Learning from a sale

We had known Bob for many years and had frequently suggested to him that, given the changes occurring in his marketplace it might be prudent if he considered selling his practice. He was after all, well into his ‘senior years’, had held his own AFSL for many years and had managed a very successful, risk focussed business, with a focus on high net worth clients. But times were rapidly changing and the writing was on the wall so to speak - it was time, in our view, for him to start looking for someone to take over the business. Perhaps not surprisingly, this concept didn’t fill Bob with any great joy - he was feeling healthy after all and those regulatory changes were a few years away at least. Why rush and sell something which he loved doing? So we waited…..a couple of years as it turned out.

Finally, Bob approached us last year and we began the sale process. He had decided that the time was now right for him – the first lesson.

And as the deal was concluded and Bob officially retired, I contemplated our time together and what I had learnt:

1.      Perhaps the most important lesson – Bob had to decide when he was ready to sell. As much as we suggested and advised that he should go sooner, he simply didn’t want to and even though I’m sure we would have secured a slightly better deal two years earlier, the reality was that he was prepared to wait a little longer and continue to serve his clients as he had done for so many years. He was settled with this approach.

So, to market we went. And to the lessons learnt:

2.      Be 100% sale ready before you go to market. Your business must be presented in its best possible light at all times. We’ve always favoured compiling a detailed information document on the business – to include qualitative as well as quantitative information which a prospective purchaser would be interested in. Always protected through a confidentiality agreement.

3.      Be realistic – most transactions will take longer than you probably think for the ‘search to sale’ process to conclude. Start early was Bob’s message.

4.      Don’t assume that those people who said that they could be interested when you were only thinking about selling, actually are now that you’re ‘fair dinkum’.

5.      Don’t put all of your eggs into the basket of only one potential buyer– always canvas widely at the outset, to learn and compare what’s the current state of play in the market.

6.      Know what you’re looking for in a potential buyer - attitude to clients and staff for example, fees, products and services offered and so on. The closer the ‘fit’ between buyer and seller, the better for all parties - most importantly the client.

7.      Know the non negotiables of your deal – what are your ‘must haves’ as opposed to ‘nice to haves’? In this regard, a healthy dose of realism is definitely required – especially with regard to your own, personal expectations. What role (if any) do you see for yourself, for example, going forward? In Bob’s case this was simple – he was looking forward to his retirement and was planning to transition out of his business as quickly and easily as possible.

8.      Keep your staff informed and updated throughout the search and negotiation period

9.      Get professional advice to fully appreciate the legal and taxation impact of a sale on your overall financial position.

10.  Use an external party to facilitate – leverage their network, market knowledge and experience. As Bob acknowledged on more than one occasion during the negotiations, we were able to provide objectivity and focus to keep discussions moving. We were worth our fee in his view – surely the ultimate compliment!

11.  Don’t be afraid to walk away. If your intuition (gut) says that something isn’t quite right, it usually isn’t.

12.  Buyer and seller can only truly celebrate and high five a successful deal, when the sale document is signed and the cheque deposited. Until then, it’s not over until it’s over.

13.  And once the deal is concluded, ensure your communications to clients, staff, referrers and centres of influence introduce the new owner (their new adviser, boss and referral partner) in a positive, professional light. A combo of written, video and face to face (virtual of personally delivered) for your “A” clients worked best for Bob, while his ‘thank you and best wishes’ close was certainly appreciated by all.

At the end of the day, Bob was selling (and leaving) something he had invested a lot of his time, money and feelings into. He had worked hard at it, taken the risks involved in running a small business and had made family sacrifices to keep it going. So, he was fully invested in it and to now say ‘good bye’ to it was emotionally impactful on him – something that should not be underestimated by either seller or buyer.

For your consideration.