Business owners' needs differ significantly from those of high-net-worth clients with mostly liquid wealth, but it is this complexity that generates significant opportunity for advisors with the right planning skillset and client service approach.
In fact, according to Jacob Leise, senior director of marketing for valuation software provider BizEquity, business-owner clients represent one of the ideal targets for advisory firms looking to grow their own book of business and secure loyal clients.
Leise made this case throughout a webinar hosted Monday by BizEquity and RIA Channel, during which he emphasized how some 10 million businesses are set to transfer ownership over the next decade alone, representing a collective $13.2 trillion in business-owner assets.
As Leise emphasized, business owners spend most of their time and energy keeping the business afloat, and they often deprioritize the creation of a true long-term plan for their own finances. Many who have engaged in business transition planning, he adds, have done so only superficially, perhaps by running their information through a few quick online valuation calculators.
"The challenges faced by business owners are unique and require guidance from a financial professional throughout the lifetime of their business," Leise says. "The more relevant your services are to business owners, the more confident they become in your abilities as a trusted advisor, leading to longer client retention and more referrals."
High Hopes and Higher Expectations
While many advisors say they want to serve this market, Leise says, the reality is that this client segment has very high expectations and a complicated set of needs that cut across tax mitigation, ownership planning and various other areas.
"Many advisors say they want these business owners clients, and it's not hard to see why," Leise says. "They generally have significant assets and they really need and value financial advice — because they are spending most of their time managing their own business. Success, however requires meeting these very high expectations."
Ultimately, Leise argues, excelling in this segment requires highly personalized services and planning skillsets that go beyond straightforward investment management and income planning issues. The linchpin to a successful service strategy, he proposes, is responsive and accurate business valuation services.
In other words, Leise says, being able to provide "the number" and to put the projected sale value in its proper context will help any advisor stand out.
Advisors Have a Lot to Offer
As Leise emphasizes, business owners often come to advisors and business consultants only after they have decided they want to monetize their business and transition away from ownership, but this obscures the fact that business owners need financial guidance throughout the entire business life cycle, not just when they are looking to sell.
Early on, Leise says, these clients need advice about strategic planning, proper funding and risk management. In turn, as the business grows, advisors can provide guidance about capital structure, budgeting, employee benefits and key-person incentives.
According to Leise, as an advisor works with the client on these issues, they can bring valuation planning into the fold as a more organic, holistic and ongoing enterprise. This longer-term approach will generally drive much better outcomes and help to set clearer goals and expectations, he says.
The appeal of this approach can be seen by contrasting it with what Leise calls "the traditional route" for valuation planning, i.e., contracting a certified valuation analyst who charges a fee to get a formal quote.
"Yes, this is generally going to be a very accurate and useful exercise, but it doesn't give you a living, breathing valuation," Leise says. "When you generate a valuation this way, the second this work is done, it is becoming outdated. You get a number that is accurate today, yes, but it doesn't update over time."
