TRANSITION TALK

If you’ve spent much time around Portland, Oregon, you know tap houses, microbreweries, and brewpubs are about as prolific as coffee shops. The Pacific Northwest takes their food very seriously, and beer and wine are an integral part of that. In the early days, first-generation craft brewers (and their counterparts in the wine industry) were entrepreneurs or career changers who wanted to break free from the corporate world and be their own bosses. Businesses began in garages and strip malls—small spaces that provided just enough room to get the businesses off the ground. Small brewers, looking to increase scale and reduce their individual costs, collaborated to share expenses for equipment or to piggy-back on each other’s licenses. Founders have shown grit, resourcefulness, and thrift to further their businesses through the first stages. Now, the most successful operations are evolving and acquiring, and the next generation of professionals are entering the industry with specialized degrees and focus on their careers. Meanwhile, boutique and even once “cult” brands struggle to maintain their position amidst stronger competition and a consolidating industry.

Does this sound familiar? The issues of scale, expense management, and growth planning are not unique to financial services. Other professionals begin their businesses with similar limitations, which they must address and overcome in order to reach a baseline of success. Passion and perseverance are powerful fuel, but the challenge comes—for financial advisors as well as craft brewers—in creating a business that can support sustainable growth. Oftentimes, the skills necessary to make this transformation are not innate to the business owner and reluctance to seek help is precisely what hinders their growth or even survival. As entrepreneurs who are passionate about their field, getting outside guidance is necessary to overcome their limitations and see the business into the next stage.

FP Transitions is pleased to announce the 2019 sales of financial services businesses in the following areas:

• Richard Metro Area, VA • $520,000
• Central Illinois • $390,000
• New Haven Area, CT • $2,000,000
• Colorado • $200,000
• Eastern Pennsylvania • $610,000
• Minneapolis Metro Area • $700,000
• Northeastern Wisconsin • $190,000
• Atlanta Metro Area • $330,000
• Eastern New Jersey • $1,500,000
• Eastern New York State • $300,000
• New York, NY • Undisclosed
• San Francisco Bay Area • $1,100,000
• Pacific Northwest • $950,000

VIEW CURRENT LISTINGS HERE 

VIEW COMPLETE LIST OF PRACTICES SOLD 

LIST YOUR PRACTICE WITH FP TRANSITIONS

Mergers are transactions that can take on many shapes, apply to almost any size advisory enterprise, and are infinitely customizable depending on the unique details and situations of the participating advisors.  

Advisors commonly think of a merger as the statutory combination of two practices into one in a tax efficient manner, but it’s better to think of the merger process as the combination of two or more advisors’ strengths, client bases, and cash flow streams, while reducing or eliminating weaknesses and inefficiencies – lofty goals to be sure, but readily achievable.

The reality is that mergers can be used to address a much wider set of challenges and opportunities including:

1. Growth through acquisition (i.e., by merging a small practice into a larger practice, and then setting up an internal succession/continuity plan);
2. Finding a successor, or becoming a successor (by first creating an internal, minority equity partner who later completes the buy-out of the founder’s S-corporation or LLC);
3. Establishing a practical and reliable Continuity Plan and protecting the value of your practice against your sudden death, disability or retirement is best accomplished by having an equity partner such as may be created through a merger;
4. Improving Enterprise or Revenue Strength through increased efficiencies and the added strengths of other advisory owners;
5. Expanding market territory, expertise, and services;
6. Building a strong, enduring business by combining the diverse strengths of multiple contributors.

To help illustrate these benefits, consider the following three examples as discussed in our recent Roundtable Talk, “Every Merger Is Unique,” below, each representing an actual merger between independent advisors that we helped orchestrate in 2018: 

• Central California • $1,500,000
• Southeastern Connecticut • $800,000
• Chicago, IL • $317,000
• Northwestern US • $1,000,000
• Eastern New York State • $410,000
• Northwestern Wisconsin • $340,000
• Northern Alabama • $3,000,000
• Columbia Metro Area of South Carolina • $1,360,000

VIEW CURRENT LISTINGS HERE 

VIEW COMPLETE LIST OF PRACTICES SOLD 

LIST YOUR PRACTICE WITH FP TRANSITIONS

FP Transitions is pleased to announce the recent sales of financial services practices in the following locations:

• Santa Cruz, CA • $221,000
• Southern New Jersey • $668,000
• Maryland • $652,000
• Southern Oregon • $261,000
• San Francisco Bay Area • $583,850
• Northern California • $1,800,000

VIEW CURRENT LISTINGS HERE 

VIEW COMPLETE LIST OF PRACTICES SOLD 

LIST YOUR PRACTICE WITH FP TRANSITIONS

FP Transitions is pleased to announce the sale of financial services practices in the following locations during the months of July and August:

• Central Coast of California • $3,200,000
• Cedar Rapids, IA • $807,500
• Kansas City Area Kansas • $1,198,812
• Little Rock, AR • $1,450,000
• Los Angeles, CA • $1,600,000
• Research Triangle of North Carolina • $1,221,696
• Southern Coast of Florida • $880,000
• Southeastern Coast of Florida • $794,037
• Boca Raton, FL • $988,046

VIEW CURRENT LISTINGS HERE 

VIEW COMPLETE LIST OF PRACTICES SOLD 

LIST YOUR PRACTICE WITH FP TRANSITIONS

It is without a doubt a “seller’s market” when it comes to financial advisory practices. With an average buyer to seller ratio of 50 : 1, sellers can be picky. Given the sheer volume of qualified buyers that send in inquiries for practices listed by FP Transitions on our open market system, it is extremely important for potential buyers to put their best foot forward and show the seller why they are the “cream of the crop.”  

Remember, your inquiry is the first communication you will have with the seller, who likely knows nothing about you. While we don’t recommend drafting a novel, your inquiry should at a minimum tell the seller enough detail to pique the seller’s interest. Inquiries that merely state, “I have cash,” “Let’s talk,” “I need more information,” or “See our website for more information,” are usually immediately stricken by the selling party from consideration, regardless of how well qualified the inquirer may actually be. This is because experienced and successful buyers take the time to make a strong first impression.

One of the fastest ways for independent financial service businesses to grow is to acquire another book of business, adding a lump of clients and their assets to a portfolio all at once. The reality is, however, that setting out to buy a business isn’t that simple. 

First, your business must be able to handle a sudden influx of new clients. Your infrastructure must be strong, you must have the people and resources available to provide quality service to clients immediately following the transition, and you must have the financial means to purchase. Second, the current marketplace right now is favoring sellers more than ever. Not only are we experiencing a 50:1 buyer to seller ratio on the open market, but values are at a high and the competition is stiff. We’re seeing a greater number of experienced buyers vying for a seat at the table, and we’re seeing more savvy sellers making strategic decisions. Finally, being able to meet the asking price alone doesn’t necessarily constitute a good fit. Even if you have everything in place to make an acquisition, you must meet a seller’s specific criteria in other areas to be considered.

The good news is that our industry has several other ways to achieve the same exponential growth as buying a book of business without a “traditional” acquisition. Strategies like mergers, continuity partnerships, succession planning, strategic partnerships, and sell & stay tracks offer alternatives for advisors who may not have the enterprise strength to execute a traditional acquisition strategy. The following avenues take planning and patience, but they can yield incredible growth and value in the long run.