“What the wise plan at the beginning, fools do at the end” - this quote from Warren Buffett often comes to mind when I am discussing exit strategies with financial advisers.
It is perhaps a little on the strong side in this context, but so often at the point when an adviser decides to sell, they realise there were some simple steps, which if thought about a little earlier, could have increased the value of their business considerably.
There are many factors which can enhance or lessen the value of a business. Having recurring income, a clear proposition, high quality registered individual teams or conversely, poor compliance and badly kept client records can all seriously impact a selling price, but these issues have been well covered before.
One aspect which comes up time and again during the sales process, is, of course, the clients.
It may seem obvious that ensuring clients are well looked after during the actual sales process can add value to a business, but in fact this is something which must be started well in advance of a sale (and of course should be in place in your business anyway).
First, you must ensure you have full information about all your clients from the beginning – if this is something you later realise you lack, then ensure you fill in the gaps.
Without good client data, the new company will have no chance of looking after your clients – the company will know this and therefore reduce their valuation of your business.
Second, ensure your clients are not over reliant on you or another key member of staff, but feel comfortable dealing with other members of your team. They may have been clients of yours since the beginning, but if there is any doubt as to whether they will go elsewhere as soon as you exit the business, then this can have a detrimental impact on the value of your business.
Also, bear in mind that you want to ensure these loyal clients continue to receive the same first class service you have always provided. The best way to do this is to work alongside whoever is going to pick up your clients when you leave.
By doing this you can help guide the new adviser with the types of products and services which may interest your clients. You can even go into fine detail, explaining how often or in which way certain clients like to be contacted.
Third, keep your clients informed. For the larger clients you may want to book a specific meeting to explain that you are retiring and that you will be gradually handing over responsibilities to a new adviser, but that the process will be gradual and you will be there to support them for at least 12 months as the transition completes.
We have made a number of acquisitions over the years, and owners who apply these principles have had happy, well informed clients, while their businesses have been valued much higher.
As I say, perhaps Mr Buffett’s quote is a little strong. However, selling a business and selling it successfully is not a short term project.
It takes years for a business to be made ready for sale and if you want to ensure those loyal clients who have helped your business grow are looked after at the end, be wise and start planning today.
John Viney is chief operating officer at AES International.
.png?source=design-system&width=126)