Your brokerage is your largest personal asset, your life's work, and a key component to supporting your future.  

That's why if you're exploring best practices, selling or succession, going it alone can be an expensive choice. Consulting with an industry-focused strategic advisor will best achieve your goals. 

Let's set the stage for why I think this is so important. As a personal financial consultant to business owners and sellers, I've seen what happens when owners go it alone. I've seen the following scenarios all too often: 

  • Owner receives a call from a potential buyer. Owner is impressed with the price, negotiates for a bit more and is pleased with the sale and his/her negotiation skills.
  • Owner knows a competitor who has sold their business to a consolidator. This competitor refers his acquirer to the owner. Owner sells the firm to this buyer. 
  • Owner wants to give the brokerage to a child who has been working in the business. Owner realizes that the child may not be as entrepreneurial as him/herself and must decide between nervously proceeding with a transition or selling the business. 

While these seem like decent decisions on the surface, in my experience, these situations often leave owners with far less than they could have received.

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Unlike your house, where Zillow estimates the worth of your property, assessing the accurate value of your business requires much more than looking at stats. The difference between what you think your brokerage is worth and what the highest bidder will pay is often very different. 

So, why does this happen? What do you need to do? And what else should you be thinking about?

This is where a benefits brokerage industry advisor can help.

Why? Because market knowledge, deal experience, and industry best practices can drive meaningful value:

  • Buyers will only pay top dollar for firms in a competitive bidding process. 
  • Industry-focused strategic advisors know all the large buyers, transaction terms, and the best way to position your firm to get the most interest.
  • An open-market valuation can help you determine financial terms for a succession plan. 

If this piqued your interest, good. And there's so much more that a good strategic advisor can help you with:

Making your business more valuable

Benchmarking

A good advisor knows how top performing brokerages are structured; from sales to support through overhead and administrative functions. To maximize the value of your business, they will help you learn from these top performers to validate where you are doing well and to alert you to areas that may devalue your brokerage and need attention.

Business focus

If you're not close to selling yet and want to build your business value, a good advisor will help you determine your optimal product or client focus. They'll help you answer these questions:

  • Will I benefit from spending more time targeting larger accounts rather than smaller ones?
  • Is there an adjacent product that I should consider offering?
  • Is there an existing product we offer that isn't as attractive to buyers?

We evaluate where your asset sits in the marketplace and help you explore options to grow and increase your value. – Al Sica, Sica Fletcher LLC

Helping you confirm your goals 

Sale, succession, or a mix? 

What's the best exit plan for you? What are the viable options for achieving what you want—quantitatively and qualitatively?

Some owners, with a second generation working at the firm, are stuck between desiring continuity while also wanting liquidity at today's valuations. An advisor can help you compare your options, from a total business sale, to a sale with an equity component, to a minority sale to an outside investor. 

Although external sales receive most of the attention in the market, there are numerous other options available to owners who seek to successfully perpetuate their agency. The problem is that most agency owners aren't aware of what their options are. – Brian Ambrosia, MarshBerry

What are your goals?

Before you proceed with a transaction, knowing your goals increases the probability of achieving them:

  • Do you simply want the highest price?
  • Would you like to access a broader product set where you can develop referral relationships with other service providers under the same umbrella?
  • Is it important to you that the buyer has other offices and support staff nearby? 

A good advisor will help you understand the financial offer. A great advisor will also help you understand the fit for your team and your clients with each potential partner. – Brett Rosen, Rosen Advisory

Do you have producers? 

Many brokerage owners are surprised to learn they don't "own" their whole book of business. How is that possible? Internal producers who receive commission on their sales also have a stake and are typically bought out of these arrangements prior to a sale. A seasoned M&A advisor has the expertise to structure the right deal for both sides. 

Negotiating the transaction

After the buyer and initial price are set, an advisor can help optimize the terms of the deal. Factors such as payout structure, post-deal compensation, and earn-out growth targets are quite relevant to the final deal value. 

Aside from purchase price, sellers need to focus on post-acquisition commission rates and achievable earn-out hurdles. A good advisor will help negotiate these critical terms based on current market conditions. – Kenny Helfer, Helfer & Associates

Due diligence

When price and terms have been negotiated and a letter of intent has been signed, the real work of due diligence begins. A good advisor is critical to this process; they will position your firm in the best light and help you produce information that the buyer wants to see. Additionally, if your business continues to grow during due diligence, the advisor will make sure that growth is reflected in the deal terms. 

In addition to advising our clients on how to position their business and maximize valuation in a transaction, we manage the day-to-day process so that our clients can focus on continuing to grow their business. – Jeff Hathaway, Dowling Hales

The bottom line 

Maximizing the value of your business, whether you choose to sell or not, should be a priority.

Don't do it alone. Don't settle for a non-competitive internal or external negotiation.

In our experience, we see the value that industry-focused strategic advisors add to the process, both financially and emotionally. Gain peace of mind, and a larger payout or an improved business, from working with an experienced, industry-specific advisor to help you determine your best options and achieve your goals.

Charles Goldblum, CFA, CFP, is founder and portfolio manager at Hurley Capital, LLC.

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