From the horse's mouth: David Barton on selling an advice business

Preparing to sell your business

clock • 5 min read
David Barton: "Our clients' best interests are at the heart of the advice process and the same should be true of any sale agreement."

David Barton: "Our clients' best interests are at the heart of the advice process and the same should be true of any sale agreement."

David Barton shares his first-hand experience of selling an advice firm and outlines five tips for business owners

At some point or another, advice firm owners must consider the future of their practice and selling is often the leading option.

As someone in this situation only recently, I can say from experience that it's not a decision to be taken lightly; it requires a great deal of care, planning and empathy. Not only is there much to ponder - legal considerations, tax planning, how to structure the deal - but people's futures are at stake, too. Making the wrong choice could have implications for the seller, their staff, and their clients.

Financial planners are accustomed to untangling complex financial scenarios. This is what makes our services so valuable to those who seek them. Navigating complicated areas such as estate and retirement planning are pursuits those less experienced in financial matters are unlikely to feel comfortable undertaking alone. Business owners must apply the same skill and due diligence to their own needs when entering acquisition discussions.


Our clients' best interests are at the heart of the advice process and the same should be true of any sale agreement. Client relationships have often been fostered over several decades, in many instances developing into friendship. Planners often know more about a client's earnings, assets, borrowing, health and even their goals and aspirations, than those who are closest to them. The sharing of personal information within the business relationship builds a remarkable level of trust between both parties.

There are few bigger tests to this relationship than when a firm owner is eyeing up a sale. Advisers have a professional duty to look after their clients and will want to ensure the same high-quality advice continues once the firm is in new hands. Purely tending to the buyer with the deepest pockets, with little consideration for their advice proposition is rarely the best course of action as clients could potentially be shoehorned into something unsuitable. And clients aren't the only people potentially affected - the firm's staff may be concerned that a sale may leave them vulnerable.

Understandably, given the wealth and complexity of options to consider, it can all seem quite daunting for potential sellers. Balancing close relationships with commercial needs is tricky to get right. I found that compartmentalising the process down makes it more palatable. Based on my experience, here are five steps sellers can take to make the decision more manageable.

  1. Plan ahead

As with any big financial transaction, thinking ahead is absolutely key. Prudent planning affords the owner valuable time to think carefully about what they really want. As a rule of thumb, planning anywhere between two to five years is sensible Consequently, if the right buyer comes along, which could happen at any time, the owner can enter discussions knowing  where they stand and more importantly what's really important to them.

  1. Calculate the value

While price isn't everything, it's clearly very important. As most acquisitions start with informal discussions between buyer and seller, even if it's just to gauge interest on either side, it's wise to know in advance roughly how much your business is worth.

When calculating the value of a practice, there are several ways this can be arrived at. A multiple of recurring revenue was previously commonplace, but recently we are seeing instances of multiples of EBITDA - earnings before interest, taxes, depreciation, and amortisation. Getting a firm grasp of these metrics before taking a seat at the negotiation table is crucial.

In addition, firm owners will want to think about how much money they need to support their own financial future. This will enable them to draw sensible comparisons with what the potential suitor is offering.

  1. Succession planning

For those selling with retirement in mind, either straight away or in the near future, being acquired offers the potential to gradually take a back seat, enabling a smooth handover where clients can be introduced to, and build a relationship with their new long-term adviser. Many acquirers allow the seller to retain a degree of autonomy over the day-to-day running of the business, which can prove a big attraction.

  1. Growth opportunities

Selling and making a clean break is a relatively rare scenario. More commonly, firm owners sell to supercharge their growth plans. By selling to a larger more resourceful firm enables some of the less commercial aspects of running a practice such as operational support services including compliance, IT, investment research, marketing, recruitment, and training to be centralised. The big upshot here is that it frees up more time for advisers to spend with their clients.

  1. Do your due diligence

Contrary to popular belief, there's little to be apprehensive about when conducting due diligence; all firms can improve what they do, and good buyers will be pragmatic and positive. The key here is ensuring policies and files are in good order, as well as detailed MI on high-risk business such as defined-benefit pension transfers. Finally, to avoid issues further down the line, sellers should be honest and upfront about any past problems.

This is by no means an exhaustive list, and priorities will differ from person to person. But by taking the right steps, owners can secure a deal that protects the financial futures of all parties. As this is a huge step, I would urge all potential sellers to think carefully before making the leap.

David Barton is chief executive at Prosper Wealth Management, part of IWP Group


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