TRANSITION TALK

Selling your business is a big decision. The good news is that demand is high and you have many options for structuring your exit. You also have many places to conduct your buyer search: reaching out to your professional and community networks, pursuing unmonitored listing bulletin boards, entertaining an unsolicited query on the table, or engaging in an open-market search. Most of these strategies result in having to navigate the process alone.

Buyers who have bought businesses before have the advantage of prior knowledge of the acquisition process, but as a seller, you often only get one shot at it. It’s important to understand what to expect. What follows is an overview of the process for selling your business through the FP Transitions Open Market.

PHASE ONE: Finding the Best Match

Business value and selling price can be two different numbers. A comprehensive and professional valuation will provide a fair foundation for your selling price that considers revenue, expenses, client demographics, geographical location, and much more.

The wealth management M&A arena is extremely competitive. Sometimes it seems like just about everyone is racing to buy a business. On average, our marketplace sees over 50 inquiries for every acquisition opportunity listed. That number can be upwards of 120 under the right circumstances. The key to cutting through the crowd is by mastering the first step of the process: the inquiry.

Inquiring on a business for sale in the FP Transitions Open Marketplace has two parts. First, there’s a questionnaire where you’ll provide specific business details to help evaluate the buyer/seller match. The second piece is the inquiry message.

You’ll be asked two things: “Why do you think your firm would be a good fit for this opportunity?” And “Is there anything else that you’d like to share about your firm?” These are where you can provide additional context for your firm and highlight any unique business qualities that make you a good fit for the sale. It’s a place to share things like your growth plans, investment philosophy, culture, or mission.

Remember, your inquiry is the first communication you will have with the seller.

Your inquiry messages should strike a good balance between providing too many firm details and not enough. Inquiries that merely state, “I have cash,” “Let’s talk,” or “See our website for more information,” are often eliminated from consideration during the first review. Your inquiry should be:

• Concise and clear;
• Address specific criteria laid out in the opportunity details;
• Provide relevant information that isn’t discernable from your questionnaire input.

In short, your inquiry is your chance to make a strong first impression and communicate your value as a buyer. The most experienced and successful buyers always take the time to make this opportunity count.

Few Words, Big Impact

The best way to know what to say and how to say it, is to have a clear picture of your business value, growth plans, and acquisition priorities. Professional valuation and benchmarking evaluations aren’t just for setting a selling price or monitoring growth. They can help you identify strengths that make you an attractive buyer as well as areas for improvement that will help you establish a targeted and successful acquisition strategy.

By tailoring your M&A priorities meet your biggest opportunities for growth, you can avoid wasting time inquiring on businesses that might not be the best fit for you. Instead, you can more efficiently navigate the process by homing in on the best opportunities that align with your goals.

Understanding exactly what you want from an acquisition, as well as what you have to offer, will help you to craft a more articulate and impactful inquiry.

Two Dos and a Don't

Besides a clear and concise inquiry message, the following are three important things to keep in mind:

DO double check your data and proofread your message. Submitting complete and accurate business data will help ensure your inquiry moves through the initial match screening. Additionally, attention to detail is a requirement in this highly regulated industry. Be careful. For some, small mistakes can be a red flag and taken for indications of performance on a larger scale.

DO submit your inquiry in a timely manner. It is true that the M&A arena isn’t “first come first served” and that it’s essential to take some time to craft a tailored message. However, it’s also important that you don’t drag your feet. The window for submitting an inquiry is short, usually around two weeks. To a degree, speed shows a heightened level of interest.

DON'T try to identify the seller and contact them outside the open-market process. Privacy and confidentiality are paramount. Violating them shows a lack of regard that is likely erode trust and get you quickly dropped out of consideration.

As with most things, your actions can speak just as loudly as your words.

If At First You Don't Succeed

Understanding your business and articulating what you have to offer a seller goes a long way to improving your chances of success, but it’s not a guarantee. As we’ve discussed, the average acquisition received over 50 inquiries, and still, in the end, there will be only one buyer. Which means, even though you may be a great fit, you might not be the best fit.

In these cases, preparation for the next opportunity might include further improvements to business and strategy. 

• Pay attention to any lessons learned during the previous experience.
• Explore and engage in complimentary strategies for growth and improvement.
• Evaluate and make any adjustments to your acquisition criteria to ensure that you’re targeting the best possible opportunities.

Experienced guidance and professional business analysis can help you know where to focus and what to do next–something our EMS™ memberships are tailor-made for.

Your inquiry is just the start of the acquisition journey, and putting your best foot forward is the key to a smooth road. Understand the strength of your business and your value in the M&A partnership, be able to clearly articulate this to a seller, maintain a clear strategy, and show respect with your actions. Follow those guiding principles and your inquiry will be on its way to the head of the pack, moving you through to the next stage of the process.

Over the past two and a half decades of working in this industry, as a regulator, an attorney and now at FP Transitions, I can safely say that I have never seen a better time to be the seller of an independent financial services or advisory practice. The commonly applied term, “a seller’s market,” barely does this observation justice. We are seeing so many supporting elements (price, terms, taxes, financing, demand, etc.) come together right now, that this may be the peak for sellers for years to come.

So here is my message: If you’re thinking about selling what you’ve built and handing the reins to a strong, next generation acquirer at any time in the next two to three years, you need to start thinking about these items today. You really need to understand why this may be the perfect time to call it a day and to sell for the full value you’ve built over the length of your career and to let someone else be responsible for the future. In a nutshell, here are the elements that are creating, perhaps simultaneously, this great opportunity at the peak of your career:

In our second book, Buying, Selling, and Valuing Financial Practices (the M&A Guide), we introduced the term of a “predatory buyer” to our readers. If you are thinking about selling your practice one day, you need to understand how certain buyers will approach you, how to protect yourself, and what, or who, to watch out for. In this article, we will answer these important questions for potential sellers: