To maximize a business' value, an advisor must ensure that it appears healthy to prospective acquirers. That could take a couple of years of hard work — a boot camp of sorts. Here are a few areas of your practice to reinvigorate before seeking an acquirer.
Demonstrate Organic Growth
Net new assets are a badge of success and a bit like an SAT score. While you don’t need the highest number to get into college, you’ll usually want an impressive score to boost your chance to attend the school of your choice. Ensuring that your business has a sustainable and meaningful growth trajectory will enhance its enterprise value and attract top-tier offers.
One way to accumulate new assets is to get referrals from existing clients or work with their heirs. A client near retirement age could lead to four or more new accounts by way of the client’s parents and the client’s children. Another way to achieve organic growth is to partner with a third party to identify potential clients.
Achieve Stability During Potential Disruption
Ensuring client stability is also a key factor in the valuation process. An acquiring firm wants assurances that the current business model and client book will not erode once a transfer is engaged. A stable practice can help attract a higher multiple.
As an advisor, you know whether your team can provide a reassurance of stability. If there’s any doubt, now is the time to establish that framework before soliciting offers.
Review and Continuous Improvement
Just as working with a personal trainer can help keep you on schedule for your physical wellness, working with a partner or business coach can help an advisor stay on track. But if you aren’t willing to ask the hard questions, hear the honest answers and make the needed changes, the work (and investment) could be for naught.
While you could achieve large valuation increases if you take on this project with the spirit of a newly minted marathon runner taking to a training program, a healthy balance is likely a better option. You have built a strong, generational business, and you deserve to reap the benefits of your work as you consider the next phase of your life. And making a few meaningful changes can make all the difference in the world. You just need to do the work.
Neil Turner is co-founder of NewEdge Advisors, an independent RIA based in New Orleans.
