Whether you are buying or selling your practice, there are five key components to consider. Why? Because others will be looking at your business from the same lens.

A 2019 study by the Financial Planning Association found that about 25% of financial practices saw little growth in revenue over a 5-year period.


  1. What is your practice worth right now?

Seller: A potential buyer will want to understand the financial aspect of your business as well as have insight into your client base. Markers of success will include:

  • Assets under management
  • Revenue, now and future potential
  • Profitability
  • 5- and 10-year growth record
  • Focus on financial planning
  • Client demographics, including average client age
  • Established relationships with the next generation of clients
  • Marketing activities
  • Client care model

Buyer: As the buyer, you will want to review the same information from a different lens. When looking into the business you are considering purchasing, ask yourself these questions:

  • What is the practice’s growth record, including revenue and AUM?
  • How often does the business interact with clients, and in what way (client events, phone calls, marketing activities, etc.)?
  • Does the practice focus on products and services you currently offer, such as financial and estate planning?
  • Is there a client care model in place that you can replicate or integrate into your practice?

Whether buying or selling, understanding what a practice is worth is essential to determining your next steps.


  1. How do you grow your practice now?

Buyers should consider where their current growth is derived from. If your organic growth pace is rapid, now may not be the right time to purchase a practice. Continuing to grow as you have may take more time and effort; however, it also gives you control over the growth process and can be more cost-effective.


However, if your business is growing slower than you would like, purchasing a practice may be a way to quickly accelerate growth. Acquiring a practice provides a built-in client base and may include staff and resources depending on the deal made. Other considerations include how much work it takes to integrate the two firms and whether the culture fits your current business.


  1. Are you ready to buy or sell?

Seller: If you are selling your practice, what changes can you make to increase the overall value and help smooth the transition for your clients? Reach out to someone who understands you and your business for a practical and candid evaluation. Based on the answer, you can decide to sell now or postpone and implement changes that may increase the value of your business.

Buyer: Do you have the capacity and time to take on an influx of clients, or do you want to wait and build the foundation to be ready later? Ensuring you have the staff, technology, systems, and processes to deal with the complexities of taking on another practice before a purchase is essential. If you have any doubts, waiting until you can put the needed items in place now helps ensure readiness in the future.


  1. What kind of practice should you consider buying?

While there are similarities between advisors’ businesses, there are also many differences to consider when deciding if the fit is right for your current practice.

  • Size of the practice: A larger practice can help build your base quickly; however, managing a more extensive clientele may bring new complexities. In comparison, a smaller practice may not allow you to grow as quickly as you had hoped.
  • Visibility and reputation of the practice: Does the practice have a public presence with a website and social media? How does the advisor’s marketing reflect their business? Can you read testimonials or reviews to learn more about the practice’s reputation? Your current clients are likely to check out the company you are purchasing. Will a current advisor’s reputation and marketing effectiveness help you build trust with existing clients?
  • Most importantly, what type of practice are you buying:

Suppose you have a strong focus on financial planning and the business you are considering buying does not. How much work will you put in to bring new clients into your financial planning world? Is the practice fee-only, commissioned-based, or a hybrid practice?

Every aspect of your practice compared to the business you are considering could be the difference between a smooth transition and unexpected surprises. Ask questions. There should be very few surprises by the time you complete the merger.


  1. One large purchase or multiple smaller purchases?

While most purchases are 50% or less the size of the buyer’s practice, there are pros and cons to purchasing one large practice or several smaller practices.

One large purchase

  • When purchasing one large practice, there may be some efficiencies you don’t have with buying several smaller companies, including one transition for all clients and quickly bringing in a significant amount of revenue. A well-known brand, reputation, and client base can be appealing if you are a smaller, less established advisor.
  • The downsides to purchasing a more extensive practice include the potential expense and time-consuming integration of a large client base. If you don’t have established processes and systems, the change may sometimes be challenging and overwhelming.

Several smaller purchases

  • Purchasing several smaller practices over time may be less risky and allow you to balance the outflow of money while steadily increasing revenue. Individual practices allow time to integrate each into your business systems before adding the next purchase.
  • Purchasing several smaller practices may mean slower, less steady revenue growth, while integrating multiple systems, processes, and client bases may be less efficient over time. Additionally, combining the marketing and reputation of several smaller companies may cost more advertising and promotion dollars overall.

Whether you are buying or selling, there are many factors to consider. Each person in the equation needs to take the time for introspection, self-analysis, and preparation. Get professional help, do your research, be prepared to negotiate, and have a strong understanding of what you want from the purchase or sale of the business. Be prepared to walk away if the investment is unsuitable for either party.


If you have questions about buying or selling a business, contact Soliman Popal with Financial Advocates. His insights and experience may be just what you need to decide your next move.