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David Shelton: Finding the right buyer

The market for advice businesses is buoyant, with recent sales of Bluefin Corporate Consulting to Capita, Arden Court Group to AFH Financial and Financial Connection to consolidator Perspective.

What conclusion can we draw? The first and obvious point is the trend toward consolidation is continuing. Good businesses will always be attractive to acquisitors and bad businesses will still be sold, albeit at knockdown prices. Second, the wide variety of business models, as demonstrated by Capita, AFH and Perspective, shows there is a potential buyer for all firms, it is a question of finding the right buyer and achieving the target price.

What should business owners do about this? If your firm is truly RDR-ready, you are likely to have pressed many of the value buttons that will reward you at some point if you come to sell. If you are not going to make it past the deadline, think carefully about how you market the strengths of your business that could be attractive to buyers. It does not always follow that similar businesses are the best fit. Often, two different businesses will benefit if the amalgamation is correctly handled.

You should concentrate on the value-drivers to provide a range of options and choices in your succession plan. These include recurring income, ability to generate revenue, profit growth, business and risk management controls, client profile and value, sources of business and brand and infrastructure including IT and processes. Each business is different and we can never be sure about the market for advice businesses in the future. However, by concentrating on this list, you will increase the attractiveness of your business and broaden its appeal to potential buyers. Many argue that now is the time to work hard at this because the value of a well-run advice business three years and more beyond the RDR deadline will rise. There will be fewer businesses and advisers in a market where demand will be high and rising as the population ages and other sources of face-to-face advice disappear.

Take a couple of days with your fellow owners and evaluate where you stand against the value-drivers. Prioritise those that will make a difference and work on them in the timescale and context of your succession plan. Less is more, so anything that is peripheral should be parked. Test the actions against how well they will contribute to increased business value. Even if your succession plan does not mature for several years, this is a set of actions that can never start too early.

The advice market has been through a tough time and it is likely that the pendulum will swing the other way when the market has settled. At last, there is a real prize to aim for.

David Shelton is the author of The Business of Advice book and website


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