Top 4 Factors Besides Price that Make a Practice a Good Fit

Whether you are buying or selling a financial advisory practice, the whole transaction can feel a lot like dating. You’re looking for someone who is willing to see the process through and who is ultimately a good fit for your practice. But a good fit is about more than just agreeing on a price. Fit is also determined by four key factors: Organizational Culture, B/D platform, Investment Approach, and Client Composition.

Organizational Culture

Alignment in values and culture is essential to making any deal work. Any misalignment creates friction that can undermine the deal and impact the buyer's ability to transition the practice to their leadership. That's because this is a relationship business, and relationships are built upon shared values and interests. So even if a deal makes it to closing, clients and staff who don't feel at home within the culture of the new practice will quickly leave - and impact results for buyer and seller. 

Platform (B/D, Custodian, Etc.)

Not only is a smooth cultural transition important, but also a smooth operational transition too. It’s much easier to merge practices that are operating on the same B/D platform, with the same policies, forms, systems, and processes. Not only does it allow the quick onboarding of staff and data, it also reduces changes and headaches for clients, which reduces attrition rates and preserves the value of the business post-sale.

Investment Approach

Just as companies make decisions about culture, practice leaders also make critical decisions about their investment approach including portfolio management style and the products they wish to offer. In some instances, an acquisition can give a practice leader an opportunity to expand into new markets and products, but generally its best to stick to what you do best and grow using the proven approach that has made you successful so far.

Client Composition

Many sound business leaders quickly learn that a profitable and scalable strategy relies on focusing on a target niche of clients. Whether its female entrepreneurs, airline pilots, or doctors, its best to stick with the market you know well and can continue to serve then to stray too far from your core audience. Finding a business that is already serving your market, or a natural adjacent, such as having doctors as a core niche and then adding nurses, ensures a strong foundation for the merger and for the success of the business moving forward.