Strategising Your Exit: Part 1

Louise Jeffreys, Managing Director, Gunner & Co, considers what you need to know today to make the right decisions for tomorrow

The news is full of stories of IFAs buying and selling, merging and partnering. So much so, in fact, that we at IFA magazine have launched a dedicated section on the IFA Magazine website ( that’s wholly dedicated to Mergers & Acquisitions.
In recognition of this we also launched Gunner & Co, a specialist brokerage that aims to bring together buyers and sellers looking to negotiate great win-win agreements.
This month we’re going to focus on building value in your business, in order to ensure that you get the very best financial agreement. Next month we’ll be looking at ways of getting your business in shape for sale, and in April we’ll conclude with a review of the types of exit strategies in the market, and the suitability of each.

Strengths and Weaknesses

“Start with the end in mind.” That’s what Paul Wilson, former Group Chairman of Lansdown Place, which successfully sold to a major acquirer in 2013, told me in our first conversation. And based on the experience I’ve built setting up and negotiating exit strategies for IFAs, he couldn’t be more right.
Assuming that you’re looking to exit in the next 3-10 years, the planning really should have started yesterday. And a key starting point is to maximise every growth opportunity you can now. It goes without saying, I hope, that the more value you build in now, the more attractive you are in the market and the better the negotiating position you will have.
Growth takes time, investment and risk, so I find using a model such as the Ansoff Matrix an incredibly beneficial tool to identify and prioritise growth opportunities, and to give focus to the plan. Below is a summary starting with the lowest risk, lowest investment. You may wish to engage in multiple tactics to turbo charge your growth in the next 1-3 years, but the key is to commit to any tactic, with the associated risk in mind.
The simplest and least risky growth opportunity is to maximise your return from your existing client group with your existing product mix, known as Market Penetration. For example, maybe only 50% of your clients are truly active, delivering you an ongoing, robust, valuable income. So what about the other 50%? Could a service like Equifax Touchstone take away a significant amount of the ground work and deliver a significant return on investment by analysing your client list? Or by identifying growth opportunities and designing personalised marketing campaigns to reignite this client base?
Similarly, looking at the charging structure of your active client base and growing your ongoing revenue is a simple but strategic tactic. The more successful businesses I work with have charging structures aligned to the level of portfolio size per client. It is often the case that charging high fees to HNW individuals is difficult to justify, however having different service propositions, with different benefits such as more face to face reviews, use of investment advice services is a great way to differentiate your clients and allow for a tiered charging structure.

Conquering New Territory

Market Development, delivering your existing client service propositions (tiered or otherwise) to a new market, is the next option for growth. You can do this in a number of ways. The starting point is to identify the group of clients you want to target, which will allow you to build a plan of how you will get them. You could make a focused plan to grow any or all of the following groups (or segments) of clients:

  • Client referrals. The easiest and almost certainly a group you are tapping into today. But are you doing it in a planned, focused way? Do you give your clients marketing material to take away for friends and associates? Do you actively ask for a specific number (say, three) of referrals at the end of each meeting? If you have built a strong, long-term relationship with your clients based on trust they are likely to be very comfortable with recommending you to their friends, but if you don’t ask, it may not come to mind. It also makes good sense to agree within the business exactly what words you’d like your clients to use when recommending you to their friends and family. What they say and how they say it makes a huge difference so suggesting the words to use is a big step forward. And if you ask for three referrals, you’ll probably get more than the typical one or two!
  • Family groups. Hugely valuable at the point of selling your business, managing the wealth of family groups is highly efficient, very ‘sticky’ (client retention tends to be 95%+), and delivers a much longer business opportunity. Could you package your typical proposition to suit a family? Are you regularly recommending ISAs for grandchildren, which by default would start to build a relationship with their parents? Is family interdependency a focussed growth strategy for you?
  • Completely new segments – If your business has primarily been built through referrals, there is a strong chance your new clients will look very similar to your existing clients. New segments are typically demographically identified, so a new geographic segment, or a new age segment. The quickest way to succeed here typically is to buy that segment in – so buying a client book from a retiring IFA say. If you are looking to sell your business in 4 years or more this can be a cost effective way to grow your business significantly ahead of a strong exit.

Service Development

Delivering a completely new service to your existing client base, as in the direction of your client service proposition, is unlikely to be a simple growth tactic for most IFAs. However, if you have built your practice primarily to service transactional business – and by this I imagine your classic high street shop-front business, primarily delivering mortgage and protection solutions to one-off customers – and if you are serious about selling, you can lose no time in realigning your focus to develop a service which is focused on building trust based on a long term relationship which helps your clients’ to achieve their long term goals in life.
That might even mean getting your premises off of the high street, to focus the mind on a strategy of ongoing client service – including portfolio management. The great thing is your will have built a great database of prospects, so once you are confident in your proposition, you have clients with relationships you can approach.
Diversification is the highest-risk growth approach, involving building a new product proposition for a new client segment. For example a robo-advice service for clients typically aged 35-50, who you are not already in contact with, or building a full new business focussed on auto-enrolment. This is typically expensive, time intensive and high-risk. Building a diversification growth strategy only really makes sense if you are looking at exiting in more than ten years and if you have the investment and management expertise to succeed.
To grow, of course, takes time, so ruthless prioritisation is key at this point. This certainly doesn’t mean abandoning clients you have built relationships with over the last 30 years; however, to make time for growth you may need to realign your client communication approach to the ongoing value and profitability of your clients. A one-size-fits-all approach, while easy to implement, may not be the most cost and time-effective.

Taking It to the professionals

When you are ready to sell, engaging a professional broker makes the process as efficient and effective as possible. At Gunner & Co. we take time to fully understand your exit aspirations – your financial expectations, your preferred timelines, and all importantly, the right fit for your clients and perhaps even your team. The objective is to find a buyer who best fits your preferences and who will work with you throughout the deal process to make the process as smooth as possible.
Gunner & Co. does not take any fees from a business seller, so there are no financial obligations with engaging our services.
Next month I’ll talk you through getting your business operations aligned to a sale, from back office considerations to charging structures – how you run your business has a direct implication on the future exit value. In the meantime, if you are actively looking to exit now and would like to have a confidential, non-committal conversation I am always happy to share my insight.