Just bought a business? Turning 2 into 1

So you’ve made the big move… Your business is in growth mode and you’ve decided to accelerate that growth by acquiring another advice business that’s for sale. The price has been agreed, as has the structure of the deal relating to the earn-out period and terms for the owner of the acquired business.

While this is a big step and great progress to get to this stage, there’s still a lot of work to be done. Because according to a 2017 Harvard Business Review report, the failure rate for mergers and acquisitions (M&A) sits between 70 percent and 90 percent! A very scary figure… Now of course this figure applies across all industries and you can argue that’s it’s different when buying another financial advice business. But there is still lots to consider if you want to integrate the acquisition successfully and maximise the value of the deal. So where do you start?

 

Have a very clear strategy

Of course you likely will have given this a lot of thought before you get anywhere near the integration phase. Hopefully you have a very clear vision of what you are setting out to achieve. Does the acquisition simply increase the number of clients of your business, or is it opening up new markets? Is it giving you capabilities in new areas of financial advice, or is the acquisition delivering significant cost savings when the two businesses are put together?

Know where you are going and what it is that you are trying to achieve, as your strategy should be the guiding “North Star” for your integration process.

 

Build a very robust plan

You need to have an integration plan for every area of the business. If you want the integration to be successful, this plan has to be developed carefully and thoroughly, building a clear roadmap for every key service area – your advice process, your service proposition, your compliance process and right through to your HR processes. You have to ensure that you have the required resources in place to actually develop and follow through on this plan.

If instead everyone just blindly “hits the ground running”, there is a strong likelihood of a significant fall-off in performance and even chaos a little bit down the road! To avoid this, give some thought to the following areas before you set out to integrate the two businesses.

 

Consider culture

This is an area that the leader of the business needs to consider carefully and be very involved in. Are the cultures of the two organisations similar or are they quite different? What is the desired culture of the merged operation going forwards and what are the main steps to help you to start building this culture? This will need clear leadership and involvement of all of the staff.

 

Good integration takes time and focus

It won’t just blindly happen. Your carefully developed plan will need to be delivered in a structured way. This will take the time and focus of some key people – maybe you, maybe members of your team. You need to recognise the cost of this as the focus of these people for a period of time will be on integration of the two businesses, rather than increasing the income of the business. However this short-term cost will definitely pay dividends in the longer-term.

 

Who are the right people to carry out this work?

If you want the integration to happen successfully, you need to have the right people carrying it out. There can be a temptation for the leader of the business to lead the integration work. However it may be that their attention is better spent elsewhere, for example leading the commercial focus of the business for a while and guiding the expectations and requirements of clients and business partners. The leader of the business should be close to the integration, but does not necessarily need to lead it. Sometimes there appears to be an “easier” solution and the integration process is passed to someone who “is not that busy”, but who may be completely unsuited to the role. This is a recipe for disaster.

The integration role is best carried out by someone who is very structured in their work and who is capable of keeping a project with multiple strands on track. If they have very high credibility in the office and strong relationships with colleagues, this again significantly enhances the likelihood of success.

 

Follow through

Finally, don’t get side-tracked by current business pressures, see the integration through to the end. That is not to say of course that you won’t change tack at times, but when this happens, tweak your integration plans rather than leave them behind.

 

A good integration process will help you ensure a successful result after your acquisition. Follow it through relentlessly and you can reach out confidently towards your goals.

Lessons from other industries – segmentation is the key

Going back to my days in college, I can recall a number of the key marketing principles that were ground into me; the importance of research and knowing your customer, understanding buyer behaviour and the role of the four P’s (product, price, place and promotion) among others.

However in my day-to-day work with financial brokers today, the principles that I find myself returning to more and more to address your challenges are Segmentation, Targeting & Positioning (STP). Many advisers today recognise the importance of these strategies as they attempt to make best use of their limited marketing resources, be they time or money or both.

There are also valuable lessons to be learned from how these principles are applied in other industries… but more about that in a minute.

 

Some definitions

So to start this 60-second marketing lesson, here is a definition of each, as set out by Philip Kotler, the grandfather of marketing education.

  • Market Segmentation: Dividing a market into distinct groups of buyers with different needs, characteristics or behaviour, who might require separate products or marketing mixes.
  • Market Targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
  • Market Positioning: Arranging for a product (or service) to occupy a clear, distinctive and desirable place relative to competing products (or services) in the minds of target consumers.

 

What’s happening in the financial broker market in Ireland?

Many financial brokers realise that a “one size fits all” proposition just doesn’t cut it any more. Either for the client who is looking for more than a generic service, or for the adviser who cannot profitably or successfully deliver the same service to all clients irrespective of their value, characteristics, needs etc.

As a result, many advisers are undertaking segmentation exercises, analysing their client bases and potential markets, most often by value. Others are also segmenting but by different dimensions – some are focusing on SME’s, others on specific professional groups.

A smaller number are then going on to specifically target sub-sections of their client bases and target markets with specific propositions, while offering a different proposition to other groups of clients. Some are even offloading their lower value clients to only target their desired groups. Others are identifying specific occupations that they will target and also those that they won’t. And then sticking to this!

Finally, savvy advisers are taking that final step of actually positioning their business and their communications to appeal directly to their target markets, even at the risk of alienating other potential customers.

 

What can financial brokers learn from other industries? 

The best examples come from the airline industry. They make it very obvious that high value passengers get a superior service. They certainly don’t apologise for it! We see first class passengers enjoying benefits such as;

  • A pick up service to bring them to the airport
  • A fast track route through the airport
  • Waiting in a private lounge
  • An airline official at their beck and call to manage any issues that might arise
  • A shuttle service directly to the plane so that they don’t have to wait at all
  • Planes are sometimes even delayed to wait for a late 1st class passenger!
  • Even at the door of the plane – turn left for first class, turn right for economy.
  • And then you’ve all the on-board perks!

Now who wouldn’t start to feel a little special?

There are similar stories of exceptional services offered to loyal users of some of the world’s leading hotel chains – room upgrades, limousine services, free laundry, sourcing tickets for high demand events as well as in-room food and drink services. All to make you feel that bit special.

So what can a financial broker take from this?

 

Develop your service packages

Develop service packages for your business that reward clients depending on their value to your business. Make your high value clients feel really special, reward them for trusting you with their money by giving them a truly rewarding client experience. Build a moat around them and pull up the drawbridge from your competitors by providing a second to none service.

Let your mid-tier clients feel valued by your business, while at the same time making them aware that there is lots more you can do for them (if they are willing to pay for it).

And of course your no/low value clients will begin to realise that it’s a business you are running and that they don’t have 24/7 access to you. If they want access to superior service (ongoing advice from you), they pay. The same as when they book a flight or a hotel room.

 

Do you know which of your clients should turn left and which ones should turn right?