Retiring Owner & Existing Clients
Retiring Owner & Existing Clients
(OP)
A retiring engineer has decided to close his business. I became aware of it at the last minute. If we were to come to an agreement and once the original owner has retired (few weeks to go), could I realistically inherit his clientele? It is very small practice and I have never been affiliated with this firm. Also not much of assets to purchase. What is the best way to make a transaction that is fair for both parties? Thank you.





RE: Retiring Owner & Existing Clients
Generally the purchaser and owner will get a professional business valuation report made and then reach an agreement on the price and financial details of the transaction. There are a number of ways to value a business and different multipliers depending on type of business.
"Gorgeous hair is the best revenge." Ivana Trump
RE: Retiring Owner & Existing Clients
Be careful with name changes for the business and with the transition of these clients. Encourage the retiring engineer to remain onboard as a consultant and to introduce you to his clients. If he remains onboard in some capacity, you can typically maintain the name if it is related to his name (under the engineering laws of many states in the US this is possible).
An initial name change can kill the goodwill of the business. It is usually better to maintain the name for continuity (unless there is some legal reason that you cannot do so). A slow transition to a name change, occuring over a year or so as you develop rapport with the existing clients, is usually better.
Good luck and keep us posted on the status.
RE: Retiring Owner & Existing Clients
Garth Dreger PE - AZ Phoenix area
As EOR's we should take the responsibility to design our structures to support the components we allow in our design per that industry standards.
RE: Retiring Owner & Existing Clients
If there is no transition time for client introduction, would it not be better to have him as a business development part-time contractor? As you can imagine, without any introduction to the clients, how will they stick around?
Good points on valuation by others, keeping the name & E&O. I am counting on some clients staying to "feel us" and of course few that will not continue with us. This brings me to what is this business worth. If there are no hard assets like an equipped geotechnical lab, few drill rigs, etc., and the existing clients don't get time to see me as part of the new team for continuity, what am I buying?
RE: Retiring Owner & Existing Clients
At the very least you should have in introduction to the major clients arranged and attended by the out-going owner. It can be written into the sale agreement if needed. Offer to do some lunchtime seminars on appropriate topics. Bring lunch for the seminar attendees and invite everyone at the Client's firm to attend. Don't change the business name right away. Let them get used to seeing your face and making the connection.
Do some reading about business valuations. Google 'business goodwill and blue sky' to get an idea of what you need to look at and where to expect the pitfalls.
"Gorgeous hair is the best revenge." Ivana Trump
RE: Retiring Owner & Existing Clients
What is the value of the business? Discounting hard assets, I would look at a multiplier of annual revenue, say 1.5 to 2.0 time revenue. There was a time when that multiplier would be in the 3 to 4 range, but not these days.
Another consideration is 8 to 10 times annual profit.
Keep the receivables...it will give you an opportunity to meet your new clients (though not always on a positive note!)
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Retiring Owner & Existing Clients
How many people? Breakdown of engineers vs. technicians vs. admin.?
What is primary business? Geotech consulting, subcontract drilling, lab, construction materials testing....?
RE: Retiring Owner & Existing Clients
I am after the contacts, as this is the only tangible item. I have just started my due diligence. Agree with your point about making payments based on future earnings from existing client base. Since it is in the same field, training would not be necessary- just need to interact with clients. Would be open to taking over lease, keeping name and even having owner as a p/t consultant during the transition.
In a nutshell, I want to inherit a repeat client list that will otherwise take me 7+ years to build from scratch. Counting on only 50% of clients swithching over and staying for good.
RE: Retiring Owner & Existing Clients
How many employees did it take to generate the $500k?
Good luck.
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients
I am in the geotechnical field and starting up my own consulting. If you are in Southern California and interested in meeting how can we get in touch? let me know.
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients
RE: Retiring Owner & Existing Clients