As the well-known saying goes, “failing to plan is planning to fail”. It is a mantra that certainly applies to the process of selling your advice company.
The more planning goes into the process of exiting an advice firm, the far more likely it is that the outcomes will be better for all those involved – the business owner, employees, clients and the acquirer.
It is never too soon to think about or begin planning the process by which you might one day want to exit your advice firm.
Or, as Victoria Hicks, acquisitions director at The City & Capital Group, puts it: “You should start thinking about the sale on the day you set up the business.”
She says: “Keep planning, considering and adapting as time evolves in case something catastrophic happens and you need an exit plan in place at short notice.”
Paul Morrish, corporate director at Succession Wealth, agrees that it is never too soon: “Every sale will involve extensive buyer due diligence.
“So if you have run, organised, documented and delivered all aspects of your business at a high quality and can easily demonstrate that, then you are effectively always able to showcase that to an acquirer at any time.”
Taking your time
While a deal might only take a few months to transact, it is probably safe to assume that you need to have several years set aside in the run-up to properly plan the sale.
Ms Hicks says: “In reality, a sale can take anything up to five years.
“The first 12 months should be an internally-focused, forensic look at the business – working through the processes which will inevitably form part of the due diligence phase, further down the line.”
At least two years of planning is required to compile a robust set of management accounts that will prove how the business is, and could, be run, according to Simon Goldthorpe, joint executive chairman at Beaufort Group.
“However, you’re likely to achieve a much stronger outcome if you start your succession planning at least five years prior to your intended retirement,” he adds.
Henna Fry, head of corporate development at Foster Denovo, says that from a due diligence perspective, acquirers typically want to see a three- to five-year track record.
“Ahead of any sale process, the advisers should think about their compliance track record and whether there is any need to address the direction of travel in terms of compliance processes that might be evidenced – for example, in improved file quality over a period of time,” she explains.
Mr Goldthorpe advises that in the years prior to selling, it is worth also making sure that your back-office process is equipped with technology to ensure that data can be transferred easily.
Part of the reason why long-term planning is so important is to secure the best possible future for the business.