How to shop for a book of business

> Wanted To Buy

Advisor: You recently spoke at our advisor association’s professional development day on the topic of buying and selling a practice. After asking myself some of the questions you suggested, I am now convinced that I want to grow by acquiring retiring advisors’ books of business. I agree with your comments about the risks involved, but I still see this as a way to gather assets fairly quickly and substantially increase my revenue.

The only really big question that remains for me is: where do I find practices for sale? It’s not like advisors put a “For Sale” sign on their office doors — that obviously wouldn’t sit too well with clients. So how do I identify and approach prospective sellers?

 

Coach says: It sounds as if you have been thoughtful about both the opportunities and the challenges of buying a book of business. There can be a lot of work associated with an acquisition, and finding the right practice to buy is easier said than done. However, as I stated at your meeting, if you are able to put together a good deal for a qualified practice, it can help you grow your business faster than most longer-term marketing and prospecting efforts. 

Unfortunately, you are not the only advisor who believes that buying could be better than building. Add the demographics of the advisor community into the mix and it seems to me that we are accelerating toward the day when there will be significantly more potential buyers than willing sellers of high-calibre practices.

Recall my question at your meeting: “Would you buy just any practice?” Obviously, you would not.

If you want to be a successful buyer in such a seller’s market, you must stand ahead of all the other advisors who might also want to bid on a practice that is coming up for sale.

With the average length of time a practice is on the market likely to be measured in weeks rather than months, you won’t be able to wait until you hear of a practice becoming available to start making yourself known to the seller. You have to position yourself as the “buyer of choice” well in advance of any seller opening himself or herself up for offers. To do that, you will need a well-defined marketing plan to put yourself “top of mind” on the morning when those retiring advisors wake up deciding to sell their businesses.

The good news is that positioning yourself as a buyer is probably something you already know how to do because it’s very similar to positioning your practice among prospective clients. Bear in mind, though, that in the same way as potential clients seldom jump up to do business with you after their initial exposure to your marketing message, advisors looking to sell their practices are unlikely to be immediately ready to enter into a transaction or even a discussion with you the first time they hear that you are interested in buying.

Your task, then, is to engage in a series of ongoing marketing activities that place your name foremost in potential sellers’ minds before the day arrives that they reach the decision to sell.

In my view, that may be less challenging than trying to market to an array of potential clients because, unlike consumer-focused marketing, creating an “acquisition marketing plan” allows you to target a much more narrow market with a singular theme and message.

That message is about your reputation, which will be of paramount importance to departing advisors because their reputations will be coloured by yours if they endorse you as their successor.

Therefore, if you want to position yourself as a buyer of practices, you must put together an acquisition marketing strategy and promotional tactics that highlight your reputation, in addition to making your name known.

Here are some suggestions for creating an acquisition marketing plan. Note how they are similar to those you would use to create an effective client marketing plan:

> Define your target market. Identify your market demographically and geographically, as well as by number of clients, revenue, asset levels, product mix and other such characteristics. Also consider qualitative criteria such as investment philosophy and client service model.

> Determine your marketing message. While your brand attributes should be consistent with your consumer marketing message, the benefits highlighted in your acquisition message must be adjusted to reflect the point of view of an advisor looking to sell his or her business.

> Develop a public relations plan. Employ a number of tactics that will build your credibility and reputation, such as publishing articles, white papers or books; being quoted in industry trade publications and consumer media; or as a speaker on industry topics.

> Go Online. Create a section of your website devoted to acquiring other practices. Include information on your target market, your philosophy and client transition process, as well as the overall benefits to the seller in choosing you.

> Advertise. An advertisement in industry publications can help get the word out that you are interested in buying other practices. Online advertising can also be effective, particularly if you use a search engine optimization strategy that brings your name to the fore during a seller’s online search.

> Demonstrate Leadership. By taking a leadership position within industry trade associations as well as in your own community, you can demonstrate the values that underlie your reputation.

Just as in marketing your unique value proposition to prospective clients, your marketing to retiring advisors must develop your “unique acquisition proposition,” and communicate that message clearly, effectively and consistently.

Where do you look for books of business for sale?

> Look First Within Your Dealer Firm. Tell as many people as possible — fellow advisors, management and staff — that you are looking to buy a practice. Making the transition with clients will be much simpler if you and the seller are already with the same dealer firm.

> Don’t Ignore Your Competitors. Who do you admire among competing advisors in your community? Consider whether they might be candidates for a direct approach.

> Talk To Wholesalers And Other Industry Vendors. They typically know hundreds of advisors and are often aware of plans to exit the business before they become public.

> Network. Make contacts through local business organizations, such as your chamber of commerce, to give you access to other community leaders who may know potential sellers.

> Use Your Centres Of Influence. Just as you look to accountants and lawyers for client referrals, they may also be sources of acquisition referrals.

> Join Industry Trade Organizations. Take advantage of association meetings and conferences by making a point to talk to as many peers as possible. Introduce your acquisition intentions into conversations as appropriate.

> Search Business Brokerage Listings. A number of companies offer matching services to practice buyers and sellers. You will see their advertisements in the trade journals, including this publication.

> Look For “Continuity Agreement” Situations. In this type of arrangement, you and another advisor would agree to help each other continue doing business if one of you becomes unable to run your practice. Include a clause in your agreement that gives “first rights” to purchase the other practice if one of you dies, becomes disabled or wants to retire.

You will have more likelihood of success if you have built a brand that cuts through the noise of the competition and you have an active search program underway.

This brand-building will allow you to proceed into the negotiation and due diligence phases of the acquisition while potentially competing buyers are still scurrying around trying to establish themselves as contenders.

One additional point: it is important to begin this process with a SWOT (strengths, weaknesses, opportunities and threats) analysis of your own practice to uncover areas to be strengthened before attempting an acquisition. It will give both you and the seller confidence that you can handle an influx of new clients.

George Hartman is president of Market Logics Inc. and managing director, advisory services with Accretive Advisor. Send questions, comments and opinions on any aspect of practice management to george@marketlogics.ca.