Selling your book for the highest price as a senior discretionary advisor (part 2)

Several weeks ago I wrote an article which provides some valuable tips on getting the highest price for your book of business. Today I will present several more pieces to that puzzle.

A key strategy to selling anything for a higher price is finding a buyer who has more utility or consumption potential for what you're selling.

For example: Say you're selling color copy machines. You know, the fancy big ones which print a hundred pages per minute. You can either go from store to store along the road looking for a business that needs it, or you can connect with the school board's representative in charge of such acquisitions. Who do you think has a bigger budget to get a top-quality printer? I venture to say the school board, just based on the utility that they plan to have from the printer.

The more utility or consumption that the printer will provide, the higher the justification of purchasing the highest quality and highest priced printer.

The same is with selling your book. You want a buyer who will have the most utility from your book, in order to justify the highest price.

So how do we define utility in this case?

There are several things to keep in mind when it comes to utility. Here are a few of them:

1. The more years the purchasing advisor has to retirement the more he/she will be able to enjoy the book. Longevity of utility. That is to say, the advisor with 5-7 years to retirement will be less willing to invest in the book compared with an advisor with 15-20 years left to his/her career.
2. The more earnings power or take-home income, the more valuable the book. Meaning, The same book will be more valuable to the advisor who takes home 70% of revenue compared to the one who only takes home 45%. So it's important to know the grid system or payout ratio the purchasing advisor is on.
3. Growth through relationship building within the book; The purchasing advisor who knows how to grow the AUM through referrals and through providing value will have more confidence in the value of the book and be willing to place more money on the table.

With several other pieces to this puzzle, it is possible to raise the price multiple significantly. Even 4X, through taking the right steps.

Key takeaways;

It's a silly mistake of a retiring advisor to sell your book to an advisor 7 years younger.

See to it that the purchasing advisor is not only great at managing the assets but also has a track record of growing through referrals and relationships within his practice.

And, in addition to being sure the advisor is a great fit in every way, be sure he/she has a great payout ratio.

If you would like to upgrade your succession plan, private message me, let's hop on a call.