What to do when key client relationships are tied to the previous owner?

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September 13, 2024

by a searcher from University of Florida - Warrington College of Business Administration in Miami, FL, USA

How do you prevent revenue loss if you realize post-acquisition that a larger-than-expected client share was only sticking around because of the previous owner?

Would you try to get the owner to stick around longer, or do you trust that you can provide enough value that you can retain the clients on your own? Or do you accept the loss and go heavy on customer acquisition?

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Reply by a searcher
from University of Texas at Austin in Houston, TX, USA
If customers only stuck around for the previous owner, does that mean that the business is selling an undifferentiated commodity (price driven)? Or is there something else going on?

Find out why other customers are staying and double down on that.

Why would customers leave if the owner leaves? They is cost and risk to changing. I assume the old owner is not competing with you.

Either way, yes get the former owner to stay and see if you can convert his customers to yours with his help.
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Reply by a searcher
from University of Miami in Key Biscayne, FL 33149, USA
I’m dealing with this right now in a large properly mgt business I’m getting ready to close on. I am mitigating that risk by having a 20% seller note that is forgivable based on client attrition in tranches up to 75% forgivability. During the 2 year forgivability period, I will be focused on establishing my own relationship with the clients.
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