One of the clichés often bandied around the market, or indeed business in general, is how its absolutely vital when you start up a firm that you’re aware of what your exit strategy will be.
Bob Hunt is chief executive of Paradigm Mortgage Services
One of the clichés often bandied around the market, or indeed business in general, is how its absolutely vital when you start up a firm that you’re aware of what your exit strategy will be.
The fact is it’s almost impossible to have a fixed exit plan in place; indeed you’d probably argue quite correctly that it’s not even desirable and that there is always a need to be flexible and reactive in terms of the exit opportunities that might open themselves up to your firm as you progress.
One point I would agree with however is that it makes sense to be at least considering what you want your exit to look like because the decisions you might right now will of course ultimately have an impact on what sort of exit is achievable.
Perhaps the most fundamental of those ongoing considerations is the quality of your compliance and ensuring your firm is on the most solid footing it can be in that regard.
No acquiring business of any kind is not going to make a great deal about the systems and processes you have in place in order to satisfy itself firstly, in terms of what it might be acquiring, an any potential heightened risk that might only become evident in the future.
Technology can play a major role here in terms of simplifying what you do but also adding in efficiencies to the process and ensuring your record-keeping, client interaction and marketing, for example, is all functioning at the highest level. Again, this is going to make your business more attractive to those who might be looking at purchasing.
The big conundrum for many advisory firms looking at a future exit has tended to work in three stages – how can I build the business into an attractive proposition, how can I best prepare it for sale, and then how can I access a buyer and maximise the value of the business on exit.
Our sister company, Paradigm Consulting, recently shifted its ‘Agency‘ proposition to tap into that overwhelming advisory firm need.
Previously it was more a matchmaking service between firm and potential acquirer but we recognised firm owners tend to need much more support prior to this. A more end-to-end offering but still helping them find acquirers when they’ve built the business and prepared it for sale.
That’s important because firms can sometimes get too bogged down in how they find an acquirer, when the reality is if the business isn’t in the right shape, then the likelihood is that a) the acquirer won’t be interested, b) they will but won’t offer what the owner wants, or c) the owner ends up accepting a deal which with greater preparation could have been far better for all concerned.
Which isn’t to say that we won’t help firms find those acquirers because we will. It’s just that we want to ensure they are in the best place possible before doing so. We still of course recognise that many firms don’t know where to start when it comes to finding an exit.
How do you meet those acquirers? You might be fortunate and have them contact you but this tends not to be the case. You can’t simply wander down your street singing “Who will buy?“ like you’re part of a advice industry remake of Oliver! “Any X-strong advisory firm today, Mista?" isn’t going to cut it I’m afraid.
So, that support is still vital, it’s just that firms open up so many more exit avenues if they‘re following step one and two of that three-stage plan.
That may not come naturally and having a proposition that can take you through that journey from start to finish is likely to mean the exit achieved is much more in keeping with what the owner originally envisaged when opening that business.
In that regard, we all tend to think big, and there’s nothing wrong with that. It will be a process though – and one where things will by necessity and design, change along the way – so putting in the foundations and fundamentals of what makes a business worth acquiring now is always much more likely to pay dividends lately. And, that being the case, there is no time like the present to do that.
