Business Health has cautioned that too many advice businesses are underprepared when it comes time to buying other books of business or selling their own.
This is one of the key messages shared by the services firm in documenting its top tips for business owners when buying and selling advice practices.
According to the company – run by Terry Bell and Rod Bertino – only a quarter of firms have a documented business or succession plan, and it cautions that any owners not currently thinking about retirement soon will be.
“A clear plan and preparation needs to be completed ahead of time,” says Bell and Bertino.
“Our experience is that buyers are more selective about what they want to buy and will not pay a premium if there is less alignment with their business model.
“Today, the question for every owner to seriously consider should be – ‘why buy my business?’
“And to adequately answer this question, while giving yourself the chance to optimise your value, we believe every business should be sale-ready. Even if selling isn’t on your mind today.”
Business Health’s recommendations include preparing a document which tells the story of your practice, clearly, objectively, and comprehensively.
“It should present the business in its best light and enable others to gain insight, while also dissuading tyre kickers.”
Among the firm’s key tips for buyers and sellers are:
- What will success look like? Any acquisition or merger should be accompanied by a clear understanding as to key milestones and end goals underpinned by a financial bottom line
- It’s important that due consideration is given to clients who will be impacted by the purchase/merger. Changes will come to some clients and, to counter any possible negativity, communicate frequently, relevantly and with empathy
- In most purchase/merger situations there will be two sets of staff who will need to get to know each other, understand how their roles will look in the new environment
- Business as usual is not likely. Most purchase/merger situations will require substantial changes
- If I’m paying, I’m saying. The person drawing the cheque will usually have the final say on all key operational and strategic issues going forward. Less equity equates to less influence
Business Health also states Australia’s advice practices are not good at planning for their own transition, with:
- 75% not having a clearly articulated/documented plan for the next 3-5 years
- 76% not having a documented succession/buy/sell plan
- 52% not having key person cover
