If you want to sell your financial advisory business, treat it like a real business and it will reward you in the long run, advised Stuart Silverman, president of Bluespring Wealth Partners.

Several steps should be taken to make sure a firm is ready for sale, in the same way a homeowner improves a home before selling it, Silverman said in an interview.

Bluespring Wealth Partners, an Austin, Texas-based subsidiary of Kestra Holdings, focuses on acquiring and servicing wealth management firms. 

Valuations at advisory firms are higher now than ever before, prompting owners—many of whom are approaching retirement age—to think about selling their firms. It is a great time to sell, according to Silverman, but there are a number of things acquirers look at, and which advisors should take heed of, before signing on the bottom line.

To be worth an optimum amount, a firm should have a system in place for conducting business so that work among advisors is consistent and it should have a distinct culture and brand, Silverman said.

“Financial plans are customized for each client, but the procedures should be the same,” he noted.

In a similar vein, members of the practice should work as a team.

“You do not want the advisors to operate in separate silos, and you do not want a business that will come to a halt if something happens to the owner,” Silverman said.

In addition, he added, an advisory practice is more valuable when both advisors and clients span the age spectrum.

“Clients tend to be a reflection in age of the advisors,” Silverman said. “But if the advisors and clients are all older, the business is not going to be worth as much as it would be if there were older, middle aged and younger people involved.”

Acquirers obviously look at recurring revenue, but they also look at where the revenue is coming from, Silverman said. If 5% of the revenue comes from one or two wealthy clients, the firm is not going to worth as much as it would with a more even spread of revenue across a number of clients.

Silverman said Bluespring Wealth Partners does an "asset walk" when looking at a prospective purchase to determine how revenue is generated.

A firm’s growth can come from adding wallet share from existing clients, from market growth and from adding new clients. “If too much of the firm’s growth is coming from growth in the market, we would look skeptically at it,” he explained.

Likewise, if the business has stopped growing through acquisition of more assets from existing clients or adding new clients, the owner needs to re-invigorate the firm by actively searching for new clients—something that may have fallen by the wayside over the years. A firm that has strong, long-term relationships with the families of clients also will be worth more to the buyer, Silverman said.

Advisory firm owners should look at profit and loss like any other business, he noted. Problems that can be discovered include under- or overcharging clients or providing services that are not compensated for. If those thing are found, the owners need to adopt more efficient practices and make the needed changes before trying to sell.

Undercharging clients cannot be fixed immediately. Instead, advisors need to explain to existing clients the value of their services so that fee structures can be amended.

In addition, a firm's owner should have a business evaluation done every couple of years “just to see where they stand," Silverman said.

“We are seeing a lot of M&A activity in the industry and we expect more to come,” Silverman said, adding that Bluespring Wealth Partners has several deals in the pipeline.