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Practice Management > Building Your Business

4 Steps to Take Before Making an Acquisition

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Remember the fable about the tortoise and the hare? While the hare was faster, the tortoise won by consistently moving forward.

The options for growing a business can be a lot like that. You can grow organically, which is often slow and steady like the tortoise, or go fast and acquire another company to build quickly, like the hare.

Unlike the fable, one growth method over another isn’t necessarily better — they’re just different. Whichever route you choose, though, you need to be intentional with your choice.

After the quarantine is over, acquisition opportunities will appear, but you and your advisory firm need to thoroughly prepare before you take this path or making a deal could harm your firm’s future.

Here are four steps to help you determine if you’re ready to grow through an acquisition:

1. Define and know your growth strategy.

This includes knowing the type of client you serve best, and what type of firm you want to be.

And trying to bring another firm onboard without achieving this first step will likely result in disaster as you try to merge two incompatible cultures.

Grow smart. Your decisions need to be consistent with the type of firm and culture you want to create.

2. Check for red flags.

If your firm aligns culturally with the target acquisition, you’re in an excellent starting position.

Before starting negotiations, though, research compliance considerations to be certain the other firm doesn’t have any issues.

A red flag could be something serious, like past violations in an advisor’s history. It also could be something that creates more work than you want, like the process of working through non-competes and transitioning clients with a rep lifting out of a broker-dealer.

3. Study their people.

Employees who are a part of an acquisition can be a plus or minus for your business — and you don’t want the latter.

Begin by analyzing how well your team roles fit together. Will you bring on all the people in the new firm, and if so, do they complement your existing team? If there is overlap between positions, will you need to choose who to bring over with the merger?

Bringing in a valuable team with skills your team doesn’t have is one of the most overlooked parts of an acquisition and merger. Whenever possible, look to add people who are complementary to your existing skill sets.

4. Review the Numbers

At this point, you need to know the business metrics of the other firm by performing a growth analysis.

Review relevant key performance indicators, such as revenue metrics, client demographics, and fee structures. Also, identify the other firm’s processes for financial planning, investment strategy and client experience.

There may be redundancies in systems, which may cause hidden costs that can disrupt an acquisition, which may have seemed like a perfect fit on the surface.

Growth through acquisition isn’t right for everyone. But by taking these four steps, you can answer the “should I buy?” question with increased confidence.

Jarrod Upton, MBA, MS, CFP® is Chief Operations and Senior Partners at Herbers & Company, an independent management consultancy for financial advisory firms. He can be reached at


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