Take the Fork in the Road

How much time have you spent thinking about when the right time is to pull the trigger on a transaction with your practice? Meaning, are you going to transition it down to next gen, or are you going to sell it to an external buyer and use that as a retirement plan, or do you want to bring on an investor who's going to be interested in helping you grow that practice and then sell the remainder of it at an even higher premium? Those are three very different things to think about, and each one of them comes with a different timing answer. And so many times I run into financial advisors who just assume that they're going to, you know, pull the trigger, hand the keys over to someone else, walk out the door, and it's going to be simple as that. And it simply doesn't work that way. If you're not thinking years in advance of when you want to create your landing strip and ultimate exit door, then you are already too late to the game because it takes years to get that done right. So you need to keep your eyes open. You need to keep thinking about what are the different ways to do this.

We were just speaking with a financial advisor here in our office today, who had a very different idea about what they thought the end result was going to be with their practice versus what they actually wanted to accomplish. Backing into the timing of it, it changed all of their time horizons because now what they really are thinking they want to do is they want to acquire some smaller practices (which they've been doing) and then they want to take some chips off the table so that they can focus on building and growing with a capital partner to buy even more practices, so that the second bite of their apple is worth significantly more than the first bite was. But you can only do that when you still have gas in the tank, when you're still growing your business. If you're not growing your business, if you coasted or peaked and now maybe you've been sliding back down the other side, then the only opportunity you have is to sell your book of business. If you want to sell your practice, it needs to be a growing concern. So as Yogi Berra always used to say, "When you come to a fork in the road, take it." When you see these opportunities coming at you, consider them. You might be normally veering to the left all the time, and maybe you need to stop and veer to the right. If I knew back then what I know today, I would have brought on a capital partner at USA Financial far sooner than what I did.

Now, the flip side of all that is more of a Pete Rose philosophy, right? There's nothing wrong with betting on your own team, and we did that for over 35 years here at USA Financial before we brought in our capital partner. But now that we've got our capital partner, our growth rate is beginning to explode, and the opportunities that it brings to the table are very unique and very different than the opportunities we had prior to having a capital partner. So it becomes a really interesting opportunity, and it's allowed us to provide services to financial advisors that in the past we couldn't. We've always coached and mentored and assisted advisors in mergers, acquisitions, sales, transitions, successions, next gen, but we never brought capital to the table to actually invest in their practices. Now we can do that, too. Without that capital partner, we would have run out of gas in the tank way too soon. But with the capital existence, it releases us to get much more creative with how we're helping financial advisors, and the same is true for you with your practice.

If you're looking to buy books of business you can do that a couple of times over, but then you're probably tapped out, and now you need a capital partner. So that's a different equation than someone who wants to run their practice the way they've been running it, keep growing it, and then one day simply sell it and transition out over, you know, 4, 5, 6 years worth of payments. That's very different than bringing on an investor today, selling a portion of the business, knowing that there's a second bite down the road after you continue to grow it. So again, when you come to a fork in the road, take it.

-- 

Future Zeros is a series for financial advisors who want to increase the value of their firm today and in the future. Your host, Mike Walters (CEO of USA Financial), digs into the nuances of mergers, acquisitions, and succession within the financial advice industry to help you add “future zeros” to your bottom line. Whether you are nearing an exit, just entering the business, or in the middle of building your practice, the Future Zeros series will provide thoughtful insights into how to grow your practice the right way in order to maximize your future value and minimize the risk associated with doing so.