The nature of what is being sold makes a substantial difference in how it should be valued and the range of potential buyers that may be interested. It is also a key determinant of the final payment terms, documentation and tax structure of the transaction, and even the spectrum of planning options that will be available for the seller post-closing.

3.     Unnecessarily Limiting The Universe Of Prospective Buyers. Buyers far outnumber sellers in today’s M&A market for advisory practices. Unfortunately, identifying the right buyers and bringing them into a structured sale process can be time-consuming and challenging. With that in mind, many advisors focus on the first offer or indication of interest they receive once they decide to sell, thinking that they may not get another chance.

Buyers are often confident and sophisticated and have the backing of their broker-dealers, while sellers are frequently new to the transaction process. Simply settling on the first offer that comes along because it’s easy can leave sellers vulnerable, and often results in costly—sometimes very costly—mistakes.

4. Not Understanding Financing Options. Financing options for selling a practice have changed significantly in just the last two or three years. Arrangements that were widespread a few years ago, such as earn-outs and revenue sharing agreements, are often not the best choice for sellers today. Sellers may also have opportunities to significantly reduce their risk in a transaction by using the appropriate financing options. Here again, though, such options require the seller to obtain a sound, third-party valuation for the practice at the outset of the sale process.

In many ways, the most common—and most costly—mistakes made by sellers in today’s M&A environment boil down to one strategic misstep early in the process: attempting to go it alone. Selling a practice is often the most important journey a successful independent advisor will undertake in their career, and sellers need a plan, not an idea or a comforting thought, to guide them through it.

By partnering with a strong third-party consultant who understands valuation, transaction structuring, financing methods, post-closing transition planning for clients and the full spectrum of other complex issues involved in planning and executing a sale process, selling advisors can position themselves to realize win-win-win outcomes for themselves, for the buyer and—most importantly—for their clients.

David Grau Sr., J.D., is the president and founder of FP Transitions, which partners with independent advisors to build businesses of enduring and transferable value. The above is adapted and excerpted from his second book, Buying, Selling, & Valuing Financial Practices: The FP Transitions M&A Guide published by John Wiley & Sons in August 2016.

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