It is very common for a seller to remain involved as a consultant for a period after the sale of a book of relationships. This arrangement can be emotionally complex for both parties.
For the Seller, the challenge lies in relinquishing control. Historically, he or she directed client relationships, financial planning and investment decisions, and often key operational matters such as staffing. Remaining on post-sale requires accepting that these decisions now rest with the Buyer, who owns the relationships going forward.
For the Buyer, the dynamic can be equally delicate. Integrating a former owner, often a strong and well-known personality, into the office while establishing credibility with clients and staff as the new leader requires thoughtful positioning and clear role definition.
That said, there is little doubt that account transitions are far more successful when the former owner stays on to actively and enthusiastically endorse the Buyer as the chosen successor. Under favorable circumstances, this endorsement can be the difference between a transition success rate in the 95%+ range and a materially lower client conversion outcome. Trust is the critical factor, and face-to-face affirmation from the Seller plays a pivotal role in building it.
Purpose of the Consulting Agreement
To support a successful handoff, Buyer and Seller should enter into a negotiated Consulting Agreement (CA). This document is separate from, and in addition to, the Purchase Agreement executed at closing. The CA is typically signed at the same time as the Purchase Agreement and becomes effective as of the Closing date.
If the Buyer is utilizing financing through a Small Business Administration (SBA) loan, specific post-sale conditions may apply regarding the Seller’s ongoing role. A well-structured Consulting Agreement helps codify responsibilities and avoid compliance or eligibility concerns tied to SBA requirements.
Key Provisions Typically Included
A Consulting Agreement outlines the conditions under which the Seller will continue to work with the firm. Common provisions include:
Scope of Services
Specific transition and consulting services to be provided by the Seller.Term
The duration of the consulting arrangement.Compensation
Separate from purchase consideration or loan payments. Compensation is typically tied to services rendered—often structured as a revenue split.Non-Compete Covenants
Restrictions on the Seller engaging in competing activities.Non-Solicitation Covenants
Protections against soliciting clients or staff.Performance & Cooperation Requirements
Expectations around transition support, including:Client introductions and meetings
Access to files and records
Staff assistance
Office space usage
Adherence to firm policies
Independent Contractor Status
The Seller is generally designated an independent contractor, not an employee, and holds no decision-making authority.Confidentiality
Ongoing protection of firm and client information.Termination Provisions
Conditions under which the CA may be ended by either party.Disability or Death
Defines what happens to compensation if the Seller dies or becomes disabled during the term.Governing Law
The state and jurisdiction governing the agreement.Execution Details
Effective dates and signatures.
Health Insurance Considerations
Health insurance can be a complicating factor, particularly for Sellers under age 65. In some states, individual coverage options may be limited. This can influence how the Seller structures post-sale employment status or entity ownership (for example, retaining an LLC while selling assets). While solutions vary, the issue should be evaluated early and addressed, if necessary, within the Consulting Agreement framework.
Striking the Right Balance
A Consulting Agreement is ultimately a balancing act. It must clearly define expectations, protections, and economics, without becoming so rigid that it hinders practical decision-making during the transition.
When thoughtfully structured, it aligns incentives, reduces emotional friction, and materially improves the likelihood of a smooth and successful client handoff.
To formalize this role, Buyer and Seller execute a Consulting Agreement (CA)—separate from the Definitive Agreement but typically signed at Closing and effective immediately.
If SBA financing is involved, the CA also helps document the Seller’s post-sale role to satisfy loan requirements.