Building a client base somebody else can run
How to reduce owner dependency, which lowers a valuation and can be reduced with one to three years of work.
How to reduce owner dependency, which lowers a valuation and can be reduced with one to three years of work.
A principal valuing their firm usually starts with assets under management. A buyer is more concerned with what happens when the principal is not there. Look at both together.
A buyer is paying today for income that arrives over years. Every pound of that income depends on a client choosing to stay. If a client stays because of a personal relationship with somebody who is leaving, much of what is being bought leaves on completion day.
The buyer reflects this in a lower price, or by deferring more of the price and making it depend on retention, which passes the risk back to you.
Ask yourself these four questions.
The last question tells you the most. If the firm cannot run for three weeks without you, it will not run without you after a sale.
This is somebody who knows the client’s situation and whom the client has met; they do not need to be an adviser. In practice this means a paraplanner or a client-relationship person joining review meetings as a matter of routine. Boring, slow, and the single highest-return change on this list.
Why the portfolio is shaped this way. Which son is sensible with money. What happened in 2008 that means this client will never hold that fund again. Recording it keeps the client known to the firm after you leave.
Review packs, the annual cycle, the way a new client is taken on, the way a death or a divorce is handled. Write down every process the firm runs. Processes that are not written down are lost when you leave.
This is the last step and the hardest. Sitting in a review meeting you are not leading, and saying little, shows that the relationship has transferred. Expect the client to be comfortable with it before you are.
All of it takes one to three years, because it is a change in how the week runs and only shows up in the file after several review cycles.
Under Securo the middle two stages are this work, done while you are still running the business and with the exit terms already agreed, so the improvement accrues to you.
How a buyer values the ongoing advice fees of your firm, and what reduces that value.
Read it
When and how to tell your staff about succession plans, and what to agree about their positions.
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Fifteen questions about your clients, the transaction and the buying firm.
Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.