Process


Many of the financial publications today tell the tale of advisors selling their business for two and a half times what their revenue is worth. But what is not being discussed in many of these reports is what the buyer should expect. Early on in my career as an investment banker, I was trying to sell a retail organization that specialized in kitchen and bathroom tiles. The organization had 23 locations throughout Colorado, New Mexico and Arizona. It was a well-run business for sure. The owners had their mind set on selling the business for $10 million. The annual income received was $1 million on revenues of $8.8 million a year. However, we kept running into the same conversation with potential buyers: “I am only going to pay six times the earnings or $6 million for the business.” After seven buyers passed on the deal, the owners finally took it off the market. Several years later, I heard one of the seven prospects came back and bought the business. Unfortunately, the sellers never got their asking price. Outweighing the Risk So what does a buyer of a financial advisor practice want? Recently, I was writing about investment options in a series I call FLOW. I determined I was looking for a 10% return and was willing to take on some risk. It is likely that the price of the investments could swing by more than 20% in a six-month period, but I believed the investment’s cash flow stream would remain consistent. To begin, a financial advisor should seek at least a return of 10% on the purchase price of a business. Ensuring this; however, can be difficult as there tends to be risk involved. First, there is risk with stock market uncertainty. Second, there is a level of client anxiety associated with the fear of a trusted advisor leaving. Third, you may encounter an employee risk which occurs when an advisor leaves the firm or has not received proper training. Lastly, you must be prepared for systemic risk, which is the risk of an entire financial system collapsing. To outweigh such risks, I would look to achieve at least a 15% return on the initial investment. This means that the annual cash flow should be 15% of the price paid to the financial advisor. Let’s say that a financial advisor has $300,000 in revenue. Using the often-heard “two and a half times’ revenue” equation, the selling advisor may expect a return of $750,000. However, the amount received ultimately depends on how much cash the firm brings in as profit. If the expenses are $200,000, leaving $100,000 in cash flow...

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Golden State has had a great year; winning 73 games, receiving a new record, and now entering the NBA Finals for the second year in a row. They did not achieve this by following the typical style of play. Instead, they moved the boundaries of where to take shots from and created space with great passing. In all, they looked at how the game of basketball was played and changed it. This is what we are going to do with referrals. SHAPING THE STRATEGY ONE ADVISOR AT A TIME Let’s first begin with a typical story on how referrals work and how one financial advisor changed the way he was operating. During one of our recent breakfast meetings, my good friend and fellow financial advisor, Paul asked me for advice on how he could ramp up his company’s number of scheduled prospect meetings. He was reaching out to people, but nothing was happening. Either they did not respond to him, they felt uncomfortable, or they were unsure of whom to refer. Therefore, we had to change the strategy in order for him to compete and retain referrals, just like the Golden State Warriors changed their strategy of play to win more games. I instructed him to follow this process. Over the course of two weeks, he spent a total of four hours sending 11 emails to prospect referral partners. Of the 11 emails sent, nine responded with a yes! He sent four additional emails to set up eight possible meetings, five of which occurred. Paul went from not having any meetings in one week to having five scheduled the next. All of this happened by putting in four extra hours of work. THE TYPICAL REFERRAL PROCESS The typical referral process has four steps. Each step of the process faces the risk of completely and utterly breaking down. Perhaps the exchange does not happen; the referral partner is not suited to make an introduction; the potential partner responds by saying he or she is not looking for a firm, or there is simply no interest. Consequently the typical referral process is outmoded. THE NEED FOR A SIMPLE APPROACH To make an impact, the process needs to be easy. Unfortunately, the typical referral is NOT an easy task. Your first goal should be to make it as effortless as possible for you and the referral partner to succeed. Next, craft and deliver a personal introduction (Note: Your introduction should not be a sales pitch for the product or service your company provides. If you don’t like being sold to, neither will the next person). THE FIVE-STEP PROCESS In the ever-competitive marketplace...

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Selling a business is an emotional decision that takes a great deal of preparation. For Greg Seal of Seal Financial Services, closing the door on being a business owner was only the beginning. Greg recently celebrated his one-year anniversary since selling his firm in February of 2015. In the last 12 months, he has learned a thing or two. His decision to sell the 31-year old firm was an emotional one that involved giving up his authoritative position as president of the company. For Greg, transitioning from owning and operating a successful firm for more than 30 years to becoming an employee required a great deal of time to comprehend. His first reality check came when he was asked to write a personal performance review. “This was the first review I ever had to compose,” stated Greg. “All of a sudden, your employees no longer look at you as the decision maker, which can be challenging when you are used to having the final say.” In addition, Greg realized the importance of smart negotiating during the sales process. Sellers should have an idea of what they expect to achieve and what is most important to them prior to selling their business. Part of the negotiating process involves having flexibility and the ability to collaborate and park your ego at the door. Identifying Your Market After making the decision to sell his firm, Greg was faced with another challenge. He had to determine whether he was going to internally sell the firm or seek a buyer from outside the practice. In order to maximize the value of his company, he had to line up his business for sale, which meant assessing and organizing financials. This included completing a U4 (a government document that informs clients of advisor backgrounds, work history and any legal actions or lawsuit against them (fortunately there were none), ensuring discretion on assets (advisors have sole rights to make changes on their clients’ behalf), and consolidating investments into manageable groups. Greg started out with 400 mutual funds and 50 ETFs, all of which needed to be condensed into models and manageable assets. When Greg decided to put Seal Financial Services up for sale in 2013, revenue for the business was over $1 million. To prepare the company for the purchase, Greg and his business partner, Janet McCoy connected with FP Transitions, a firm that specializes in helping financial advisors sell their business. Although the company was helpful in evaluating the firm over several years, Greg and Janet instead chose David Grow JR at Succession Resource Group (SRG), as the firm had a more concrete understanding of the compensation...

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Picture this: you’ve just met with a powerful potential client—a female business owner with a stellar reputation in the community. You addressed each element in her financial situation and asked all the right questions. You devised a valuable plan, and she appeared to be on board. You provided her with a detailed breakdown of fees, references, and the accounts custodian. Before your conversation ended, the two of you had already scheduled your next meeting, and then… You receive an email saying that she has not yet reviewed the information you provided and is therefore postponing the meeting. Does this situation sound familiar to you? Interactions like this are frustrating and time consuming, and may leave you curious as to how you can prevent clients from dragging their feet in the future. Driving the Sales Process with an Effortless Evaluation Plan In his book, “The New Solution Selling: The Revolutionary Sales Process that is Changing the Way People Sell,” author Keith Eades emphasizes that as a salesperson, it is vital to guide clients along in a way that promotes accountability from both parties involved. One way Eades encourages accountability is to use an evaluation plan as a road map while navigating your business as well as your clients’ needs. An evaluation plan is a step-by-step checklist that outlines each milestone, date and party or individual responsible for taking action. Implementing a plan helps to keep the process on track and helps prospects understand what is expected at every step along the way. Here is a sample evaluation plan: If a prospect has suggestions or makes adjustments to the plan, that’s an even better sign. This means the individual is fully engaged in the process and feels hopeful about the next steps. This organizational tool can encourage prospects to own the plan and take charge of the process. The more involved your clients feel, the greater the likelihood that they will engage with YOU.Utilizing a plan also pushes you to understand where you — as the advisor — stand with prospective clients. If they accept the evaluation plan, you can be confident that the sale is moving in the right direction. If a prospect isn’t ready to move forward in the sales process, it is unlikely that they would agree to set an evaluation plan into...

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For many advisors and business owners in general, the thought of creating and eventually selling a successful, longstanding business is a dream come true. Unfortunately, when it comes to financial planning, most advisors merely create a job and not an actual business. Consequently, the anticipation of selling a job to another advisor is difficult and maintaining a successful business on a daily basis can be nothing short of grueling. This is why having a sales process “manual” in place not only helps you run a better financial planning firm, but can transition your job into a thriving business. Step One: Putting Your Processes into Place for Greater Sales Opportunities The first question you must answer before you begin developing a strategy to increase sales is why you want to build your firm and what you anticipate the impact to be. You cannot effectively navigate a plan if you’re unsure of what lies ahead. When it comes to establishing a process, there are three elements to consider. The first is making sure you have a definite purpose. Perhaps you are looking to increase efficiency or you want to create a consistent client experience. Whatever your reason, be sure to understand your purpose moving forward. Second, you should carefully envision all potential outcomes. Questions you may want ask yourself before proceeding are: How can we complete this in as little of time as possible? How does this plan help us to fulfill our purpose? How usable is our finished product? Understanding potential outcomes can help your business steer clear of issues along the way, and maximizes efficiency so you can dedicate more of your time to clients. Lastly, it is important to take time to review your process for any areas in need of revision. Helpful ways to organize information may include using templates to create policies, procedures & checklists. Categorizing each topic into a table of contents may also allow for easier navigation in the future. Step Two: Increasing Your Clientele through Lead Nurturing In order to generate the anticipated amount of sales for your business, your process should focus on broadening the number of contacts you have on a list. By following this process, you will see your warm leads grow progressively hotter. To convert potential clients to loyal followers, lead nurturing must be incorporated into your sales process. This concept allows you to create something of value for your prospective clients. By educating your prospects over a period of time, you are building the value proposition that clients will easily be able to latch onto. One of the many benefits of establishing a solid sales process is that...

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In the past, we have discussed the importance of hiring the right people. This may sound like a simple process, but how can you be sure your company currently has the right people in place? And if you don’t, how do you go about finding them? More importantly, how do you retain them? These questions are overwhelming, but are important ones to answer, as the benefits of hiring the right people are increased effectiveness, efficiency and improved profit. As a sales trainer for financial advisors, I often use the Moss Adams profitability and compensation survey results from financial advisors. The public accounting firm concluded that the top tier firms paid employees 10% to 20% more than other financial advising companies. The firms that increased employee compensation also saw a rise in profitability by more than 30%. This means financial advisors are receiving more productivity from each employee. The question now is how do we go about hiring the right people? Gino Wickman, founder of the Entrepreneurial Operating System (EOS) and author of Traction: Get a Grip on Your Business, suggests evaluating employees on the GWC scale: ‘Get It, Want it, and Capacity to Do It.’ Let’s look into how this approach plays out. Get It Getting it means understanding the big picture as well as recognizing the smaller pieces that are needed in order to get the job done. Does the employee understand his or her mission? Can he/she achieve the desired outcomes? Want It The employee needs to enjoy what he/she is doing and be motivated to excel. In essence, your employee needs to have a drive. This might not exist for every project, but in total, all members of your company should have a desire to succeed. Capacity to Do It The last function in the GWC scale is having the education, experience and ability to handle the job. Education and experience are easy enough to measure; however, ability is far more difficult. Ability is how an individual applies his or her knowledge in order to make decisions. Before I began incorporating the GWC scale into my hiring process, I contracted an individual who had run two offices for a prominent wealth advisor. Prior to that, she was in charge of operations for two separate financial advisors, so she was familiar with what we were trying to accomplish. She enjoyed managing others and had a history of assuming leadership positions. Her previous roles had granted her the education and knowledge needed; however, when it came to capacity, she was unable to apply her ability to communicate, make decisions or accomplish projects. If one of your employees lacks one or several of these traits, it...

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