If you want to sell your financial servicespractice in the foreseeable future, here are six keythings to do, starting now:

1. Start early.
2. Develop a stable, loyal staff.
3. Delegate whatever you can to staffmembers.
4. Plan to hang around during thetransition.
5. Review your income statement to improveprofitability.
6. Do things to protect your family and practicetoday.

And now for the detail:

1. Start early:

Start today.

It will take three to five years to get everything squared away,so start now. Contact a business broker for tips on what to do toprepare your practice to sell. Like a realtor, the business brokerwill tell you what is needed to “spruce up” your practice, to makeit more valuable and saleable.

Related: How to maximize the value of youragency

• Don’t put the practice on the market until it is readyto sell.

If you put your practice on the market early it will not havethe value that it would have if you wait until everything is inorder. On the other hand, start now to look for prospective buyersamong other financial services practitioners.

• Clean up you books and records.

Generally a potential buyer will want free access to youraccounting records. A good set of books and records will make iteasier for the potential buyer to make a decision, and will alsoreflect well on you as a business owner.

• Don’t start new activities that won’t produce profitsoon.

Activities that don’t produce a profit will drag down the priceof your practice, eventually making your investment in them aloss.

• Get your personal finances in order.

Your practice is only as valuable as the buyer can afford to payfor it. It is quite possible that you will have to finance some ofthe selling price, taking back an installment note receivable fromthe buyer. Therefore, you must price it so it is affordable.

• Clearly separate distinct lines ofbusiness.

For example, if, in addition to your financial servicespractice, you developed a specialty to administer certain employeebenefit plans, clearly separate the two activities and be preparedto sell them separately. If you own your real estate you may wantto retain it and rent it to the buyer.

• Be prepared for an asset sale.

Buyers who purchase the stock of your corporation will not beable to deduct that cost until they sells the stock. But if theybuy your equipment, they will be able to depreciate it. If they buy“goodwill,” (the price paid minus the value of the tangible assetspurchased) they’ll also be to amortize it.

• Have a look at your offices, make sure they arepresentable and look professional.

Have you upgraded to flat screen monitors, or are you stillusing those old cathode ray tubes?

2. Develop a stable, loyal staff:

A stable, loyal staff will have a tendency to stay with thepractice, making the practice more valuable, smoothing transition,and increasing client retention. You can develop a more loyal staffin many ways:

• |

  • Sponsor a qualified retirement plan.

  • Provide fringe benefits.

  • Provide professional training.

  • Consider an educational reimbursement arrangement.

  • Develop an incentive compensation package.

  • Consider non-compete agreements for key people.

Related: 5 expert tips on easing succession

3. Delegate whatever you can tostaff members:

• By pushing work down you will develop your staff’sprofessional ability.

More client contact with the staff will make for an easiertransition when you retire. It will make your staff more capable ofa smooth transition.

• Limit yourself as much as possible to CEOduties.

If you have delegated as much as you can, your absence will notdisturb work flow as much as it would if you have to be consultedfor routine, day-to-day decisions.

4. Plan to hang around during thetransition

Stay involved during the transition to new ownership,introducing the new owner to your clients. Your participationwill smooth the transition for the new owner and improve clientretention. By physically and formally “passing the torch” to thenew owner, you will preserve the goodwill you have built up overthe years.

In addition, if the sale price of the practice has contingenciesfor client retention or loss, it will improve the payout toyou.

Related: Successful succession

5. Review your income statement to improveprofitability

Specifically:

• |

  • Focus on developing recurring engagements.

  • Focus on developing high-profit activities.

  • Consider terminating problem clients.

  • If you charge hourly fees analyze your realization (fees chargedvs. write offs) and consider terminating low realizationclients.

  • Diversify your client base to include both younger and olderclients.

  • Improve profitability by automating functions.

  • Look into software that can provide higher level, higher value,output for your clients.

  • Dispose of obsolete inventory.

  • Trim staff if feasible.

  • Look at client demographics; clients in the accumulation phaseare more valuable than clients in the distribution phase.

  • Identify or eliminate expenses that would disappear with yourabsence. For example: (i) high-value automobiles; (ii) avacation condominium that is used for board of directors’ meetings;or (iii) high-cost professional seminars in resort areas.

Related: A personal account of successionplanning

6. Do things to protect your family and practicetoday:

• Enter into a mutual assistance agreement with acolleague.

In the event of death or disability a financial servicespractice can evaporate quickly.

A mutual assistance agreement can keep the practice together,preserving the value for the disabled owner or surviving family. Ina mutual assistance agreement the two of you would mutually agreeto step in, in the event of death or disability, to keep thepractice together until such time as the owner can return, or thepractice is sold.

• Secure life insurance.

Should you pass away and should the practice be sold at adiscount, or disappear completely, the life insurance can replacethe lost value for your family.

• Secure disability income insurance.

Your most valuable asset may well be your ability to earn aliving. Disability income insurance can replace some of the incomeshould you become disabled.

Related: What's YOUR succession plan?