Have you ever received a “Dear John” letter abruptly ending a relationship? It probably felt sudden, impersonal and maybe even unexpected. Unfortunately, some business owners send the same type of cold correspondence to their clients when transitioning their company. This type of approach can affect the relationship and ultimately cost the business money.
Why the Approach Matters
I recently received a letter in the mail from my dentist, who has been my provider for over seven years. I knew he was getting up in age and was eventually going to retire, but I was still shocked by the generic letter that immediately came after my last visit. Addressed to “All My Valued Patients,” it made me truly wonder how valuable I was to his practice. Don’t get me wrong, he wasn’t getting rich off my routine cleanings, but to not tell me himself only a few days before while I was sitting in his office?
Keeping an Eye on Customer Satisfaction
The letter stated that my dentist had sold his business to another practitioner, who I don’t know and am not willing to blindly follow. Since the practice will most likely lose my business because of how the transition was handled, I started thinking about how they could have handled the situation better.
I reached out to one of my colleagues who specializes in selling and merging dental practices and his insight shocked me. He told me that a typical transaction between retiring or merging practices loses 30-40% of their patients when a transaction occurs. After doing further research, I found out that typical “rules of thumb” for dental practice valuations were 60-70% of annual sales, which falls in line with what my colleague told me. Can the sales price get better? What about a valuation of 100% of sales? How could we increase the value of the practice?
A Better Way to Communicate Your Transition
What if your business could guarantee that a vast majority of your customers will stay after a transition? Communication can help create a smooth and seamless transition in the eyes of the customer. Keeping the customer satisfied will encourage them to stay with the practice and increase the value of the business.
How can you better communicate a transition to keep your customers satisfied? First, start preparing early. Knowing that an owner is going to transition within a certain period of time, start communicating to your customers 12-18 months down the road. Make a soft introduction to either the next generation, key employees or the new acquirer at an appropriate point in time.
Consider having a transition period where you work beside the new owner, or owners, to create a new comfort level with your clients. This show customers that the level of service and care will not waiver with a change in ownership.
Taking a few small steps can add more value to your client relationships and ensure upwards of 40% of clients don’t walk out the door on day one following a transition. Contact an Anders advisor to find out how our Business Transition Planning Services Group can help your company implement approaches to retain clients and add value.All Insights