8 Steps You Need to Take Right Now To Sell Your Financial Planning Firm in 2017

Warren Buffet says that “risk comes from not knowing what you’re doing”.

You may be running a successful and thriving financial planning practice but do you know how to sell it to the right buyer at the right price? If the perfect buyer strolled through the door tomorrow, would you be ready to launch into the sales process?

Many practice owners haven’t a clue as to what needs to be done to get their financial planning firm 100% ‘sale-ready’ and to maximise their return on the sale of a lifetime’s work.

Lack of knowledge, poor preparation and insufficient business sales experience are the three main factors that contribute to poor sales results in the financial planning sector.

So if you’re planning to sell your financial practice in 2017 or in the near future, here’s 8 steps you can take right now to get the most out of the process and achieve an outstanding result.

1. Be prepared: Do your market research

One of the primary reasons lucrative business opportunities crumble is because the business owner is wholly unprepared for the sale. Think: researching the market, building a sales strategy, performing a financial audit, creating a selling document and casting your eyes over key financial and tax issues.
Just like your prized family home, your financial planning practice is a highly valuable asset. Emotional factors can seriously jeopardize a timely and profitable sale of your business. Staying on top of all the issues associated with a proposed sale will stand you in good stead to meet the emotional and financial challenges of the negotiation process.

Look around at other marketplace transactions to assess ballpark figures for similar businesses. Consider what kind of buyer would be a great strategic and cultural fit for your business – you don’t want just any old buyer, you want the right one. Understand what may affect your prospective buyer’s analysis of your business and what it’s worth so you’re ready to fire on all cylinders in 2017.

2. Step into their shoes: create realistic expectations around price

As Atticus Finch once said, you never really understand a person until you consider things from his point of view, “until you climb into his skin and walk around in it.”

You’ve no doubt spent years toiling away in (and on) the business. You have a deep and visceral understanding of the way it works. You’re in the trenches every day, working hard to support your family and employees.

But a buyer may not have the same appreciation of your finances, processes, people and the history of the business. They may not know you, your business, your clients or your staff so try to step into the shoes of your buyer and see it from their unique point of view.

Many business sales fail due to the difference in price expectations between the buyer and seller. Knowing the true value of your financial planning practice is critical to a successful merger, sale or succession plan.

Be honest from the start about the strengths, weaknesses and important figures in your business and start thinking about the expert valuation process so you can kick off informed negotiations in 2017 with a bang.

3.Plan ahead: consider life beyond the business

When you fail to plan, you plan to fail. And let’s be frank: the outcome of the sale of your financial planning business is a pretty big deal.

As highlighted in Inc Magazine’s ‘Managing the Emotional Toll of Selling Your Small Business’ , sellers who lack a solid plan for the next stage of life find it difficult to let go of their businesses and are more likely to allow personal emotions to hijack the process.

So whether you’re retiring to hit the golf course, cutting down on your workload, handing the business over to family members or undergoing a professional reinvention, it’s important to consider the finer details of your exit strategy and write down your plan for the future.

What does life look like outside of your current professional world and practice life? Have you mapped out any ongoing relationship with the buyer?

Writing down your personal and financial goals for life beyond the business will pay high emotional dividends when you actually go ahead with the sale.

Remember: setting goals is not just for the Oprah Winfreys and Tony Robbins of this world or the ‘ra ra’ self-help crowd. There’s an enormous opportunity to share your gifts and knowledge with the world through mentoring or consulting once you’ve handed over the reins.

You may want to get involved with non-profits and enjoy some family time. You may write that long-awaited novel. Perhaps you’ve always wanted to take up fencing.

Or you might just be looking forward to leaving the kids behind to vacation in a remote place where poolside cocktails are about as energetic as the daily activities get and the reception is conveniently poor.

Whatever the goal, a simple plan outlining what you want to achieve in the next 5 years and tick off your bucket list after you’ve wrapped up the sale will help you form a picture of your daily life outside of the practice and keep up the momentum and inspiration.

4. Watch the clock: set a proposed timeline

Selling a financial firm is not a quick ‘flash in the pan’ kind of process. It’s a marathon not a sprint so you’ll need to conserve precious energy to last the distance. Understanding the time frames involved in selling a business is key to getting a transaction over the line.

Many financial planners have no idea how long it really takes to develop a clear sale strategy, from the initial discussions with your advisor and complex due diligence processes to expert market appraisals and drafting lengthy documents to identifying a suitable buyer and actually executing the sale.

A practice handover can be stressful and demanding endeavour – it can take 6 months or much, much longer – so setting realistic goals and timelines will help you navigate it with less headaches.

5. Keep it neat: Tidy up your financials

According to the Financial Planning and Investment Advice in Australia Industry Report 2014 , in the five years leading up to 2019 and 2020, industry revenue is forecast to grow at a compound annual rate of 3.3% to reach $5.4 billion, with profit expected to increase at a similar rate. So despite some industry disruption, it’s a great time to buy a thriving financial planning practice.

Before talking to potential buyers, meet with your accountant and perform a full financial health check to ensure that the numbers stack up for your prospective buyer. Perform a complete finance overhaul by looking at:
• Cash flow analysis
• Profitability
• Income, expenses and balance sheets
• Revenue Profile

Eliminate any non-operational expenses in your accounts that the buyer may not want to pay for – car costs, salaries for non-working family, discretionary expenses. Prepare adjusted financials to remove any anomalies based on the above and provide evidence for these adjustments.

Accurate, reliable and detailed financials showing solid cash flow and low capital expenditure requirements will make the purchase of your business a highly attractive acquisition.

6. Call in the pros: build a sales strategy with an expert

You may feel the urge to charge ahead with a prospective sale in the confidence that you know your business best. Which is absolutely true.

But underestimating the complexities of the sale process is certain to lose you serious time and money if you’re ill advised about the steps that need to be taken along the way.

Selling a business can have a substantial impact on your cash flow, taxes, finances, relationships, lifestyle, transfer of wealth plans and family. The sale of your financial planning practice is likely going to be one of the largest transactions and (possibly) stressful experiences of your life.

But it doesn’t have to be stressful. To protect your assets and help maximise the value of a sale before you sign on the dotted line, hire an experienced advisor to implement a clear strategic plan.

A well-chosen expert can help you define a smart strategy that’s in alignment with your personal goals, business values, family plans and overall financial objectives. They can also help you select your advisory ‘dream team’ to help you negotiate the sale with confidence, from legals to taxation to business and property experts.

7. Perform a review: Get your books in order

When you’re make the due diligence process easy for the buyer, you’re halfway there.

As part of your review process, start to gather the data you need to persuade the buyer to buy. Being as organised as possible with well-prepared business financials, client data and product information means you’re one step closer to closing the deal in 2017.

Examine all of your licences, contracts and any other arrangement or contractual relationship that may affect a proposed sale.. You really need demonstrate to buyers exactly what you do, how you do it, who you serve and how you achieve excellent results.

Ask yourself these questions: do any of your existing business terms increase or decrease the value of the business?

Are there any glaring red flags for buyers? Will they be wary that you have close relationships with two main clients, with little opportunity to diversify or spread the risk?

Inadequate preparation of your financials and data will lead to a riskier transaction process and will likely mean you won’t be able to close the sale in six months.

8. Go digital: Enhance the customer experience through tech tools

With the rise of digital technology, the customers of tomorrow will expect far more from their professional advisers. Deloite’s The Advice Based World report suggests introducing technology and processes that enable customers to be more involved and engaged with their finances, which in turn allows access to their adviser at a more appropriate frequency .

The report says that firms should review all existing digital interactions to identify opportunities to enhance the experience. According to the report, digital solutions may lead to better risk management and compliance performance.

To be a 21st century firm, consider whether you need to switch software products, develop a digital strategy, create an online client portal or consider external partnerships to deliver services in a new and improved way.
Buyers will be far more interested in an agile financial planning firm that can grow and evolve into the future with a strong commitment to technology, innovation and delivering an exceptional client experience.

A final word

Selling your financial planning practice is not an overnight kind of gig.
It takes time, money and solid preparation to make sure the transaction and sale process yields the personal and financial rewards you deserve.

To get a flying head start and nail that sale in 2017, make sure you’re crystal clear on what you want, do your homework and get some expert help. Be ready to present your financial planning firm as an innovative and agile practice that embraces technology and focuses on an exceptional client experience.

Follow our simple steps above and you’ll be ready to hit the ground running in the New Year.

Chris Wrightson. Founder and CEO at Centurion Market Makers, the industry experts in the sale, acquisition and management of financial planning firms. If you’re planning on selling your firm in 2017, we’d love you to call us for a confidential discussion, or continue browsing our website for more tips, tools and info on the steps to take when buying or selling your financial planning firm.

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