Exiting Before You Go Completely Kaput: PSFs
If you advise, own and manage a professional service firm, especially within financial services, and got to a point in your life where you wish to call it a day you can always speak to fellow professionals or to your “trusted” advisors?
You may receive an unsolicited approach whether from a smaller equity fund, large rival or a business transfer agent (broker); but always keep your options open especially if you are a “micro” firm?
From a practical point of view the only thing of real value is the quality of your loyal client bank.
Do not fall for the initial high “offer” only for it to be gradually lowered overtime, as your morale is tested and “flaws” or issues found to justify any reduction in price or onerous adjustments to terms being discussed.
If the practice is loss making or has one too many skeletons then it probably has very little appeal to a genuine acquirer?? At the outset be completely honest and see if the potential buyer can work out an amicable solution for you?? If not, and there is no interest from anyone else – you may have to just close the firm down?
There will always be certain fellow professionals that you already know, respect, trust, admire, and who have more advanced infrastructure, support staff, systems and processes in place.? These may be the very people with whom you can have an honest heart to heart and say that you are thinking of phasing your life into retirement or another project and are contemplating a possible exit in the near term – would they be interested in an informal conversation?
Whilst there are a number of ways to “value” your business and many professionals can help you in this respect; however, that “value” is subjective – somebody may be willing to pay more and someone else less?? The problem is that your “business” is not really your pension in its current form – “physician heal thyself”, you knew very well that you should have put away resources to meet your financial needs, did it for clients, but not necessarily for yourself, not because you were “tight” or “greedy”, but in all honesty, as with many micro firms, you were struggling to survive and to pay the bills?
Whatever method you actually use to arrive at a “value”, be honest, can you actually live off the interest/returns from that capital (when eventually received)?? Objectively compare this to another way: agree a referral commission/fee split (say, 20% of the gross fee/commission income from each client/deal – for a fixed period [10-25 years], in perpetuity whilst the client stays on the books that is in the new firm or until the “price” you really want is achieved) with another advisory firm/fellow professional that you respect and know can sympathetically take care of your clients?? Play around with the figures and see what actually produces the highest projected returns for you?? If you have a mishmash of clients, some of modest means and others with greater net worth, then, after carefully “profiling” your databank – start a conversation with several advisors/firms, with whom each segment may be a logical fit?
There is nothing to prevent you from asking whether you can have an element of equity in your acquirers firm – so that you may get enhanced returns over the medium to long-term (that is, in order to help build up your pension “capital” once again)?
Whatever decision you come to, there is no perfect answer – you just have to do what is right for you and sincerely hope that your professional bonds are strong enough to help take care of you and your loved ones’ when you wish to gradually exit stage left?
Kip
The EBO Guy