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Thoughts on losing a client

Losing a client

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I lost a client today, got the dear John phone call this afternoon to say they were moving to a bigger firm, reason was that investors wanted to move to a bigger firm, time for a change, fresh look at the accounts etc. Initially I thought this wasn't bad news because the fee was too low but after thinking about it I was also left feeling disappointed. I had this client from the begining when they started five years ago. Tech company, first year t/o was about £30k and now they're due to break £1m this year. They've received approx £4m in funding in 2019 and head count has gone from 2 directors initially to 12 ft staff. The original fee was £1,500 for standard VAT, payroll and compliance but I could only marginally increase the fee over the years and this year I had been back and forth about increasing the fee to a monthly rertainer of £500pm. The relationship was always good and we went back and forth a few times on the fee but nothing was agreed. 

In one sense I'm happy because the existing fee wasn't feasible but disappointed because they got a very good service and it's only until after they have left and gone to a big tier firm that they'll realise how much we did for them. On reflection I'm kicking myself for doing so much over those years because there was an informal understanding that when business picks up that the fee would be increased and they favour would be repaid.

It begs the question as to how much should we do for our clients? I once heard it said that "we could be the worst accountants in the world and our clients wouldn't know" but the opposite is also true, we could be the best accountants in the world and our clients wouldn't know.

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By Jholm
28th Aug 2019 16:45

I think the nature of the game is that people will come and go and to not get too attached. Sure it's a great feeling to retain someone for so long, watch their growth and build great rapport but there is only so much you can do.

The time freed up can be invested in another client and the cycle continues.

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By mrme89
28th Aug 2019 16:55

The business did pick up and you kept your fee low.

You need to price your work at a level that you think is a fair price for the amount of work involved. You are not a charity.

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By gainsborough
28th Aug 2019 17:08

They may regret the switch when they start getting billed for every email and 5 minute phone call but agree with the above comments - this was a business transaction and not a favour to be repaid.

Hopefully, you can use the time gained to get more profitable clients and might be worth checking your other clients to make sure that you are billing your true value.

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By ireallyshouldknowthisbut
28th Aug 2019 17:35

Its happened to us too, the business has grown and as we are used to the client and like the client and not wanted to pee them off, our fee not really grown with it, so you end up feeling a bit deflated for having not really charged your full worth.

We try to be flexible around fees when clients are facing tough times, but ultimately you should not do anything on a "promise". You need to be paid as you go. Easier to say than do of course.

You will inevitably find the new accountants will be charging a lot more than you when they go from "the little guy" to a larger firm set up, so it wont be about fees, but about their perception of what the new firm can do for them. I imagine they didn't agree your new rates due to them looking to move on anyhow, rather than that prompting a shift.

But ultimately you need to be happy for them that they have outgrown you. You tend to do your best work when you work for lots of clients facing similar issues, and we actively turn down work for clients of this size as its simply not core for what we do, which is more around 1-2 person businesses, albeit a few are a little larger.

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By Red Leader
28th Aug 2019 17:59

I agree with ireally's last point in particular.

@OP: how typical was this client in terms of the technical issues etc that arose? Was it an outlier? Or was it part of your mainstream where you're positioning yourself?

Fast-growing businesses will inevitably outgrow you at some point. Even Grant Thornton experiences the same phenomenon when clients move to the Big 4!

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By michaelbeaver
28th Aug 2019 18:19

This happened to us recently as well, although in our case we were asked to retain the payroll function.

We understand it, they had gone from the founders and have now had around £5m of investment in from the big end of town, so they've moved accounting and tax to a second tier firm, mainly from pressure from their investors to go with a better known firm.

I'm quite neutral about it, to be honest. They had, as in your case, certainly outgrown their fee, so seeing them leave was partly a relief.

In all of these cases, I reflect on what I learned in performing services for them, and then turn my attention to get another client in for the same fee but less work.

It's all horses for courses.

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Replying to michaelbeaver:
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By Tickers
28th Aug 2019 18:48

michaelbeaver wrote:

This happened to us recently as well, although in our case we were asked to retain the payroll function.

We understand it, they had gone from the founders and have now had around £5m of investment in from the big end of town, so they've moved accounting and tax to a second tier firm, mainly from pressure from their investors to go with a better known firm.

I'm quite neutral about it, to be honest. They had, as in your case, certainly outgrown their fee, so seeing them leave was partly a relief.

In all of these cases, I reflect on what I learned in performing services for them, and then turn my attention to get another client in for the same fee but less work.

It's all horses for courses.

What I find interesting about the pressure from investors excuse was that they've already received the funding. So the investors were happy to invest the £4m when the accounts were being prepared by a smaller firm so why they excuse that they need to change after they received the investment?

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Hallerud at Easter
By DJKL
28th Aug 2019 18:27

I suspect when clients wish to avail themselves of a firm's say corporate finance /equity raising skills that they will start looking beyond the smaller firm- a belief, sometimes mistaken , that larger firms have better connections etc.

They may have a better skillset but actually the best connected accountant I ever worked with was a sole practitioner who assisted/advised me when I was sorting out our debt position with our main lender post 2009- he had an address book to die for , right up to main board level /senior lending level with the major Scottish banks- bigger firms are not always better.

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By memyself-eye
28th Aug 2019 18:37

Let us know if they 'beg' to come back to you in a year or so!

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By SXGuy
28th Aug 2019 20:40

I had a client, who had been with the firm since the very start of his self employment some 20 odd years ago. He had a number of successful businesses over the years. Built up a friendship outside of work and often met at social gatherings.

His last venture was the most successful ever and grew massively which enabled him to practically move abroad in the sun and leave it to run itself back in the UK.

He felt he needed someone closer to him to deal with all his tax affairs and so he left.

But he felt so guilty about it, was almost in tears and couldn't stop apologising.

Although I was abit down with the loss of income I could see that it made sense and I was happy to see him go. I guess the point is at some point no matter who they are there is always a chance that you will lose a client, and the only thing you can do is try and replace what you have lost.

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By Kaylee100
28th Aug 2019 20:47

Wish them all the very best. Say how you've enjoyed working with them and pat their back on how well theyve done. Tell them they know where you are if you can ever help in future.

These things happen and clients do outgrow small firms. Equally, bigger firms often network and talk them into moving with promises of better service, more specialist advice or unicorns. Whatever, fair or unfair, its out of your control.

Its the nature of our game.

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Replying to Kaylee100:
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By Tickers
28th Aug 2019 22:11

Kaylee100 wrote:

Wish them all the very best. Say how you've enjoyed working with them and pat their back on how well theyve done. Tell them they know where you are if you can ever help in future.

These things happen and clients do outgrow small firms. Equally, bigger firms often network and talk them into moving with promises of better service, more specialist advice or unicorns. Whatever, fair or unfair, its out of your control.

Its the nature of our game.

Everything that has been said on here is perfectly reasonable but ultimately I'm more disappointed with myself for going the extra mile all those years when really I should have stuck to my guns and been tougher with the client. Lesson learned.

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Replying to Kaylee100:
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By SouthCoastAcc
29th Aug 2019 11:27

Absolutely. I think of it like this, they gave you their custom and I'm sure you are very grateful for that.

Also, they could come back to you in future.

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By Moonbeam
28th Aug 2019 20:58

I agree with all that's been said. What I would urge you to do in future is to be quite tough with clients about your fees. It won't stop businesses like this going to the next level up at some stage, but at least you won't feel like you've been trod on. You need to market your skills and services more to your clients. And if they're using everything you offer, ask them what more you can do, and what their comments are about the existing service.
If there's something you can reasonably do better you need to know, and if your service is fantastic it will be good to hear about it. Ask them for a testimonial as well.

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By bernard michael
29th Aug 2019 10:07

I quoted and won a small company client 6 years ago from a top 100 firm. Since then their profit has increased massively, with very large retained cash balances. I still keep my fees low (increasing only slightly) because of the goodwill created which has resulted in them having sent me 18 new clients over the period
Perhaps I'm lucky or it's good marketing!!

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Replying to bernard michael:
By Moonbeam
29th Aug 2019 10:38

18 new clients! Wow!

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Replying to Moonbeam:
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By bernard michael
29th Aug 2019 10:43

Moonbeam wrote:

18 new clients! Wow!

Yes but over 6 years from this source

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Replying to bernard michael:
By Moonbeam
29th Aug 2019 11:17

18 clients over 10 years would suit me!

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By jon_griffey
29th Aug 2019 11:15

A few thoughts here..

- At the smaller end of the profession, we give a personal service, and so losing a client can feel like being dumped by your girlfriend. It can be tough to get over.

- There is also the danger that by keeping fees on the low side you can appear too cheap and so you can't be any good. This really does happen.

- Always leave on good terms, with the offer that they would be welcome back. We have had many clients come back to us when they discover that the grass is not greener.

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Replying to jon_griffey:
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By SouthCoastAcc
29th Aug 2019 11:29

reassuringly expensive :)

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PJ
By paulgrca.net
29th Aug 2019 12:56

Never burn your bridges with clients that leave always try to stay on good terms. In my experience somewhere between 10 and 20% come back at some latter stage.

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By adam.arca
29th Aug 2019 13:10

Agree with all the above comments, really. In time, every accountant in practice will experience some or all of these situations. Moral of all these stories is that clients generally only see what they want to see and the reason for change is much more likely to be them than us.

My own war story dates back to my naïve and callow youth: I had a client with whom I'd always had a great relationship; he brought a partner in and that should have been a warning to me (it always is now); I then agreed to prepare the next set of accounts, and defer charging my fee, so that they could raise a loan and use a tiny part of that to pay the fee; they got the loan but then wanted to pay my fee in instalments; at this point, I dug my feet in and insisted that, in that case, they also pay for the next year in advance over the same number of instalments, thereby effectively doubling the cash outflow every month; a few months down the line and I got the sack for being "too expensive" (at the time I was raging but, on reflection, I really do think they were stupid enough to have completely forgotten about the deferral of the earlier accounts fee); then, surprise, surprise (not), the client ends up going to the former accountant of the business partner.

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By Jane Evans
29th Aug 2019 16:26

I received a good tip from a friend who works in the construction industry. He said it is fine to offer a client a low fee for whatever reason, but always explain that it is at a discount to the normal fee.
Eg say, “Our normal fee for this amount of work is £3,000 pa but as you are starting up we can offer a discount of 30%.” Then as the business becomes established you can withdraw the discount. This way you have educated them on the normal fee, and the future negotiation becomes easier. I have found this works well.

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By Moonbeam
29th Aug 2019 17:52

I do question why we think it's OK to discount our charges. The client will of course love it. He can't get money knocked off much else when starting up. And if he really can't afford the accountancy fee for a startup business he doesn't have a business.
Easy for me to say. I have a client whose fees went up regularly because his business got larger. Then he had what could have been a terminal illness, and the business limped along for a year while he recovered. My fee reduced for that year, but I haven't been raising it for increased activity since then, so that's not right either.
We all need to be more clear about how wonderful we are, especially with ourselves!
I personally need to woman up!!

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By Glenn Martin
30th Aug 2019 00:00

Don't beat yourself up over it. You did nothing wrong, the client was pressured to move by his new investors. He may well come back to you with a new venture.

The size of client is not that big to be with a bigger firm, they will get hit with bigger fees for lower service level than you provide as they will be small fish compared to audit clients.

I am guilty of helping startups he need more of your time than they can afford to pay for. You win some you lose on some. I have jobs not get anywhere I had some that went big and we are still involved on a much higher fee, and they respect the punt we took on them in the early days.

I can make that decision as its my firm, a manager in a mid size firm probably does not have that autonomy.

Aside from fees their is a social benefit to helping startups to get going and create jobs, as you are seen as a good egg who helps people get established, you just need to have that sit down with them after 18 months and keep chipping that fee upwards.

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By JimLittle
30th Aug 2019 10:41

I am like you as go that extra mile for clients and sometimes even without pay but unfortunately some clients cannot see or appreciate the extra effort and value they are getting. Sometimes hard not to take it personally. It never greener on the other side.

There is one chaotic client where I have gone out of my way to help them over the past one year. I could not have provided a better service .

I received an email yesterday from them they need their accounts and corporation tax return done asap when its not due until next year - I am always chasing them several times and now they are chasing me. Reading between the lines they are probably looking to move elsewhere. Its is annoying not the fact they are moving as I have so much work on but they appreciate the hard work I have out in. Anyway their loss.

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By billgilcom
03rd Sep 2019 10:24

Their loss and they’ll never know what they missed is the best way of looking at it. More time for others or new projects

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By itp33asso
03rd Sep 2019 11:04

FT: "Judge accuses HMRC of making up figures to terrorise people"

Article is gated. But if anybody has subscription to the FT perhaps they could paste and copy it and share it with the rest of us!!

(Aren't I naughty!!)

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By The Accountant
03rd Sep 2019 12:39
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By thevaliant
03rd Sep 2019 16:58

I will say, don't worry yourself about losing them.

You might get them back.

In the last ten years, we've had two clients leave over fees. Both came back within a few years when they realised the new fee quote from the new client was nothing but a 'get my foot in, then triple it thereafter, and provide a worse service'.

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By sallyrichardson
10th Sep 2019 11:49

We do an incredible amount of extra work for our clients and have very high retention. One recently left and went to a bigger firm with a big shiny office, a couple of months ago just before they were due to start MTD for VAT. We then got a call from them last month saying their new accountant was wondering if we had signed them up, and if we could do their return for them as the new accountant "wasn't ready to do it yet". They also asked if we had been "hopefully using the client's HMRC account to submit VAT" so they could do the same. Seriously. I had to respectfully decline to help and point out that all our clients records are accessed via our portal as per HMRC rules.
This experience cemented with me that we do a fab job, bigger is definitely not always better, and that this client already regrets leaving. Have faith that in this type of breakup, it's not you it's them!

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