staff member allocated to them or you will take someone to do the more basic stuff as their own special contact. Use the words 'special' a lot. Say you will always be in the background and will be able to advise on the more complicated stuff.
Set out exactly what you will do for them (LoE amendment) and mean what you say. Put their fee up to compensate for the 'gold' service
The worst that can happen is that they leave but if they do that will mean a big hit for your business.
Or try to find a bookkeeping business for whom you can have an arrangement.
Then you can concentrate in building up your business with other more appreciative clients until you are certain you can exist without them and to ensure that your % split is OK. Then you can tell them to go. Care is needed here - you dont want to cut your nose off to spite your face as they say

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By tom123
06th Sep 2018 12:09

I am a bit mistified that the client is large enough to have a 'finance director' and also pay out such a chunk in fees.

For that amount of money they could have at least 1,2 qualified staff.

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By tom123
06th Sep 2018 12:09

I am a bit mistified that the client is large enough to have a 'finance director' and also pay out such a chunk in fees.

For that amount of money they could have at least 1,2 qualified staff.

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07th Sep 2018 11:35

Having been in the position of having a similar client, here are my thoughts.

No one client should take more than 25% of your income. If/when your rainy day fund can carry the business for at least nine months, you should have the courage to broach The Subject with the client. (I say nine months, simply for three to settle down and three to gear up, with three to hire more staff or, heaven forbid, let people go.)

When you approach the client try this tactic. Explain a core value, like one of excellence, and say how important it is for your practice to do its work well and to maintain its reputation. The ever moving deadlines are creating problems: the work for your other clients is suffering, but - crucially - the mad panics are compromising your core value of excellence for them, your valued client. Therefore you will be hiring extra staff to cope with this. Accordingly, your fees will go up by 25%. Unless you are underselling yourself and not charging a reasonable fee, the chances are the client will walk away or try to barter. Hold firm. Let him walk away.

If you retain the client, seriously look at outsourcing work (which we have done) to free up internal resources and so be able to take on new clients to get to the 25% max for one client. Also, when the client adds more work, like a new company, simply say yes, but increase the fee at the very least proportionately.

I speak from experience. Tough, but very much doable.

Best of luck

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07th Sep 2018 12:17

I back Basil's approach. Clean and shows you care. The poster and many others are concerned that % size of the fee is worrying.

Once sold the goodwill figure will help to deal with the shortfall in the loss of income. Although the poster does not say I do wonder if new client maketing is being ignored because of the demands.

Finally if the good will is sold in arears no or very few warrantees will be needed

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to pauljohnston
07th Sep 2018 18:05

I genuinely do not see a viable market for the purchase of a single client with no loyalty to the buyer that would require the buyer to invest in such a huge resource to service it.

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to andy.partridge
08th Sep 2018 10:13

Neither do I. Or at least, the market is very limited.

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07th Sep 2018 13:12

You've got yourself in a very bad position by being overly reliant on one client and not recognising or dealing with the problem earlier.

You've compounded the problem by giving in to their setting of deadlines- the example of 6pm call for a 9am deadline tomorrow is a case in point. You need to be firm and say 'can't be done, you'll have to face the penalty'. Let them incur a few fines and penalties whilst pointing out the long lead times before these might be incurred.

Then sit down with the FD and the other members of their board and explain what you want from them, and when. Agree a schedule- in short, you need to get them organised. Get it in writing.

Then get them to take inhouse or outsource the basic works like payroll, book keeping and supplier payments- you can assign a member of your staff across (at a healthy margin!) to assist in this transfer and to put all the systems in place - they will eventually take them on full time or you will get back a member of staff with valuable skills you can utilise.

As they sound a bit messy, it's up to you to provide the lead and get them better organised- if they have been growing strongly they might have not stopped to re organise how they do things and need someone to come in and tell them. Lots of lovely consultancy fees (which you might even third party and take a margin).

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By rawa363
07th Sep 2018 16:43

No business should ever have one client/customer that represents more than 20% of t/o. Few businesses could survive the sudden loss of income of this size.
What you must do is become very active at new client acquisition and reduce your dependency on this client. To get rid of them once you have more new clients put up your prices significantly, they may choose to leave you or if they stay it will make the pain more bearable.

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08th Sep 2018 09:59

So ; you sack the smaller clients in favour of the big client. Then big client sacks you. Had you thought of this scenario ?

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to Mr J Andrews
08th Sep 2018 11:17

Mr J Andrews wrote:

So ; you sack the smaller clients in favour of the big client. Then big client sacks you. Had you thought of this scenario ?

No one mentioned sacking the smaller clients. It's precisely because the OP is concerned about the effect on their smaller clients that the thread has been posted.

I like the idea of taking on someone to exclusively manage the client, but the OP must call the shots, not the client. Set out clear lead times and don't let the client bully you.

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By Arcadia
08th Sep 2018 16:40

What about merging with another practice? Are you happy staying at a practice size of £125k pa if you lose the big client, or do you have bigger ambitions? Are you really charging them enough? I suspect you are a very cheap option for them. You imply they are a major international group and £125k is probably neither here nor there to them. If they went to the outsourcing dept of a larger firm they would be charged at least £500ph for the partner, £350 for a manager, and £200/£100 for everyone else. Is this the sort of level you are charging?
I know it is probably only one example, but the 6pm/9am thing - is that really so bad? Don't you have to put in the hours for those late returners in January? Have you never had a small client call you wanting a reference for a landlord the next day (or the same day), or a new client up against it? I think this sort of thing happens - we are there to provide a service after all. By all means do all you can get them organised, but I wouldn't ditch them. You never know what's round the corner, and if you are putting aside the profits - maybe you get to retire early!

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12th Sep 2018 18:25

I know I’m coming in late, but I’ve just got back from holiday ...

We have 3 sets of group clients who between them are 47% of our t/o. As with the OP, my smaller clients lose out. Each year since I began (2014) I’ve lost a 25%+ client, one year I lost a 20% and a 35%. Christmas was cancelled that year.

Over the last 12 months I’ve been desperately trying to move the %s, which was generally working, but my largest group client has added a new big chunk (40% client in 2015, 20% now, going to 35% in the next few months). This does worry me as I can see the work from this client only going one way, until the take a big chunk in house (I lost 10% of overall t/o in 2016 when they did that). I think I’m going to outsource the processing on the new & future work whilst I stick with the advisory. I do like the idea of and may employ a staff member who will spend 75% of their time on that client, whilst I spend more time on lead gen, to try to a) reduce the %s and b) have work for when the leave.

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18th Sep 2018 13:55

You need to get rid because ethically they are too big for you. Also, they are taking over your life. But don't just walk away, sell them to another practice.

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