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Practice Management > Building Your Business

When It Comes to Your Firm’s Values, Get Real

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David Grau Sr., founder of FP Transitions in Portland, Oregon, once told me about an unexpected trend his firm saw when matching sellers and buyers of independent advisory firms.

Far more sellers were interested in selling to owners of firms like their own rather than to the highest bidder, he said. They were more concerned with their clients continuing to receive a high quality of service than they were about the money involved.

Fast forward about 15 years, and we find the greatly expanded M&A market for independent firms has both increased the value of most independent firms and, unfortunately, is testing the client-centered resolve of many owner advisors.

One of the driving forces behind higher firm pricing is the recent interest that venture-capital firms are showing in the independent advisor industry. Most of these VC firms have other holdings in the financial services industry, although not typically in the independent world.

And there’s the rub. Focusing on specific industries such as financial services makes good business sense, as does looking for synergies between their holdings in the same industry.

Yet, these “synergies” combined with investors’ motive to maximize the return on their investments, has the potential to take the “independence” out of financial advice.

This means it’s very important for advisory firm owners to have not only a very clear view of “why” they want to sell their businesses, but also a very clear notion of what their values are and whether those values have changed over time.

True Goals

It seems a large percentage of owner advisors thinking about selling their firms are primarily focused on the money. What can I get for this business? And how can I position it to get even more?

There’s nothing wrong with that approach, if that’s where you’re at. But most firm owners really aren’t there, and they just don’t know it.

Unfortunately, this usually only becomes clear when they get down to the final stages of negotiating the sale — and the intentions of the buyer come into clearer focus.

This is the stage where the buyer makes clear his/her/their requirements for what they expect the owner to do between then and the final handover.

These often include things like laying off some employees, jettisoning marginally profitable clients, changing the service model, and positioning other clients to use the products and/or services of the new owner’s other subsidiaries.

The problem is, if you wait until this point to realize what your values are and start questioning whether this “deal” meets those values, you run the risk of wasting a lot of time and effort. There’s also the emotional toll— on you and your employees — of pulling the plug after months of hard work and preparation.

And, of course, there’s always the chance that you’ll let momentum and pressure compel you to make a deal with which you’re not comfortable.

Next Steps

The good news is that it’s relatively easy to avoid these problems as well as to sidestep potentially bad decision: Take some time before you start talking with any potential buyers to define your real values.

Is the selling price really the most important thing to you? More important than your clients? Your employees? Your partners? Your reputation? Your legacy?

If you’re like the many independent advisors I know, the answers are no, no and no!


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