Many successful financial advisors and business coaches will recommend that peers looking to bolster their revenue should invest in marketing. But Bill Moffatt is exceptionally qualified to do so.
About 15 years ago, Moffatt, an advisor and portfolio manager in Halifax with Toronto-based TD Waterhouse Private Investment Advice, which is owned by TD Waterhouse Canada Inc. , began pouring as much as $125,000 per year into specialized workshops for clients and prospects to advise them on how to sell their businesses.
Today, Moffatt manages about $440 million for about 290 clients, mostly based around Halifax, but some as far west as Toronto.
So, how did he do it? Like many marketing success stories, this one revolves around demographics. Moffatt’s story begins with a familiar theme (the baby-boomer generation), has a tight focus (owners of small, private businesses) and finishes with the successful execution of a strategy. Up to 65% of Moffatt’s clients are private business owners, the key drivers for the growth of his business.
The crux of Moffatt’s strategy, from an asset-management perspective, is what he refers to as an apparent contradiction. Although business owners tend to be highly focused and disciplined individuals who dedicate themselves to the vitality and stability of their operations, they are often at sea when it comes to planning for retirement and the transfer of their wealth to family members. Such clients almost always agree that they need to address the issue of liquidating some of the value in their business for this purpose, yet they can’t seem to figure out how to do it. “They are unprepared and they often don’t know where to look for assistance,” Moffatt says. “This is the business opportunity that my business partners and I have looked to exploit.”
It is a massive opportunity, he says, a statement that he backs up with a raft of statistics and numbers that he’s accumulated in his some 25 years in the business. He says 50% of business owners plan a change of ownership within 10 years of planning to leave the business; another 25% plan one within two years of planning to leave the business.
Moffatt also points out that owners often underestimate how much preparation is involved in the orderly sale of a business: about 80% of those that sell their business this year will not have contemplated the event 12 months before closing the sale.
In addition, although some business owners eventually pass the business on to their sons and daughters, those are in the minority — 60%-70% of businesses are sold to non-family members.
The reason that many businesses are sold so quickly, without a great deal of preplanning, is because the event is triggered, in a large majority of cases, by a call from out of the blue from a potential buyer — typically, a competitor either looking to grow or to take out the competition. So, while business owners can spend years developing a market, a product and a service that is profitable, they often sell hastily and under pressure.
• Top Advisor Summit: Growing a practice with high-value business seminars
Bill Moffatt, an advisor and portfolio manager with TD Waterhouse Private Investment Advice, describes the seminars on business valuation and succession that help grow his business. The Halifax-based advisor runs the workshops on a co-op basis with legal and accounting firms. WATCH
@page_break@Other catalysts can also hasten the process — failing health, divorce or a paradigm shift in the industry.
No matter what the situation the owner may be in, a business should be ready to be sold at any time. That process can take several years and varies greatly from business to business. For financial advisors who may want to gain more experience in this area, it’s crucial to get to know how owners think. As a starting point, Moffatt urges: “Speak to all of the business owners you can.”
However, it’s also crucial to understand that the sale of a business has many technical elements and that you cannot guide a business owner through the process alone. The greatest value that Moffatt’s firm brings to the table is more experts — people at the legal and accounting firms with which Moffatt has long-standing relationships, who can speak to individual company owners and demystify the complex elements of a sale.
In Moffatt’s case, he links up with a well-known, local law firm, Halifax-based Stewart McKelvey, and the local office of Chicago-based international consulting and accounting firm, Grant Thornton LLP to co-host seminars and workshops. It is in these seminars that clients and prospects begin to think about how to monetize the value of their businesses.
The process sometimes starts with understanding basic business terms, which can even include earnings before interest, taxes, depreciation and amortization, notes Moffatt: “Many don’t know what EBITDA means.”
Some business owners may not be aware of the consequences of forming a holding company to hold assets generated by profits from the business. Although this structure has some advantages, such as protecting business assets from the reach of creditors, it has a significant downside: the lifetime $750,000 capital gains exemption available to small private businesses on a sale can only be used by operating companies.
Today, Moffatt estimates that he’s spending about $60,000 a year on his quarterly seminars, which are for both prospects and existing clients. Some of the planning is done in-house by his staff, but costs include event management, printing and distribution of materials. Moffatt stresses that it’s crucial to channel substantial funds into such purposes. Doing so will set you apart from 95% of other advisors.
IE