This week’s guest author, Kevin Condon, began his career in 1984, starting from technical due diligence and developing a full service financial planning practice through partnership, practice merger, acquisition, and diligent sales and marketing. He sold his mature Washington, DC-based practice in 2002 to return to Denver where he developed a first-ever commercial portal for financial advice provision online.
Active in leadership positions through the years as a CFP Practitioner, NAPFA Member and blogger, he provides a uniquely helpful perspective to new and mature business owners to buy, sell or enhance a professional practice. His thirty years of experience and honorably acquired scar tissue can help your firm think through and meet today’s challenges.
Although there are many issues that may detract from the value of a firm as it undergoes an ownership change or other major transition, there is one thing an owner must ask:
“Do my clients perceive that the firm will offer them less (or more) value after this transition?”
This question poses problems for both seller and buyer. The buyer wants to maximize the value of the asset. But, so does the new owner/transition partner.
The old team knows where the skeletons are buried; they are all too familiar with the foibles of present clients. The new owner normally doesn’t know the firm’s clients well enough to ensure successful transition and is scared of losing them.
Here are a few questions that may help you anticipate problems in transition whether you are a buyer or a seller.
Which of these apply to you as a buyer?
…as a seller?
A. Owners’ concerns:
1. On a scale of 1 (100% retention) to 10 (will anyone come over?), how concerned are you about losing clients in a buy/sell transition or change of ownership personnel or location?
2. How much transition revenue loss is acceptable to you?
3. Will the firm’s best clients feel fearful or even abandoned? Have you asked them? Do you really know?
4. How will the transition affect the next generation folks in the practice? Will the firm lose assets as it ages? Or just change demographics and
make cultural adjustments?
5. Are the firm’s best clients women? men? How will this transition impact them?
B. Clients’ concerns:
6. Are you insecure about working with two teams of advisors during the transition? Why, specifically?
7. What are your concerns about continuity? Competency? Comfort? What is your biggest fear in this regard?
8. How confident are you that that this transition will serve you well?
9. What are the five reasons you would stay?
10. What are the five reasons you would leave?
11. In general, on a scale of 1 (not at all) to 10 (100% certain) how confident are you that you’ll be better off with this transition?
C. Firm’s Concerns (market positioning):
12. Do you understand your competitors and your current firm’s comparative UVP (“Ultimate Value Proposition”) relative to those who will pursue them as the transition proceeds? Can you keep your marketing advantage, or even improve it?
13. Alternatively, does your firm need market repositioning or even re-design to survive transition without losing value?
Pick one broad area (A, B or C) that seems most applicable to you as a buyer or a seller.
Take time this week to discuss those questions either with your prospective buyer/seller or your clients.