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Ready... Steady... Pass the baton!

For most people, selling their business is a once-in-a-lifetime event, but in many cases, business owners are unprepared. The idea of selling often gains traction from a phone call from a firm or broker expressing interest in their business or meeting someone at an event. This automatically puts the owner on the back foot.

Selling a business isn’t easy. It’s a complicated process with many moving parts, and unless sellers stick to the process, they will lose control, which will work against them and play into the hands of the acquirer or, worse, kill the deal.

Following the rules will keep the business owner in control of the process, which will lead to a better deal, delivered with less stress and in the timescales you want. So let’s start at the beginning by asking the question, ‘Is the business owner ready to sell?’.

We like to work with the assumption that the business owner believes they have a great business and are confident:

  • It is very well run
  • It provides an excellent client service
  • It has great systems and processes in place
  • The service levels are delivered every year without fail
  • It has low staff turnover and fantastic staff development

Stating these facts is a great start, but the seller must prove it. This needs to be proved from afar, as the last thing a business owner wants is a potential acquirer going anywhere near their staff and clients until they say so. So, they need to work on producing a ‘shop window’ on their business to give acquirers a feel of the opportunity.

To do this, there is specific documentation and evidence required:


Audited accounts must be up to date, and it is vital that a seller can quickly produce accurate sets of management accounts for the current year. Ideally, these will also show how the business tracks against the target. The recent turmoil in the markets and the rise in interest rates impact backers' ROI, so it is also becoming more important to show solid projections for the next 12-24 months.

It is important not to underplay the impact of being able to produce accurate information quickly. If it takes a seller a while to produce a set of management accounts, what does this say about how the business is run?

Client Proposition, Investment Proposition and Regulatory Framework and Governance

Anything around client proposition, investment proposition, regulatory framework, and governance is straightforward, as firms are pretty good at this. For example, risk controls, compliance framework, file checks, and annual reviews (MiFID II requirements) provide good evidence. In many cases where firms outsource a compliance function, they will have three or six monthly compliance reports, which are very useful. The company’s latest PI application is also a great source of information as well. Finally, it is essential that staff contracts are up to date and that HR policies are in place for medium and larger firms. All this information should be easily accessible.

Client Data

One of the main areas that firms tend to find harder is client data and the ability to produce the MI needed and in the format required. In most cases, the Financial Advice profession is predicated on different IT systems, which tend not to talk effectively.

The primary client data Acquirers like to see is a client base profile split between age groups, revenue and assets attached to those age groups, geographical locations, product types etc. It is often best to express this as households rather than individual clients. Usually, this data will have to come from multiple reports.

From our experience, the Financial Planning profession is not the best at capturing data with the ability to access it in one place. Often the type of data Acquirers need will mean interrogating the back-office system in multiple ways. This must then tie up with the data the numerous platforms and providers hold on the firm’s clients. If you have read an IO Report, you will realise this is a challenging topic but critical. The more accurate this is, the better.

This also plays into the client proposition. It must be demonstrated that the services being charged for are being delivered. For example, if the seller’s clients have annual reviews, there must be proof that these have been delivered. Having an annual look ahead is good practice to see who receives a review and when. Also, looking at the quality of the reviews regarding annual suitability and MiFID II is essential too.

The whole data area tends to be a minefield, and it is, without a doubt, the most challenging aspect for an IFA to pull together. Think of data as value. The more accurate, the more value there is.

Charging Structures

We always find firms’ charging structures interesting, as they don’t always align with the revenue streams and where the new business comes from. For example, if a company has £100m of AUM and charges 1% per annum, the revenue should be £1m. In most cases, it isn’t. We accept that there may be tiers for large clients, but sometimes this is because not all advisers follow the ‘script’ or clients have not yet been moved to the current charging structure. This needs to be explained positively.

Other types of data that could add value to the business in the eyes of an Acquirer

Being able to identify where the new business flows come from is critical. We find that the usual answer is "from existing clients”. Unfortunately, this answer is not good enough. If a seller wants to convince an acquirer that they are worth paying more for, they must clearly show where all their new business comes from. It is excellent if all business comes from existing clients, but this is not usually true. Identifying what business comes from your website, marketing, introducers, or referrals is necessary.

We find that not many firms can show the levels of referrals, where their clients have come from and the revenue they have generated. So, a seller should look at the areas they would want to know about if they were buying a firm and start collecting it.

The more a business can prove where its income is generated, the better. This is very powerful for a couple of reasons:


  1. It identifies a revenue stream that will continue after an acquisition, which is hugely valuable and;
  2. High levels of referrals are a good indicator of excellent client service.

This also plays into what was mentioned earlier about being able to provide a forecast for the coming 12-24 months. The more a company can identify where the new business comes from, the more likely it will provide an accurate financial forecast. This is very useful for the acquirer as it gives them great comfort around the figures, and it also portrays the seller’s business in a very positive light and sets it ahead of many firms.

DB Transfers

Finally, the seller needs to focus on the shape of their business and the type of business. At this stage, we must address the elephant in the room – DB Transfers. If the amount of DBTs (their transfer values expressed as a percentage of AUM) is in the region of 15%-20%, then the number of acquirers is limited. A business owner would need to demonstrate that all the other aspects of their business are so good that an acquirer couldn’t refuse it!

If a company has between 10%-15% of DB Transfers, there are more acquirers and below 10% even more. However, some acquiring firms will have a very low tolerance, i.e. 5%, and it’s essential to know these facts before potential acquirers are approached; otherwise, a seller will waste a lot of time and money.

We have massive sympathy for firms who are turned away because of the number of DB cases they have done. If a firm has been trading for 20 years and has done 5 cases per annum, which is not a high amount, then it will have 100 cases on its books which for most acquirers is an issue.

The key here is to focus on the back book and ensure the files meet today’s standards. The best way of doing this is on the client’s six monthly or annual reviews. A common area of failure we see is that older cases do not have a state pension forecast on file. This wasn’t required when the case was transacted, but getting it on file now is good practice. Potential sellers should ensure they have complete MI on all DBT cases and a thorough DBT annual review process in place. The tighter this looks, the better.

In Summary

The sale of a business is a multifaceted process that necessitates precision, comprehensive data, and distinct business operations. Preparing for a sale involves far more than just running a successful company; it's about effectively showcasing your business's tangible and intangible assets. Prioritising robust data collection, regulatory compliance, client service quality, and careful handling of sensitive areas like DB transfers is crucial.

The sale process might seem challenging, but it becomes significantly more manageable with a systematic approach and the proper guidance. Always remember, a well-prepared sale is not just about maximising financial gain, but it's about preserving and enhancing the legacy of the business. Ultimately, the value built in a business is best represented when the sale is seen as an end and a new beginning.


If you are a Financial Advice Business Owner who wants to maximise the value of your business sale and ensure a smooth exit process but not sure where to start, we can help you.

We understand that many Business Owners are hesitant to begin the exit planning process until they're ready to sell. Still, getting your business into an attractive "saleable" condition can take years.

We are proud to say that Paul Harper Consulting has exclusivity of the innovative software that creates personalised Exit Roadmap plans for our clients in the advisory and wealth space.

The software is unique in its ability to generate highly tailored action plans that carefully consider each client's unique circumstances and aspirations.

As the sole user of this cutting-edge technology within the advisory and wealth space, we take pride in offering unparalleled service and support to our clients. Our expertise and innovative software ensure that we deliver exceptional results that exceed our clients’ expectations.

If you would like to know more, feel free to  book a call message me on LinkedIn or call me on 07768 952212

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