Selling and running a financial planning business

There’s no way around it. Selling a business is hard work, and not in the way you might think!

Most people assume that getting a good deal is the hardest part of selling a financial planning business. This isn’t the most challenging part, especially if you have someone like Melo in your corner! The most emotional and physically challenging bit is getting all the information together to get the deal over the line is.

One of the biggest traps is that sellers who are financial advisers, and are actually servicing clients, underestimate  the time it takes to get through due diligence.

If you’re still advising clients, running a team, solving problems daily, how are you now going to tackle the 247 questions that the buyer’s legal team need answering.

What this looks like in reality is digging out contracts from 2017, explaining why your client segmentation model changed three times in four years or collating all the details of the office property you rent.

ANYONE and EVERYONE who has been through this process will tell you: “It’s like doing a full-time job, on top of your full-time job.”

Here’s the truth: The better prepared you are, the smoother due diligence goes.

Oh and the more help you have around you, the less likely you are to burn out or blow it.

You need a deal team:

1. Sell side broker, (we are a rare breed!)
2. Sector specific M&A solicitor
3. An accountant who understands financial planning firms AND accountancy tax practices surrounding selling a business.

These people have done all this before, countless times. Whilst every deal is unique, they have the skills and experience to adapt to whatever the process throws at you.

When deals fail, it’s rarely about price. Deals crumble when there is friction, fatigue, and founders who just can’t keep all the plates spinning.

Real-world story: how DD took away the chance of a share sale

Melo worked with a seller who had a clean, profitable business and a nice share sale offer on the table.

But they massively underestimated the time required to manage the deal alongside their ongoing client work.

The result?

Annual reviews stopped getting done.

Melo didn’t find out until it was too late.

The buyer pulled the share sale and offered an asset purchase instead.

Still a deal, but one where the seller would pay a lot more in tax.

All because the deal got in the way of the day job.

So, what can you do?

• Start preparing early. If you’re thinking about selling in the next 5 years, start to get yourself deal ready.
• Get your deal team lined up. Sell Side Broker. Accountant. Solicitor. All financial planning business deal-literate.
• Consider bringing in help. You can’t do this properly off the side of your desk. If you don’t have staff who can work on due diligence full time, bring in an external expert (like Melo) to help.

Exits shouldn’t be seen as a transaction. It’s a phase of your business lifecycle. Be intentional. Be structured. Don’t go it alone.

If you’re thinking about selling in the next 5 years, now is the time to start preparing.

Not sure what to prepare? Well give us a call!

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