Close This website uses modern features that are not supported by your browser. Click here for more information.
Please upgrade to a modern browser to view this website properly. Google Chrome Mozilla Firefox Opera Safari
Financial Services Intelligence Watch
Sub Menu
Search

Search

Filter
Filter
Filter
Filter
A A A

Selling a business

Publish date: 17 January 2020
Issue Number: 103
Diary: CompliNEWS
Category: General

By Lee Rossini

Once you have made the decision to sell a business, it is to your advantage to ensure that it is a planned rather than a forced sale. Timing is critical to getting the best deal possible; this means managing the business in a manner that it is ready to be sold at any time. From your point of view, the objective of selling the business is to maximize your returns whilst the objective of the purchaser is to acquire an asset that has a predictable cash flow and potential for growth in order to maximize the return on their investment.

From a timing perspective, obviously the best time to sell your business is when the economy is strong as there will be more buyers around with available cash. However, even if the economy is weak, you should be able to realise the right price for your business if you have managed the business well. This includes offering financial advice that meets the needs of your target market, a relentless focus on positive client experiences, an ethical culture and overall, a business that is well-managed and can easily be separated from its owner/s.

There are different options available when considering the sale of a business. The option chosen depends on the nature of the business and the one that is likely to achieve the outcomes most suitable to your needs. There are advantages and disadvantages to the different options. Some of the sales options are:

Option 1 -  Selling the business to a family member
Advantages
The purchaser is known to the owner.
Disadvantages 
The owner may not get your price due to the familial relationship. If things don’t go according to plan, it may cause a rift in the family.

Option 2 - Selling the business to senior management or employees
Advantages
The owner knows the person(s) and what to expect from them. The transition is easier because the purchaser understands how the business operates. Clients are less likely to be affected by the change in ownership. The culture and practices of the business are more likely to remain the same.
Disadvantages
If there is a disagreement during the sale process, the person(s) may leave the business. Price may still be an issue as it can be difficult to ask for the true value of the business.

Option 3 - Selling a share of the business to existing members, partners or shareholders
Advantages 
The owner most likely knows the purchaser/s and what to expect from them. The transition may be easier if the purchasers are actively involved in the business. The clients are less likely to leave the business if the sale is internal rather than external.
Disadvantages
It may be difficult for the owner to get a market-related price for their share of the business. If there is no agreement, it could be difficult for the parties involved to continue working together in the future.

Option 4 - Selling the business outright or a share of the business to an external purchaser
Advantages - If the sale does not work out, the parties do not have to continue working together. The owner is more likely to get a market-related price for the business. A sale to an outside party will bring fresh ideas and perspectives into the business.
Disadvantages 
The culture of the business may change entirely. Clients may be uncomfortable with the sale and leave the business. The transition requires careful and sensitive handling for it to be successful.

Option 5 - Merging with another business
Advantages  
If there is a synergy between the cultures of the businesses, it could be beneficial for clients and employees.
Disadvantages 
Challenges arise when two different business cultures attempt integration. Clients may not be comfortable with the newly merged business and may leave.

As you can see from the options briefly described above, making the decision to sell a business involves making many smaller, and yet no less important, choices and decisions. Weigh up the pros and cons and assess which options is likely to provide you with optimum outcomes.  As far as possible, keep the business ‘sale-ready’ as this will enable you to take advantage of the best opportunities that may unexpectedly come your way.

Working Smart

By Lee Rossini

A brand identity is an important factor in the success of a financial advice business; it is essential to be noticed in a competitive environment. Clients are becoming increasingly discerning about the businesses they trust with their financial well-being. Therefore, building a brand that resonates with your target audience is essential not only for attracting clients but also for fostering trust and credibility. Here are some guidelines on how you can successfully create a strong brand identity.

CPD

Subscribers are reminded that they can now complete their monthly CPD quizzes and claim CPD hours. For more on accessing the CPD quizzes, please click on the CPD FAQs button on the top bar of the screen. 

 
We use cookies to give you a personalised experience that suits your online behaviour on our websites. Otherwise, you may click here to learn more, or learn how to block or disable cookies. Disabling cookies might cause you to experience difficulties on our website as some functionality relies on cookie information. You can change your mind at any time by visiting “Cookie Preferences”. Any personal data about you will be used as described in our Privacy Policy.