Selling Your Financial Planning Practice: The Ultimate Guide to a Successful Sale

When you’re selling your financial planning practice, it’s easy to let emotions get the better of you. You may have spent years or even a lifetime growing your planning firm, and it is probably your most valuable asset.

Unfortunately, many financial planners leave money on the table when the times comes to put the business up for sale – either through inadequate planning and preparation, not knowing the true worth of the business, negotiating from a position of weakness or accepting an offer from the first buyer that walks through the door.

With an ageing population and a challenging regulatory environment in the industry, it is more important than ever to plan for your exit early, understand your numbers and position your business in the right way to secure a successful sale.

For a knockout sale price and smooth transition process, there are a number of important steps to follow. We’ve mapped out the ultimate guide to show you how to plan for a successful sale of your financial business.

Planning and preparation

Even if you don’t have immediate plans to sell, the planning process itself is a valuable exercise. In Australia, those businesses with a documented succession plan (even if it’s not fully implemented) are 57 per cent more profitable than those without any plan at all.

And yet, poor planning and preparation is often the reason for a failed business succession plan or an inability to secure the best sale price for a business.

The Voice of Australia Business Survey conducted by Bentley’s South Australia, suggested that just 19 per cent of SMEs have an exit strategy. And according to the MGI Australian Family and Private Business Survey, close to half (4%) of all Australian SME owners plan to sell their businesses within the next decade.

The more information buyers have, the less risk they perceive and when you’re well prepared, you also enhance the buyer’s perception of your asset (with a consequence decrease in risk factor). You are more likely to maximise your sale value and sell the business in a much shorter timeframe.

To ensure your business is “sale ready”, do your research, start planning your exit early, think about succession, perform a financial audit and make preparation a top priority. Here’s some key steps to take in the planning stages:

Get your business model right

If you want to build your financial planning firm and make it ready for a future sale, getting the business model right is a critical factor.

In a rapidly shifting changing regulatory and market environment, it is important to operate as an advice-based business and not purely as a sales organisation.

As reported in the AFR, planners who hold an advice mindset (not just a sales one) with an intention to ‘serve’ not sell to clients, are able to challenge their clients’ perceptions and understanding of the financial landscape and ask difficult and insightful questions. This, in turn, leads to more engaged clients which inevitably increases the chance of a more successful transition and higher sale price.

Making sure you have a sustainable and comprehensive business model that can grow into the future is a key factor when it comes to preparing the practice to be sold.

Do your market and industry research

Getting a handle on what is happening in the marketplace will give you a great idea about how firms like yours are valued.

Assessing shifts and innovations in the wider financial planning arena, including industry reforms and legislative changes, will also assist you in planning for the future. The Future of Financial Advice (FoFA) reforms and demographic changes (ie, an ageing customer base) are driving change.

For example, FoFA introduced opt-in rules where financial advisers need to to obtain written client agreements every two years in order to charge for ongoing advice.

Potential buyers may also ask reform-related questions like:

How many new clients have you acquired since July 2013?
Which of your clients are grandfathered under FoFA (ie pre-July 2013)?
Would the clients be grandfathered for Opt In if there was a change of AFSL as part of sale?
Understanding these changes and questions will enable you to prepare your business for sale in a more informed way which will, in turn, be more appealing to buyers.

Focus on data, systems and processes

Document primary systems and processes should be documented to ensure consistency across the board.

Maintain current and comprehensive client data on clients and make sure that all of your other business information (financials, processes, employee management) are available as electronic records so that prospective buyers have confidence that they have access to all they need to assess the worth and future potential of the business.

Organise your financials

Perform a complete finance health check by looking at:

  • Profitability
  • Recurring Revenue per client
  • Client demographics – particularly age profile
  • Historic revenue and profit growth rates
  • Analyse and document historic owners’ compensation
  • New business history, revenue rates and sources

Detailed and reliable financials demonstrating low capital expenditure requirements and strong cash flow will make your business a highly attractive acquisition.

Positioning your business for sale

Once you’ve done your research and tidied up your financials, you need to think about positioning your financial business for sale in the best possible way. Key to this is anticipating the profile and requirements of your “Premium Buyer”.

In order to maximise your chances of a successful sale, focus on these steps:

  • It might sound obvious but make sure you have a high quality business with a unique value proposition;
  • Ensure that your business is an efficient and well-run machine in terms of systems, technology and processes;
    Put mechanisms in place to attract and retain new clients;
  • Be ready to show that you have engaged staff and the ability to attract and retain talented employees who will help sustain the business in the future;
  • Eliminate or reduce any risk factors in the business so the prospective buyer trusts that the business is a solid purchase proposition.

Your best option is to hire the services of a sale and acquisition professional who can help you define a smart sales strategy that aligns with your personal, business and family goals, position your business to attract buyers and set up your advisory dream team (think legals, accounting, tax, valuation).

Assessing potential buyers

Examining the potential buyer requires you to put your critical thinking cap on and step outside of your business for once.

You can segment buyers into three (3) groups:

  1. The Bargain Hunters and Opportunists – these buyers are highly unlikely to pay maximum value for your asset;
  2. The Fair Market Value (FMV) purchaser – these buyers will pay as the name implies and if you don’t have a buyer from the next group then these buyers are your audience;
  3. The Premium Buyer – these buyers after often strategic or emotional buyers. Strategic buyers are buyers who will make more money from owning your business than you do due to their current business and circumstances. The emotional buyer is the buyer who has come “second” on a number of previous acquisition opportunities and is not prepared to come second again!

However, the real issues are you know your business inside out but do they care enough about your business to help it grow into the future? Is the buyer a strategic fit? Is there a cultural match? Do they understand your company culture and respect the way the business treats its staff and operates overall?

Whether or not the buyer is a cultural fit may be one of the most important factors of all.

Management and business expert, Peter Drucker, once said: “culture eats strategy for breakfast”. It’s the perfect way to describe the fact that not even the most brilliant and detailed business plan can make up for different or unaligned objectives, values and belief systems between the buyer and the seller.

If the buyer owns a current business which they plan to merge with yours, here are some further questions to consider:

  • How do both businesses charge for their services? And are the value propositions the same?
  • Are the technology and systems similar and/or compatible in both businesses?
  • Is client ownership an issue?
  • How do the client segmentation models operate in the respective businesses and do they align well?
  • Do client segmentation models operate in both businesses (buyers and sellers) – if they do, how aligned are they?
  • What investment philosophy has each business implemented with their clients and will they be compatible and maintained?

Working out the value of your business

Valuing any business is always a challenging task but especially where you operate a professional services business which relies on its client list.

It can be hard to put a price tag on service businesses as the valuation process involves a speculation of future earnings as well as a number of variables and assumptions.

Ultimately, there is only one value that really matters: the price a person is prepared to pay to acquire the business (or part of it).

Keeping that in mind, a great place to start is to ask yourself: ‘How much would I really pay for my business?

Understanding valuation methods

The financial advisory industry has changed considerably over the last ten years, moving from a transaction-centred model in the 80s to a more client-focused, fee-based revenue model in recent times.

This means valuation methodologies have changed to incorporate a number of variables including cash flow, systems and processes, the age and demographic of the client base, marketplace demands, financing terms and recurring revenue.

Understanding what numbers are of value

Most buyers will be interested in sustainable, recurring revenue or EBIT, as opposed to gross revenue or funds under management.

The most commonly used method is market value where the valuer to determine the price to be paid for the practice by reference to comparable sales.

For more information on valuation methods and common valuation questions, you can download our free practice valuation guide here.

Get an independent valuation

Of course we’re biased because this is what we do! But it really is critical that you know the likely sale value range and the likely profile of a premium buyer for your type of business as well as the style of transaction that would maximise your sale price, before you start.

Hiring a valuation expert to help you implement a solid strategy will not only assist you in protecting your assets it will help maximize the value of a sales deal before you sign on the dotted line.

For large and complex advisory practices in particular, hiring a professional valuer could mean you’ll avoid selling the practice for less than it’s worth which will have a significant impact on your potential retirement income.

Managing the business transition

Like other professional services businesses, such as accounting practices or law firms, clients develop a strong rapport with their trusted advisers. This can prove challenging at sale time because the buyer might be anxious about valuable clients moving on once you’re gone which may lessen the value of the business.

In order to keep the largest number of clients in the practice when you sell it, you will have to manage the transition carefully and ease your clients into it. Let all of your clients know about the impending change and what they should expect from it. A well-planned handover or ‘overlap’ period where you as the owner are available to answer questions and deal with issues during the transition period will help to ease any concerns from clients and instil more confidence in the potential buyer.

If you can prove to a buyer that the business will retain its key clients, you’re much more likely to net a higher sale price and keep your loyal customer base happy.

Avoiding the risk and pitfalls of a sale

In my experience, avoiding the following common mistakes will make the sales process easier and more successful:

  1. Inadequate preparation across three key areas: yourself, your business and the buyers
  2. Failing to understand the likely valuation range,
  3. Engaging with only one prospective buyer which can lead to significant time wasted and or disappointment,
  4. Poor understanding of the transaction terms for other marketplace transactions
  5. Insufficient transaction management process and tools,
  6. Drafting inadequate commercial terms and detailed contracts (where in the event that the integration does not go to plan from the buyer’s perspective, the deferred or final payments to the vendor are a lot less than expected or withheld),
  7. Poor awareness of the cash flow and debt funding implications for buyers when using debt to fund the acquisition. (Most buyers will try to utilise their existing resources to run your business and will not require all of your staff – and even possibly you!)
  8. Focusing on the headline multiple offered rather than the 15 terms that will impact the final price in dollars that you will bank,
  9. Confusing “buyer of last resort” valuation with other valuation methodologies without assessing the differing risk profile of each,
  10. Selling to an institution or large AFSL group without assistance of an adviser.


With good planning and preparation and professional valuers and expert advisors on your side, you’ll be far more likely to achieve the optimum price for your financial planning firm.

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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