The Perfect Fit

Posted by FP Transitions on Mar 3, 2015 1:43:00 PM

For sellers, when it comes to finding a buyer, "the perfect fit" has to do with much more than just meeting the price tag placed on a business. In truth, most buyers are willing to meet the asking price, and 98% of sales facilitated by FP Transitions close at or above the listed price. So, with an average of 50 inquiries per listing, sellers are able to look at other important factors:

1. Client Base

As a buyer, you may be looking to diversify your client base through acquisition, but showing some similarities with the listed practice is a good idea. Experience in serving a certain generation of investors, a niche demographic, or even a certain professional group is important to sellers who have a specific clientele.

2. Revenue Sources & Investment Style

Humans are creatures of habit, and clients will most likely be comforted knowing that you are managing their assets in a way that they're used to–this ensures a much higher client retention rate post-transition.

3. Business Philosophies & Client Service

Sellers look for the smoothest transition possible for their practice and their clients; the less disruption in frequency and manner in which clients are served, the better. Additionally, showing that your business has a similar company culture to the practice being sold helps to ensure that employees (and their knowledge of the clients) will remain after the sale.

4. Cash Flow & Value

It's important that your practice have a larger cash flow and higher value than the one you're acquiring. Not only does this make sense financially, but sellers are interested in seeing that the business they've built will continue to grow and prosper even after they walk away.

5. Geography

While it isn't always a factor in determining the perfect fit for a sale (occasionally a seller's client base is already served remotely), your location does make a difference in cases where the seller maintains a strong local presence.

The bottom line is: advisors want to leave their business–their life's work–in the hands of someone they know will care for the clients and business like they do. If you can highlight the similarities between your firm and theirs, you may well increase your appeal as a buyer.


Topics: Selling Your Practice, Acquisition