Finding Funded Buyers for your Financial Planning Practice

Business Brokering Tuesday 27th of October 2020

The combination of FOFA / RC fallout, Covid-19 and a tightening of credit availability is shifting the financial planning practice market in the direction of buyers. This has ramifications if you are thinking of selling - but it's not the whole story. As always, context is critical.

Changes in the financial planning landscape are going to directly affect the number of funded buyers in the marketplace. That doesn’t necessarily change the vendor’s situation (wanting to exit, needing a buyer, wanting best price). But it does change the urgency, and it probably ought to change your approach.

The knee-jerk reaction to a reduction in buyer numbers is to assume a corresponding reduction in practice prices – because the scarcity of buyers means they can command a better deal, right? Well, it’s not really so simple.

There’s a lot of factors that go into determining price of a business, and they have a lot more to do with the potential buyer’s analysis of their own situation and the particulars of the practice on offer rather than any consideration of whether there are three other bidders or nine other bidders, for example.

Ultimately, you don’t need many buyers to benefit from a competitive tender process. So long as you have sufficient buyers in the end-stage of negotiations you don’t need to worry about what the rest of the marketplace is thinking. And at the end of that process you only need to accept one of the offers.

The focus needs to be on securing a sufficient number of interested and funded buyers. Which, honestly, has always been the focus.

For a prospective vendor, the real and immediate effect of the marketplace shift is that there is more competition for the attention of these interested and funded buyers. This fact needs to be front-and-centre in your mind as you begin the sale process.

First and foremost – if you decide to sell then you need to commit to it. You are in competition with every other vendor, and your best offer will be coming from a buyer who is looking at every other vendor. Make sure your offering is at the top of their list.

You should have professional representation, by which I mean an agency agreement with a business broker who can provide you with high-quality IM documents and can see to their distribution to the widest possible market of funded buyers.

Once your offering is in the public eye you need to respond to buyers promptly, and be already planning to answer their questions well in advance of any due diligence process. Assume any buyers are as knowledgeable and professional as you are – think of the questions you would ask in their shoes.

Sale transactions are still happening – we know, because we’re doing them all the time. The enviroment is changing, but that just means that vendor behaviour and expectations need to adjust accordingly.

One final point – if you are concerned by the shifting market and are considering an exit then you should do so now. Because the causes of this change are fundamental and structural, and that means that the marketplace won’t be shifting back any time soon.


Mark Witt CA

Mark is the Head of Brokering at Business Exchange with over 20 years experience and 400+ completed transactions

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