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Blog Post

December 4, 2015

5 Mistakes Advisors Make When Transitioning A Business (Buyers & Sellers)

Many New Opportunities to Buy, Merge and Partner | Queenston Consulting




Queenston is Canada’s premier transition specialist in the financial advice industry. We have valued and transitioned more businesses and have more market comparables than any other business in Canada.

Bottom line in our industry right now is “it is a seller’s market” yet most transitions are rushed and the price and the transfer of clients is not done in a thorough manner. Here are the most glaring mistakes:

  1. Wrong Price – Advisors use Rules of Thumb without realizing the range of multiples is very wide. 3x recurring revenue may be an average but Queenston has seen the range from 1 to 5+. A multiple of 1 can be overpaying and 5x can be cheap. The Right Fit, Geography, Demographics, Age, Business Model, AUM per household, etc. all will determine where in the range the price should fall. An objective valuation should always be obtained for both sides of the transaction.
  2. Wrong Person On the Other Side of Transaction – In my opinion, too frequently sellers and buyers come together serendipitously and make an impulse buy / sale. Is this a good fit for clients? Is the buyer the right buyer or just in the right place at the right time. I have seen Vendor Take Backs of 7 figures where the seller has no tangible indication that they will get paid back. Negotiating with a person who has all the leverage – if you are selling to someone with a much larger business – they do not need your book so may not pay what it is worth. The right buyer will pay 50% more and will still get a good deal because they are the right buyer.
  3. Wrong Terms of the Deal – No tax planning on either side is a common mistake. Payback period too long or too short especially based on the negotiated selling price. Sellers frequently allow huge claw backs on the price if clients leave – what if the client leaves because the buyer screws up? Remember one thing “the key is not the price; the key is the terms of the deal”.
  4. Listening to the Wrong People – Your Dealer and/or your MGA will be more concerned with your book staying with them then you getting a fair price. Other Advisors who have done deals – whether a buyer or a seller – do not give accurate information. The person on the other side of the transaction wants to have bragging rights over you.
  5. “The shoemaker’s kids go barefoot” – Financial Planners do not plan for their own financial situation especially concerning their business. 90% of advisors do not have a Succession Plan or Continuation Plan – that is not fair to your clients, your family or you!

The most efficient growth model in our industry currently is growth by acquisition. Queenston gets 50 – 200 enquiries on any business we list “For Sale”. Yet many advisors still sell to the first person – quickest and easiest and usually the wrong fit for the wrong price.

We help our clients in several different ways including:

  • Business Valuations – transitions; buy / sells; shareholder’s disputes; divorce; etc.
  • Buying, Selling or Merging with the best candidate and getting the best structured deal.
  • Succession Planning – protecting the value of your business (Continuation Plan); Exit Strategy (Junior Partner) and tax and financial planning for the business.
  • Growth in Value program – Queenston works with clients to identify areas that if improved will increase the value of our client’s business over time. We help improve the 25 value drivers of your business.

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