By Suzanne Patrick-Lawrence
After an uncertain year, many of us are rethinking our long-term plans and re-evaluating our business decisions. One big decision may impact the future of your practice. If you’re part of the 40% of active financial advisors who plan to retire within the next decade, (1) this is an ideal time to revisit your succession plan to make sure it’s still in line with your goals. Here are some options to consider.
Addressing The Questions
When you are ready to move on to another career or even retirement, it’s not as simple as giving your notice and packing up your desk. You have grown your business with your own blood, sweat, and tears, and created relationships with your clients, guiding their financial life. Even though you are ready to close the book on this chapter of your life, you still want the best for your clients because of how much you’ve invested in their lives. Is it possible to make a smooth transition that will benefit everyone?
Many advisors who dream of retiring in the near future need to determine how to sell their practice to fund a comfortable retirement. Before you make such a move, there are countless questions that need to be addressed, such as the following:
- How do I minimize the impact of this transition for my clients and family?
- How much is my business worth, and how can I be sure I will get paid?
- Will my client relationships be handled with the same level of care that I provided?
- What are the risks, and what is the best way to handle them?
- What are some available resources that can help me understand my options when it comes to transitioning my practice?
According to a report by the Financial Planning Association, only 27% of all advisors have a formal plan to transition their business. (2) Just like preparing for retirement, preparing your practice for sale is most effective when you start early and rely on a professional to guide you through the process.
How Can I Sell My Practice?
If you have worked for decades to build your practice from nothing, the decision to sell might feel like giving up a child. You aren’t selling a product, you are selling the years of relationships you have invested in. That is why it is critical that you find the right fit with an ideal buyer so you can move into retirement with confidence. You want to be sure your buyer not only has the right qualification to take care of your clients’ needs, but also shares the same values and goals as you do. Your future buyer might do some things differently, but if you can find someone who will treat your clients like family, then you can rest assured knowing that your clients are in good hands.
How Much Do I Sell For?
Once you’ve decided that the time is right for you to exit your practice, you need to figure out how much your business is worth. Since your business is an extension of you and your dedicated work, it may be difficult to put an exact number on it. That’s why you need a professional valuation that numerous considerations into account, such as your client demographics, the firm’s profit margins, economic conditions, among others.
In addition to the above factors, there are specific steps you can take to maximize the value of your firm, including reducing personal expenses, and increasing your cash reserves.
Let Us Partner With You
You have put your clients first throughout your whole career; now it’s time to continue making them a priority by creating a plan that will take care of them and their finances. At Advisor Business Solutions, we support you in this process by providing you with the experience and resources to get the answers necessary for your peace of mind. If you are planning ahead and looking at the eventual sale of your business to another advisor, we can help.
With our Succession Plan Roadmap coaching, and flexible exit planning services, we can walk you through each step of the process. Learn more about how we can help set you and your firm up for a secure future by reaching out to us at [email protected] or calling 562-439-4804.
Suzanne Patrick-Lawrence is president and CEO of Advisor Business Solutions. She is a business planning and communications specialist with over 20 years of experience developing business and marketing strategies for financial services, global corporations, government agencies, nonprofits, and small businesses. She is passionate about working with financial advisor practices seeking guidance, support, and structure to position their firms for a successful transition. To learn more about Suzanne, connect with her on LinkedIn.