Robbie Bennetts: 4 keys to selling your financial planning practice

Most financial planners perform very poorly when it comes to selling their business. If you want to sell your business successfully, there are a number of important steps to follow to not only make yourself an attractive acquisition target but to also maximise your final price.

Get your business model right. This is the first and most important point for financial planners looking to grow and potentially sell their business in the future. We have a changing regulatory and market environment, so there are number of important factors to consider in this.

I have previously talked about the importance of the operation running as a business and not as a sales organisation. The challenge going forward is to provide associated services that provide a more comprehensive business and sustainable growth model. This leads me to my next point.

Staffing. It is important to give some consideration to the right staffing model for your business. Some guys run their businesses together with their wife, and sit around thinking they are going to successfully sell their business. But it takes more than that.

Financial planners can take a leaf out of the pages of accounting firms and legal practices, which charge staff out to clients at a certain rate. Under FoFA you are going to have to consider similar options, so think carefully about staffing plans and how you can leverage staff most effectively.

Happy clients. This is vital for any financial planning business looking for a potential buyer. If you can identify that your business is not only going to retain clients – but grow them – then it’s going to be worth more money.
If you are selling your business, it’s a good idea to hold a client function and help transition clients through the process and understand that they are going to continue to be looked after.

Understand what numbers are of value. When a potential buyer comes along, most financial planning businesses generally point to their trail book and say, ‘I’m worth X amount based on my trail and this is how much I have under management.’ I see this all the time, but this is not the future.

The future value of a practice will be determined more by EBIT than funds under management. As the industry continues to change and as more practices add further business services, it will be reflected in business valuation models, and not just funds under management.