Discussion:Buying clients I brought in

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Discussion Forum Index --> Business Growth Community --> Buying clients I brought in

Supersmall52 (talk|edits) said:

5 December 2013
I came to work for a firm after five years of experience with a much larger firm with the intention to buy the practice 4 years later. We didn't sign a contract because I wasn't sure if I actually wanted to buy the firm. Now, two years in we are ready to sign a contract and begin the transfer process. The issue; I have brought in $32,000 worth of yearly business in the last two years on my own time. The current owner is saying that he would like to get paid something for those clients as well.

I have gotten 10% of billings for these clients in addition to my payroll so I have received something for my efforts. I realize that payment for them would be expected in a larger firm but I came to the firm with the plan of purchasing (also the thought process of the owner). I have been treated as a partial owner from day one as far as decision making.

I have thrown out the idea that I could pay back the 10% I received but I thought it was a bit much to pay full price for them.

Any thoughts?

LadyLiberty (talk|edits) said:

7 December 2013
I have never thought of paying for clients you brought to the firm!

I would tell the owner that you brought new clients into the firm, to show him/her that you had the ability to keep his clients. Then you would explain that as the owner would be concerned that the person taking over the firm (you) would have the skill to retain his clients.

Good luck!

AgwmTax (talk|edits) said:

8 December 2013
When you came to this firm, did you bring a block of billable clients with you? If yes then there should have been a MOU if not a contract.

When you say you have been treated as an owner, it is just that right. You actually don't have any equity or ownership interest in the business yet? Then you are an employee a key employee perhaps and since you collected your negotiated salary and a 10% commission of the clients that you solicited, I think you have been adequately compensated.

In the absence of a MOU or contract those are all firms clients so you have to now negotiate your purchase price based on the total book of business.

Terry Oraha (talk|edits) said:

2 February 2014
Supersmall, you don't have a profile. Sometimes it's difficult to determine what is fair here. Its important to know what the state law provides. For example in Michigan the non-compete laws are meant to prohibit unfair competition by an employee gained through the employees activities. In other words, whatever competitive advantage I have gained through my personal activities in my opinion is personal goodwill.

What is your personal goodwill worth. For example if you left the firm and took the client that would mean your personal goodwill with the client is valuable and the firms goodwill with the client is worthless. Vise versa if the client chooses not to leave with you. All this is usually a moot point, because most people in our business settle this issue by agreement. An agreement that states all firm clients belong to the firm is common, and even if my personal goodwill is more valuable an agreement like that has the effect of meaning that my personal goodwill is leased to the firm in return for whatever compensation I'm getting. Agreements avoid litigation about who truly own the more valuable asset (goodwill).

If you have no agreement, which is unlikely, because that means your employer wasn't protecting his own firm assets, but if you don't I would certainly push the argument that the client is not there's to sell. Now even if you do have an agreement. I suspect that in many states agreements stating the clients you bring to the firm belong to the firm, may not hold up if litigated. It really depends if your state has strict or relaxed noncompete laws. It also depends if this was negotiated up front when your salary was negotiated. For example many firms negotiated my salary, hired me, and on my first day of work pulled out their boiler plate employee contract which basically said I'm not allowed to own clients personally. Currently my employee contract says that if I quit I can take clients I brought to the firm. I won't work anywhere else without that a similar clause. I'm willing to agree not to raid the firm too, but I think we need mutual respect. I would press this issue because it doesn't sound right to me.

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