TRANSITION TALK

10 Reasons to Professionally Value Your Business

Posted by FP Transitions on Nov 28, 2018 2:08:05 PM

10 Reasons to Professional Value Your Practice

Experienced business owners recognize the importance of tracking and monitoring the value of their practice over time. They know their practice is their most valuable asset, and by valuing it, they are empowered to grow, protect, and realize the value they have built.

Following are ten situations where it’s essential to have a current value and accurate understanding of your business.   

1. Increase Value

To cultivate growth and increase the value of your business, you need to have a starting point—a place to grow from. An accurate and comprehensive valuation will identify value drivers and growth opportunities, allowing you to create an informed growth strategy and make changes that will improve performance. The ability to track those changes and the value of the practice year after year enables you to see your progress and ensure your growth is on target

2. Benchmark Your Business

Tracking your value year after year allows for accurate benchmarking of the business. A thorough benchmarking report will look at your business and compare it to similar-sized businesses in the market, evaluating your company’s standing against the competition. Benchmarking reports reveal how your business stacks up against your peers as well as against leaders in the industry.

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Topics: Valuation & Appraisal, Business Value, Business Growth, Acquisition, Succession Planning, Benchmarking

Which Exit Path is Right For You?

Posted by FP Transitions on Sep 20, 2018 11:53:53 AM

Which Exit Path is Right for You?

You’ve built a business providing financial insight to a growing community of clients. You’ve fostered this relationship over the years and established a trusted role in their lives. As your clients have moved along their journey as professionals, entrepreneurs, investors, or heirs, they’ve turned to you for advice at each step; and now they are counting on your business to be there and to see the process through to the end. This means that as your clients transition into their own retirement, they will depend on your services more, not less. Regardless of the plan you choose, it is your duty as an independent financial professional to have a plan for client service and support that extends beyond your own career.

One way or another, your path as a financial planner will come to an end. The question is whether or not you’re going to exit on your own terms and in your own way. Are you going to create a plan for your exit that preserves the value and growth of the business you’ve spent your career building? Are you going to make sure your clients’ assets are in good hands for the length of their lifetimes, not just for the length of your career?

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Topics: Business Growth, Business Value, Enterprise, Sustainability, Benchmarking

Maximizing Business Growth Through Benchmarking

Posted by Marcus Hagood on Sep 14, 2018 8:48:16 AM

Maximizing Business Growth Through Benchmarking

The average advisor faces a difficult and increasingly competitive industry. With industry consolidation, technological advances, increased competition, more regulatory oversight, and the need to recruit and retain talent, it has never been more critical that financial advisors use benchmarking as part of their ongoing strategic planning process. With benchmarking, a business owner can improve their relative revenue and expense performance, organizational structure, and marketing results to support growth and achieve short-term and long-term goals. Used in conjunction with your business planning process, benchmarking is a powerful tool to track and build additional enterprise value.

What is Benchmarking and Why it is Critical?

Benchmarking is defined as a measurement of the quality of an organization's policies, products, programs, and strategies as compared against standard measurements of their peers and “best-in-class” providers. An effective benchmarking program provides insight into the connection between your business decisions and the resulting outcomes.

Benchmarking improves performance by identifying and applying demonstrated best practices to sales, operations, and procedures. Comparing the relative performance of their products, services, and sales both externally (against competitors) and internally (with ongoing operations and business decisions) ensures that performance meets or exceeds the competition. The objective of benchmarking is to find examples of superior performance and understand the business practices driving it. Effective business owners utilize benchmarking insights to improve by incorporating these best practices, not through imitation, but through innovation.

The Four “M's” for Incorporating Benchmarking into Business Planning

Every firm has unique needs for benchmarking. For example, the goals of a mature firm versus that of a start-up practice may differ greatly. More established business and solo advisors might be more likely to utilize benchmarks to implement changes that result in increased efficiency and profitability. By contrast, a young developing practice may be more focused on driving and managing growth in clients and revenue.

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Topics: Business Growth, Business Value, Enterprise, Sustainability, Benchmarking

Top 10 Drivers of Business Value

Posted by FP Transitions on Jan 24, 2018 9:23:30 AM

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The value of your practice is determined by many factors, some obvious, and some not so obvious. Even if the idea of exiting the business is far down the road, as an owner you need to consider the ten factors below as part of managing and growing the practice. Focusing on these areas can make a major difference in your book’s sustainability and its eventual purchase price (when transition time arrives).

The purpose of this article is not to review the theoretical aspects valuation or create an exhaustive list of factors that influence your value. That would be a much longer, technical article–which can be viewed here. The point here is to highlight the drivers that can help give your value an extra boost in the right direction. These factors include:

  1. Predictable revenue and recurring revenue streams
  2. Client demographics
  3. Average client tenure
  4. Size of potential market
  5. Transition timing
  6. Client affluence and average client revenue
  7. Asset or revenue concentration
  8. Use and structure of referral fees
  9. Length of surrender period
  10. Profitability

As you look at your practice with an outsider’s eye, you will see avenues that help grow the business and make it more robust. 

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Topics: Business Growth, Buying & Selling, Sustainability, Business Value, Valuation & Appraisal, Benchmarking

Brad Says...

Posted by FP Transitions on Jul 24, 2015 10:43:55 AM
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Topics: Business Value, Business Growth, Benchmarking, Valuation & Appraisal

The Art of Valuation

Posted by FP Transitions on Apr 14, 2015 10:00:00 AM

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Success in any endeavor comes from a combination of luck, timing, and strategy. If your goal is to grow your practice, acquire another firm, or build a legacy with your financial advisory business, developing the right strategy is crucial to your success. In Sun Tzu’s The Art of War – often cited as the canon of business and military tactics – understanding your unique strengths and weaknesses compared to your competitors’ is the foundation of a successful strategy.

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Topics: Valuation & Appraisal, Business Value, Benchmarking

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