Huh! Good to Know…Helpful Tips for Navigating a Purchase

Next Generation Planner: October 2020


Jeanna Fifer, CFP®, CPWA® 
Financial Planner/Partner, Cordis Financial

If you find yourself with the opportunity to buy into a firm or buy a practice, there is no shortage of considerations to go with the excitement.

Whether it was a long time coming or the fortunate outcome of a well-timed meeting, the questions will no doubt start to stack up. Obviously, a huge part of the decision to buy is the price and mechanics of the purchase, and there are numerous articles, white papers and podcasts on valuations and deal structures. Successfully navigating a purchase will include many elements beyond the numbers.

The Big Picture

From the beginning it will be most useful if you clearly understand your ultimate goal. This sounds simplistic, and maybe it is, but identifying your ideal circumstances can help to guide the many decisions along the way. It may not be just one goal, but rather a combination of outcomes that can be achieved to determine a successful transaction for you. These objectives can serve as a beacon during negotiation. For example, you may find yourself torn between getting the best price and sustaining valued business relationships. Knowing how hard to push can be challenging. Write your objectives down—being able to reference your thoughts throughout the process will be refreshing. With a clear understanding of your personal definition of success you can contrast and prioritize the choices you will ultimately have to make.

Clarity and Emotions

It doesn’t matter the size of the transaction—a full transition or a minority stake—the implications are a big deal. Each party is coming to the transaction with expectations and emotions; managing the emotions throughout the process can be the hardest part. If you are able to establish a trusting and open environment, you can cut through the minefield with less damage. Ideally openness is embraced by both sides. Sharing your expectations, frustrations and concerns along the way facilitates understanding and respect. It is easier to see what the field looks like—and avoid the explosions—with up-to-date status reports and ongoing open communication.

Realistically, a pending transaction will consume your thoughts. Throughout the planning process the buyers and sellers may not always be on the same wave. Setting meetings for proactive discussions and strategy updates can help to manage the flow of a deal. Out-of-the-blue questions or conversations can be challenging to fit into the daily work within the business. If each side is respectful of the other’s time and energy, you can keep the sailing smooth.

Throughout the transaction process, each side will have different responsibilities. Call it out so no balls are dropped. Understand what information you need, or can provide, and make sure the expectations are clear. Small things, like whose opinion comes first and how conversations get started, can make a big difference. The transaction represents change, and understanding everyone reacts to change differently should always be front of mind. Keep in mind that a seller may not be used to opening up, either emotionally or around the numbers, so handle the process with care. If you are working with other professionals in the transaction it may be helpful to have separate conversations where each side can put their expectations on the table without judgement.

Contingency Plans

As financial planners, we are familiar with assessing the risks. Don’t underestimate the value of running through the worst-case scenarios. Imagine what could pop up in your life or practice. What if it happens sooner than later? While you won’t know exactly what it could be, having thought through the possibilities before they crop up can bring comfort in an uncertain time should you find yourself there. Importantly, you should think through how you can handle the different situations; in other words: don’t just think about the what-ifs but also the then-whats.

If you can, build in some wiggle room. There are a number of expenses to facilitate the transaction; consulting fees, attorney fees and financing costs as a start. Who picks up the tab is different in each transaction. As a buyer, if you have to come to the table with cash to cover some of these expenses, budget on the higher end. You don’t want to be surprised or caught short when it all comes together.

Do You

Whether you are joining a leadership team or leading on your own, the road begins as you maneuver through the transaction.

“There’s a correlation in our industry of ownership and leadership,” said Rachel Infante, CFP®, CSRICTM, of Birchwood Financial Partners, a fee-only financial planning and investment management firm in Edina, Minn.

It will be important to find your voice and explore your personal leadership style. If you find yourself encountering a number of “been there, tried that” or deeply rooted routines, give yourself time to continuously make an impact. 

“I used the discussion process to advocate for some changes I wanted to see us make,” said Liz Clough, CFP®, AIF®, of Rembert Pendleton Jackson, a fee-only independent RIA based in Falls Church, Va. “I brought up the ideas by saying that the business is in good shape now, but we need to keep making it better.”

Use the energy that has built up in anticipation of being an owner to make a difference. Whether that’s tackling existing problems, introducing new ideas or improving the client experience, keep moving things forward. Be strategic. You are likely filled with ideas and possibilities! Embrace that the purchase is just the start.

Jeanna Fifer, CFP®, CPWA®, is a financial planner and partner with Cordis Financial in Minneapolis, Minn. Jeanna is an active member of the Financial Planning Association of Minnesota. She served as the chapter president in 2016 and received the 2019 Distinguished Service Award. She loves board games and is always interested in a must-watch recommendation.

Practice Management
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