Whether you intend to sell your business or not, prepping the practice for a potential buyer will make it stronger, now and into the future.
"You should always have your practice ready to sell to the most qualified buyer for the highest price," says George Hartman, president of Market Logics Inc. in Toronto. "That makes you a good businessperson because the things you will do to make your business more attractive will contribute well to the practice."
Follow these tips to make sure your business is always in tip-top shape:
> Write out a strategy
Prepare a detailed plan that shows you — and any prospective buyer — how your business functions.
"You should have a written business strategy that shows how you intend to grow the business," Hartman says, "so that a potential purchaser can look at it and say: ‘OK, I see how that can be done'."
Understand and record the metrics of your business, Hartman says, to show a potential buyer that your business is well run.
For example, you should be able to show the profit you earn, he says, and where your expenses go.
> Document your achievements
Keep a record of successes, to show that your business methods work.
Track the activities of your marketing program to demonstrate its success. For example, Hartman says, if you run seminars, record the number of people who attended the events and how many of those prospects became clients.
> Segment your clients
Focusing on your most profitable client relationships can make the business more profitable for you — and more attractive to buyers.
Take the time to segment your client base, Hartman says, which may require reassigning or transferring some of your clients. Divide clients by specific criteria, such as asset levels, placing clients into various categories.
> Lose your "superstar" status
In order for your business to be attractive to a buyer, your clients must be connected with your business — and not just with you.
In some practices, Hartman says, the advisor is a "superstar." That means the practice is built around that advisor's reputation and profile in the community.
While a good profile can be important, Hartman says, such an advisor would need to turn that personal goodwill into corporate goodwill. To do that, he or she might introduce other team members to clients or hire a junior advisor, who takes on increasing levels of responsibility.