logo

SELL AND STAY STRATEGY

By Jerry Butler

INTRODUCTION

The financial advice industry is in a seller’s market. There is consolidation of AUM as everyone is chasing the elusive and wonderful recurring revenue. It is a great time to take advantage of the marketplace for advisors with less than 10 year exit strategy. Lock in great multiples. Continue to earn money including up side on growth. Tax advantages that may be reduced or eliminated in the future.

Sell and stay is a great strategy for those advisors that want to take care of implementing a Continuation Plan (more info?), Succession Plan (more info?) and/or an Exit Strategy (more info?).

WHAT IS A SELL AND STAY STRATEGY?

One of the most difficult decisions for most advisors is pulling the trigger on the sale of their business. It is their baby. They built it from scratch. Plus – they love what they do. At the same time, they know they should get something in place to protect the value both for themselves, their estate and their clients.

The Sell and Stay is the perfect solution. It involves selling a portion or all of their business similar to a merger but a more defined exit strategy. It allows the “seller” to lock in a great deal, keep working with clients, concentrate on what they like to do and earn an income until ready to exit.

WHY IT MAY BE RIGHT FOR YOU

Having a business in our industry can not be beat. Recurring revenue, huge up side, personal satisfaction and the opportunity to reward your motivation. Most advisors earn above average income and have an excellent lifestyle. That’s the good news! The bad news is the exit price is not a windfall and is usually 3 to 4 times the owner’s discretionary earnings (normalized cash flow before owner compensation). It is a common reason not to sell – “I make almost that amount in a couple of years!”.

There are many other reasons to sell including lifestyle, locking in the value and doing the best job possible for your clients. Working less. Paperwork less. Compliance worries less. You get the picture. If any of that sounds appealing – a Sell and Stay strategy may be right for you.

BENEFITS TO SELLERS

  • Move to a Lifestyle business: the advisor can adjust their work week / month to enjoy life away from the office while locking in a great price and receiving an income.
  • Monetize your business: put some money in your pocket and lock in a great multiple.
  • De-risk i.e. Valuations / Price: the multiple is fixed but you decide on the Exit.
  • Continuation Plan
  • Succession Plan
  • Exit Strategy
  • Keep doing what you enjoy
  • Future Growth

BENEFITS TO BUYERS

  • More opportunities
  • Less cash outlay
  • Economies of scale / synergy
  • Better business model
  • Client continuity and retention
  • Turn key operation / office
  • Talent acquisition / training
  • Acquire Knowledge – Knowledge

CHALLENGES

There are many challenges to finding the right match. In fact, my experience is it is much easier to sell a business than to match up advisors who will continue to work together into the future.

  • Find a match
  • Several steps – value, negotiate terms of the deal, employment relationship, partnership / shareholder’s agreements, conflict resolution/ etc
  • Sophisticated transaction structure
  • Most lucrative opportunity for buyers and sellers

HOW QUEENSTON CAN HELP YOU

Symbol-blue
error: Content is protected !!
Scroll to Top