6 ways to increase the price when selling your financial advice business

While there is no doubt that the price of financial planning businesses have come back from some heady heights in recent years, there are still some attractive sale opportunities for firms with the right profile. However with fewer buyers out there, those that are looking to buy are extremely selective and are only interested in really strong businesses. So what are the factors you need to get right to make your firm as attractive as possible to any potential purchasers out there? Here are some of them.


1. Be realistic

First of all you have to be realistic about the value of your business to the buyer. While you may have an emotional attachment to this enterprise that you sweated over and built up lovingly, to them it is a transaction… While they will want to retain the positive features of your business, the numbers will tell the main part of the story about the value of it. So no matter what valuation model you use in running the numbers, be realistic.

In relation to valuation methods, buyers may value your business using a number of methods. The oldest model is probably the multiple of revenue model, with this being replaced now by buyers using a multiple of the profitability of the business (usually excluding the business owner’s earnings) as this takes account of both revenues and costs within the business. However there is now a move towards using predictive models in relation to future cash flows with greater weight being given to cash flows that are seen as more “stick-able” than others.


2. Have a clear business proposition

A buyer will want to believe that he is getting more than his money’s worth when running the rule over your business. A very compelling business proposition will help to provide this comfort. For example, this may be strengthening the buyer’s position in their chosen market or indeed giving them access to a new market. It may be a unique expertise that your business offers or strength in attracting a particular target group of clients. If you’re not clear about these unique factors about your business, how can you expect a potential buyer to place value on them!


3. The level and persistency of business are important drivers

Of course the size of your business is a main factor. But so equally is the persistency of your revenue. Lapse rates have become a major issue for life companies and advice firms alike, so obviously persistency will significantly impact the price someone is willing to pay for your business. There is little value in a firm that can’t demonstrate an ability to build up a steady and durable revenue stream.


4. The quality of your client base is key

We all know that your clients are at the core of your business. They also are a key determinant of the value of your business. Can you demonstrate that you have been able to successfully infiltrate your chosen markets and that you have really engaged both these existing clients and indeed potential clients in the particular target group? A buyer will look for clients who are engaged by your organisation and indeed target groups who, while they may not be clients as yet, are aware of and potentially open to your business.

To achieve this, you’ll need to ensure that your sales and marketing processes really stand up to scrutiny.


5. Your service and compliance systems must be excellent

Potential purchasers also want to minimise the headaches involved in a purchase! They want to buy a well run business, that looks after its clients in a professional and engaging way and is compliant in everything that they do. In fact better still, they want to buy a business with potentially better processes and systems than their own! Who doesn’t want to buy best practices? So there’s a real opportunity to make your business more attractive to a buyer through utilising excellent business processes.


6. The quality of your staff is very important

While your clients are at the core of your business, your people are the heart and soul of it. They have the strong relationships with your clients, the expert skills that potentially are sought by a buyer and the capability to deliver brilliant service to attract and retain your clients and valuable income stream.

Or are some of your staff not an asset to you as you get into discussions with a potential buyer? If you are looking to sell, it might make sense to have that difficult conversation with your Great-aunt Maud who has been with you for the last 25 years and scares the living daylights out of everyone… A potential buyer may not appreciate her particular skills so you may need to have solutions in place for them in the event of a sale.

These are just some of the factors you might think about as you prepare your business for a potential sale. If you have any comments in relation to the above or indeed can identify any other factors, please leave your thoughts below.