Pull These Three Levers to Make Your Practice More Valuable

If you’re thinking about selling your advisory practice, you’ve got one chance to capture as much value as you can. In this article, we will explore three of the most important elements of value that can help you make the best deal.

In many ways, a solid advisory practice is a dream asset that can produce steady recurring revenue. At the same time, an aging advisor population means it’s not exactly a seller’s market. The CFP Board says there are now more Certified Financial Planners over the age of 70 than under the age of 30.

One way to make your practice more valuable and enticing is to have the highest and most predictable stream of cash flow possible. We will explore that topic more deeply in the next article.

But there is another realm of value that can be equally important. Call it the intangible value. Qualitative factors like reputation, intellectual capital, community engagement, and methods of doing things.

This element of value creates more levers that you can pull to crank up the value of your practice. The best part is, you may already have strength in these areas that you simply need to work on refining, describing and communicating to a potential buyer.

Your brand

What makes you different and special?

From a branding point of view, this can be a bit of a trick question. Many financial advisors would say it is their personal approach that makes them different and special – their ability to listen and empathize, or their ability to create financial solutions that are well-tailored to their clients’ individual needs.

While this may be accurate, your personal approach is not going to be included in the sale. Therefore, your brand has to be a bit bigger than you are. It must be something that will survive after the sale and still be there after you are gone.

How do you achieve this? One fix is to give your practice a business name different than your name. Another step is to document your approach and frame it as a repeatable process. How exactly do you get to know your clients? How do you come up with recommendations? What are your ongoing service standards?

Your market

Who do you serve?

If you specialize in a specific market, that can be attractive to a buyer who is in the same niche or who would like to move into that niche. Plus, having access to a defined segment of people can increase trust, create situations to broaden your reach and improve the odds of receiving business by word-of-mouth.

If you don’t think you have a niche, you might want to take a second look. Some niches are obvious – like dentists or business owners. Others might be harder to spot, but are still there if you think about it.

Examples could include a common social circle (like a club or community), common values (like a religious or political affiliation), common life circumstances (like families or people who are widowed or divorced), or even a common psychological profile (like people who wish to avoid financial risk).

Look for common threads among your client base that you might be able to crystalize and articulate. Bonus points if you can demonstrate how your expertise in your niche has driven client acquisition and retention in the past.

Your operations

Can your business survive without you?

Some say the answer to that question is the difference between having created a business and having merely created a job. A business has processes and systems that can continue to function without always relying on you to do the work.

If you use technology to manage aspects of your business, be ready to showcase that to a potential buyer. Clean up your CRM, get your email lists running smoothly and organize your business software as needed to show that you are running a tight ship.

Same with your client service model. If you have not documented the process for meeting prospects and managing the relationship over time, now is the time to do so.

If you have staff, be prepared to show a buyer how they contribute to your business. How much do you spend on payroll, which tasks do they handle for you, and how does the whole operation net out in terms of running a sustainable and profitable enterprise?

If you do not currently have an assistant, you may want to think about hiring one who can help you refine your operations and amp up the value of your practice.

Selling your practice can be a lot of work. Depending on your goals and timelines, you may decide that it’s worth spending six months or a year optimizing your brand, market and operations before seeking a buyer.

A 2018 study by the Financial Planning Association and Janus Henderson Investors found that while 95% of advisors see risk in not having a succession plan, only 13% of those at firms managing less than $50 million have one in place.

If you take the time to start planning now, it will put you well ahead of the game.

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