In this episode of the FPA Podcast, Graham Burnard of Elixir Consulting joins Ben Marshan, Head of Policy, Innovation & Strategy, FPA to discuss what you need to know when it comes to valuing your financial planning business for sale.

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Transcript

Interviewer: Ben Marshan

Interviewees: Graham Burnard

Ben Marshan

Hi, welcome to today’s FPA podcast. I’m Ben Marshan. I’m the head of policy, strategy, and innovation here at the FPA, and today we’re going to be talking about valuing and selling your business. We’re talking about how to get the best value for your business, how to prepare for the business sale, what to kind of expect on the other side of the sale process. Today, we’re joined by Graham Burnard from Elixir Consulting, and he’s going to talk to us and answer all these questions about how to prepare yourself for that sales process. Welcome, Graham. Do you want to give us a bit of an intro to yourself and what you do?

Graham Burnard

Yeah, sure Ben. I’m one of the consultants at Elixir Consulting. So, we work with firms all around the country, large and small financial advice firms in all stages of growth from setting up right through to exit, around all sorts of aspects of their financial advice business, including sort of guiding them through a sales process. But though we’re not business brokers as such, we do get involved in kind of talking to people about how to maximize value and maximize their exit strategy.

Ben Marshan

Fantastic. So, I mean, we could talk all day about how to get your practice right, and how to get your business right, but we’re going to focus specifically on preparing for a sale and that valuation stage. So, from working with all the businesses that you kind of work with, what’s kind of the right time for a financial planner to think about selling their business or part of their business?

Graham Burnard

Look, Ben, it really depends on the reasons they’re thinking to change. So, I know some advisors have got a great business and they’re happy working in it, but as a sole practitioner, they’ve decided that they just can’t cope being the sole person running the business, seeing the clients. So, they’ve decided to sell so they can get that extra support mechanism around them. So, their reason for sale is very different from someone that’s just not wanting to do the educational standards and has decided that it’s time to up stumps and get out of the industry, and don’t want to continue as a planner. So, I think it’s first of all really understand your reasons for wanting to crystallize the value in your business and get out, or whether you want to stay in the business and keep working as an advisor.

Ben Marshan 

I guess once you’ve kind of made that decision, what sort of things do you need to kind of do to start preparing yourself for that sale of the business?

Graham Burnard

Okay. Well, first of all, I think it’s been really clear what you want your role to be post-sale. Are you going to keep working in the business? And if so, because that changed the dynamics a little bit of the sort of firm you’re looking for because it’s not then just about maximizing the sale price. It’s also is that in work environment compatible, will it provide the extra manpower I need to service my clients, all those things that, again, the reasons for doing it become actually the important consideration. If you’re just doing effectively a trade sale or something where you’re exiting out, you might have a work period of 12 months, two years. That’s probably less critical than about the sort of the ongoing business environment. It is about maximizing the value of your business and ensuring that you’re going to get that very best sell price that you actually can.

Ben Marshan 

Once you’ve made that decision that you’re going to either cut and run or you’re going to work through for a period of time to help build up the business and make that kind of transition, what sort of things do you need to start doing to optimize the value of the business, to make sure you’re getting the best price possible for the seller?

Graham Burnard

Yeah. Look, I think the key considerations are purchasers these days, number one, they want to minimize risks, so they want to have certainty about the earning stream. So, having a really robust compliance history is critical. You’ve got to have shown that your business is compliant, you’ve been getting through audits effectively, et cetera, your client files need to be in really good shape. Clearly, electronic, you don’t want paper files anymore so you got to have scanned documents, make sure it’s all set up in your CRM of choice, and that data is very transferable.

Graham Burnard

And then, it’s really then about making sure that your client base is what’s desirable. And by that, I mean we’re seeing a big difference now in… Well, people are getting much more forensic about what’s making up that revenue. So, clients that have small ongoing fees and that varies a little bit, but it might be 1,000, $1,500, sometimes even $2,000 per annum are being valued either at one times or sometimes even cut out at the sale value completely because advisors that are purchasing it are looking, going, “For that $1,500, I can’t compliantly service those clients. Therefore, I’m either going to have to get rid of them or I’m going to have to lose money on them or take the risk that I can increase the fees.” So, there’s a real risk factor to those clients that are below the economic servicing costs. So, you’ve really got to make sure you’ve done your fee review piece on your clients so people can look at it and go, “Yes, those fees are commercial. Yes, they’re sustainable, and I’m confident when I buy that revenue stream, it’ll be maintainable.”

Graham Burnard

And I think the extension to that is then that you’ve got a really good history of clients signing up to the annual fee agreements, ongoing service agreements, and again, that they’re seeing that there’s a robust, I guess, connection with the clients. So, it’ll make that certainty greater because see, the average attrition rate from businesses purchasing client books is sort of minimum 9%, 10% and sometimes quite a lot higher. So, they’re going to start discounting that, and the more, I guess on uncertainty there is around the maintainability of that income stream, the more they’ll discount on the assumption that some of those clients are going to walk.

Ben Marshan

Can you do to sort of improve the quality of those client relationships in a period where you’re actually getting to the stage where you’re looking to actually sell?

Graham Burnard

Yeah. Well, I think it is having those robust fee conversations and making sure you’re getting an appropriate fee in place that is commercial and relevant, that will be attractive. So, it is migrating some clients from asset-based fees to fixed fees, for example, if you believe that’s going to be more sustainable. And certainly, we see practices probably being devalued if all the clients are asset-based fees because of the volatility of earnings. So, advisors seem to be putting a bit of a premium on those practices that have had clients migrated across to flat fees, particularly when they look at it and go, “Yeah, that service proposition they’re being delivered, it is profitable and those clients are maintainable.”

Graham Burnard

I think one of the big risks that so many particularly small practices and sole practitioners have is the clients feel they’re doing business with the advisor, not with the business. So, there’s that real strong linkage to the planner, and it’s, to be honest, great for the ego that people like doing business with you as an advisor, but it’s not a great way to run a business, and you really want to try and make sure that the value proposition is not around you personally, and certainly you as a stock pick or anything like that, that was attributed to your personal skills because those clients are certainly highly at risk should the purchase go through. So, educating the clients about the business providing a service and a value proposition that’s not just around you becomes then much more critical because those relationships are potentially more transferable.

Ben Marshan

I mean, do you think you have to do a process of almost re-engineering your business and re-engineering your client relationships in the lead up to being prepared to go to market with your business?

Graham Burnard

Yeah, look, potentially. Certainly, those firms, like I said, that have a very strong value proposition or linkage around the principle of the business, and they’re seen as that Joe is my financial planner, that’s who I trust implicitly. The more that’s the case, then you’ll benefit from re-engineering where they start to see that there’s a team of people providing the service, and it’s not all about Joe, and certainly that you’re in investment options where you’re not a stock picker and how clever you are at picking fund managers or stocks or whatever because again, that’s really at risk in that transfer process. So, the more you can show that there’s a robust investment philosophy that is transferable, again, clients are going to be less nervous and less likely to look around to change advisors at the time of transfer.

Ben Marshan

And so, do you find that businesses that are kind of set up that way to start with have a much easier time in that preparation for sales process, or can you sort of shift things around fairly quickly to make that change?

Graham Burnard

I don’t think it’s an overnight thing with some of those. To convince clients who’ve been working with you for 10 years that there’s a different type of relationship that is more transferable, I don’t think it’s going to happen overnight. So, you’ve got to work to that and start educating the clients, introduce them to more people in the business. If you’ve got an associate advisor, make sure they’re involved in the review meetings. All of these things need to happen, and it’s over a period of time because clearly, clients might have one, maybe two reviews a year. You want them to experience a bit of that touchpoints with other people in the business for a period of time for them to feel confident that if you weren’t around, they’d still be looked after.

Ben Marshan

And so, what do you think is more important? Is it your clients that are actually more important or is it the business that you’re selling that’s actually more important?

Graham Burnard

Well, I think that, Ben, depends on how large the business is. So, what we see is businesses of $2 million to $3 million or more tend to sell on multiple profit on EBIT because people look at that as a going concern. So, what’s the process of the business, the staff and all that. Underneath that level, it’s still sold as a multiple of recurring income because people are basically buying the book and generally looking to tuck it in.

Graham Burnard

So, if you’re looking at that multiple of earnings, generally, it’s the quality of the clients which is the important thing and the earning stream around the clients because that’s what people are buying and what they’re valuing. They’ll put a multiple on the different streams of that client income based on age, size, et cetera, of the clients, but above that, when you’re looking at EBIT, it is the business quality that’s important, how good are the systems and processes, the staff. Yes, the client base still and the quality of the earnings, but that infrastructure becomes something that will be looked at and considered in the purchase process.

Ben Marshan

So, if you were looking to start to get an idea of how much you might sell your business for, or on the other hand, how much you might buy a business for. You talked about EBIT, you talked about recurring revenue multiples. What are the kind of different business valuation methodologies that kind of out there and being used?

Graham Burnard

The main ones we see, Ben, as I said the multiple of earnings on the smaller, I won’t say smaller, the sort of $2 million or less typically of revenue, and it’s moving around a bit, but we’re seeing if the average is say 2.4 to 2.5 times, there are businesses that are selling for only two times because they’re seen to have a lot of risk factors or be less attractive, and there’s some that might sell for a bit more. And within that, you’re starting to see also, I guess you’d say a stratification of the client base where clients over age 70 might have a lower multiple applied to their revenue because they’re in pension rundown, et cetera, whereas younger growth clients, they might attach a higher multiple to. Risk income, generally a bit higher because again, it’s a bit stickier, not having annual service agreements to sign and what have you, so that might sit at 2.8 times.

There’s a few of the broking businesses put out newsletters once or twice a year to sort of say where the market’s at, and you can get that to start to gauge kind of a rough ballpark of what the business might be worth. But to get serious, you probably want to start talking to a business broker that’s sort of able to look at that and analyze it and break it down a little bit more scientifically. Above that level, it’s basically EBIT, sometimes NPAT, so net profit after tax instead of earnings before, which is largely the same. It’s just obviously the tax rate at 30%, and you just brings up the multiple up a little bit higher.

But it’s generally EBIT, and around again, you’ll see variations in the multiples, but if six times is sort of the average, there’ll be some really good high-quality firms that are very desirable, might have a really clean niche market, whole range of reasons they’re very attractive, might sell a bit above the six times for, again, those with sort of risk factors or less desirable, maybe older client base, et cetera, might sell a bit below that sort of multiple.

Ben Marshan

Right. And you were talking a little bit about the difference between asset-based fees, commission-based fees, fee for service, how big a difference does that make?

Graham Burnard

Yeah, look, it certainly does. Again, it’s at the margin. It’s not a deal-breaker for most people, but they’ll look at that volatility of earnings. And again, it’s a bit of the mindset of the advisor. If the advisor purchasing it kind of is wedded to and likes asset-based fees or a hybrid of asset and fixed, they’ll be more attracted to that because they’ll have convinced themselves that growing fees over time is attractive. But if you’ve made the mind shift to flat fees, you’ll probably recognize that there’s less volatility in those earnings. There’s more certainty, and particularly in a period of market downturn like we had last year that you don’t have that suddenly drop in revenue that can really hurt.

So, it’s a little bit in the psyche of the purchaser as to how attractive or not that is, but we’re seeing generally it’s one of those factors of uncertainty that is tending to put a bit of a discount on a firm if they are purely asset-based fees.

Ben Marshan

Yep, okay. And in terms of the business models, does it make much difference if you’re, for example, self license or whether or not you’re operating as a corporate authorized rep type model or you’re just selling the clients or a portion of clients?

Graham Burnard

Yeah, look, again, it depends a bit on the purchaser. Obviously, being self-licensed, there’s pluses and minuses. There’s probably some extra risk elements there. You need to go to the cost of probably get an external compliance audit to make sure that it has been well managed as a licensed as well as a business.

But we also see some people are very attracted to other firms that were in their licensee already because it’s obviously very easy to tuck in the same process, and same software, same compliance regime, so they’re seen as less risk factors. So, for a purchaser that’s in a large licensee or in a licensee, they might say, “We pay a bit of a premium for someone that’s also in that licensee, just because of the ease of the transaction.” And they can go to the licensee and really understand the risk factors around that book probably a little bit easier.

Ben Marshan

Yeah, a bit more trust. It’s a bit more [crosstalk 00:20:19]

Graham Burnard

Yeah, and there’s transparency, and like I said, it’s a sort of line of least resistance in the change.

Ben Marshan

Yeah. So, in terms of there’s obviously a number of different ways to finance that business acquisition. As the seller of the business, what do you need to be aware of in terms of how the buyer is going to finance the acquisition and what you may need to do as part of that process?

Graham Burnard

Yeah. Look, I think one of the key things is whether the buyer is providing terms which are subject to finance or have they got something pre-approved. An experienced purchaser would probably go to the lender and have a line of credit already lined up so they’re ready to go and sign, and it’s really just their decision about the purchase because it’s being secured against the value of their existing business, and therefore, the offer will be unconditional in terms of finance. So, it’ll be not subject to finance so there’s one less risk factor in place. Certainly then, if you have an offer that is subject to finance, there’s that uncertainty about there might be an offer accepted at a certain valuation, will the financier sign off on that, what’s the buffer from the borrower’s perspective. So, that probably just adds that little element of uncertainty when you’re weighing up different offers that you’d need to consider.

Ben Marshan

What sort of protections might be the buyer looking to put in place in terms of the purchase that the seller of the business might want to be aware of before they go into the process?

Graham Burnard

Yeah, look, good question. The obvious one is the earn-out period. So, you’ll see deals where it’s 60% upfront and then 20% year two, 20% year three. Some might be 80% upfront and just another 20% in the following year. So, it depends how much has been retained and what are the conditions on that. Again, that adds an element of risk. If there’s 40% at risk, based on the percentage of clients are going to be retained, there’s a high degree of uncertainty than if 80% was paid. And then, yeah, if you have 40% of that valuation at stake, and yet the purchaser comes in and radically increases fees or moves clients to a new platform that they don’t like, you might find that that triggers something where there’s clients leaving, your payout figure is reduced, but you’ve had very little control over that.

So, I think it’s understanding what they’re going to do that may impact that retention of clients positively or negatively can then increase or decrease the amount of risk you’ve got on that retention amount.

Ben Marshan

And so, should there be any terms or conditions as a seller that you might need to put on the transaction or the process?

Graham Burnard

You probably do want to, but again, it’s how enforceable some of those things are, is probably the question. So, I think it’s really about then having a good, robust conversation with the purchaser and understanding their intent, looking their existing business model. It’s highly likely they’ll migrate clients to whatever the investment solution they’ve got in place, the platforms, et cetera. How does that sit with you? I know a lot of advisors, one of their key considerations is what’s going to happen to my clients when I leave, have a real affinity that they’ve built up, not surprisingly, and they want to make sure the client’s looked after. Is the investment philosophy aligned with what you’ve been doing? If it was an aggressive stock picker, but you’ve been into more passive investments, clearly, there’s going to be a sort of an impact on some of the clients that you might not feel comfortable with.

So, I think it’s really understanding that philosophy of the business that’s buying, the investment philosophy, how they manage it, and how they’re managing the staff. So, again, what happens to the staff on the team is obviously a key consideration for a lot of advisors. So, what’s the team like that’s there, how many staff will be retained, what’s the working conditions, all of those things become important as well. Again, I think it’s very hard to lock those things into an enforceable contract, but it’s still something we can be fairly clear on the intent and the likelihood that that will end up well for both the staff and the clients post the sale.

Ben Marshan

Are there any other types of questions that seller should be asking the buyer so that they’ve got comfort around those sort of aspects of what’s going to happen to the business, what’s going to happen to the clients so that they’ve got some comfort with the transaction they’re entering into?

Graham Burnard

Yeah, I think it is just really building into that as much as you can. Like I said, really understanding their investment philosophy, do they intend to move the clients, what’s the impact of their service proposition on the clients, will it be more or less than what’s being delivered. I just think you’ve just really got to go through and analyze all of those things that make up the value proposition of the business and understand their long-term vision and strategic direction. If they’ve got a business plan, have a look at the business plan, particularly, and this is where it gets really important if you’re wanting to stay in the business, whether it’s a merger of some sort or you’re wanting to stay on as a salaried advisor for a number of years, really critical that the vision lines up with your vision, the values of the business. See if they’d been able to articulate the values, the vision, the purpose. All that becomes really important, and particularly in a merger. This is a marriage of two people, and if they haven’t had a chat about what the future looks like, where they want to head, it almost inevitably ends up in tears.

Ben Marshan

A buyer is going to ask a lot of questions to the seller. What sort of questions should you be expecting as the seller of the business to come from the buyer so that you can start to prepare answers and have things ready for them?

Graham Burnard

Yeah, so I think certainly audit reports. They’ll want to see the history of compliance, what have been the audit results. And if there have been any crosses, exactly why, what’s been done to remediate that, obviously full detail on the client books so they can analyze that. So, make sure it’s easy to produce out of the CRM if not already there. Not just dates of birth and thumb, but everything else about the demographics of the client base. We always like to sort of have client avatars of typical clients so they can start, so here’s the sort of clients we typically sort of work with and get them to fit to understand that.

Again, the staff, make sure there’s either position descriptions in place or a very clear roles and responsibilities breakdown. So, people can get a very clear view as to who if they are like and have excess staff, which ones to retain, which ones do they need, et cetera, so they can start to analyze that. So, I think a lot of clarity around the job functions in the business, that’ll help them quickly assess what they need to retain or let go. And yeah, I think it’s clarity around that value proposition of what you’ve been providing the client. So, it’s clear what the client expectations are, both in terms of what you’ve got detailed in the ongoing service agreement or annual service agreement, but also kind of just a broader description of how you engage with clients, sample reports, et cetera, like that. So, it’s very clear what the client expectation is based on what’s being delivered to date.

Ben Marshan

What sort of other professional services should you be looking to use as the seller?

Graham Burnard

Look, certainly a lawyer. Make sure you’ve got a lawyer lined up to review the contract, and someone that’s experienced in financial services sales, so not just your suburban lawyer. You want to make sure it’s someone that’s actually done a number of these transactions so, knows what to look for in the agreements and knows what’s commercial and what’s not. So I think that’s the number one. And probably speak to a valuer and get a sense of what a fair and marketable price is. At the end of the day, it’s like buying or selling a house. The value is what the market will pay. But I think be very clear on your expectations and make sure you’re not overly high, but also maybe you’re underselling yourself. So, a very clear view around where the market sits so that you don’t feel you need to take the first offer, but also that you’re not pricing yourself out of the market. I think they’re the key considerations to my mind.

Ben Marshan

What are, I guess, some of the alternatives that if you’re… I’m not into running this business anymore or I’m looking to get out of financial planning more broadly, what are some of the alternatives you might have around? Rather than selling, what else could you think about doing as an alternative?

Graham Burnard

So, I think the first major alternative is looking to bring a successor into the business. So, hiring a salaried advisor that you can bring on board, probably check that they’re a fit, and then over a period of time, start selling down equity to them, either through vendor finance or through their own financial borrowings and reduce equity, and then that has the advantage that you might stay on part-time. A lot of advisors I know want to retain say 30 clients to keep active. They don’t want to just completely get out of it. So, you might have a minority shareholding and that becomes a good earning stream as well. So, that’s certainly one.

We do see a lot of people looking at mergers and trying to sort of merge because they don’t want to again, get out of the business completely. It probably adds just that extra element of risk, like we’ve touched, on around is it the right marriage. As well as a business fit, is it a personal fit? Are the goals and aspirations of the two people compatible? Yeah, it adds another element of risk. And then it’s, again, the sort of the nature of the sale. So, there’s a big firm doing a tuck in is very different from another sole practitioner that’s buying a business because they need to scale.

Again, it comes down to, like I said right at the beginning, what brings you to the table. So if, for example, you’re feeling overworked, underresourced, you probably want to go somewhere where there’s a bit of scale where you feel that they can actually add some manpower to the business, a bit of horsepower to take that pressure off you. You currently have 220 clients you’ve got to review. You’re saying it’s just too many. It’s no good going to another advisor that’s also at capacity because that’s not going to fix the problem. So, again, be really clear on the problems you’re trying to solve and will it be solved by merging with a small business or a big business. The advantage of a small business is if you want to still have a seat at the table and have some control and influence, it’s probably easier in a small business than if you’re a tuck in to a very large conglomerate style business.

Ben Marshan

And you’re finding planners and merging with other planners at the moment, or when they’re looking to do these kinds of merger type arrangements, they’re looking at more professional service type things working with accountants and lawyers and trying to merge them into some sort of larger conglomerate.

Graham Burnard

It’s more common that I’m seeing is the planning firms coming together. It’s always difficult, that sort of the linkage between the financial planning firm and accounting firm, and it’s probably the exception that it works really well and is value creating. And then you’ve got the issue that the planning firms is probably on a higher multiple than the accounting firms. So, again, are they going to pay up what it’s worth?

So, if anything, I’m probably hearing more planners that are looking to acquire small accounting practices and tapping into them to broaden their range of services. The accounting firms seem to be just trying to grow organically. They might bring a salaried planner on staff, but they don’t… Not so often that I’m seeing that they’re buying financial planning business because I just don’t think accountants understand that business as well as their accounting business and probably struggle to look at the purchase price and understand the multiples would have been paid.

Ben Marshan

So, it’d be great to hear if you have any insights on sort of some success stories around somebody who’s done really well out of selling their business.

Graham Burnard

Ah, yeah. Look, there’s certainly are, there’s some people that are very happy they’ve made… Particularly if you’ve sold in the last few years, you’ve probably got a premium price, realized an asset of two, $3 million and put the money into your super and you’re living a great retirement life. So, there’s certainly a lot of senior advisors that have exited and done very well.

Graham Burnard

In more recent times, what we’ve seen are the ones that have been able to sort of grow scale effectively, and they’re the ones that seem to be quite happy. When they have made up a marriage that’s compatible, they’re actually seeing, “Yeah, I’m less stressed than I was when I was just on my own. I’ve got some people to share the burdens of running the business and bounce ideas off, but also some scale to investing technology and software and all these things, which are costing a lot of money.” So, certainly when that merger goes well, they’re definitely happier than they were premerger and less stressed, but not all of them end in happy marriages. It can be that they get disappointed when the reality hits and things are not quite what they seem. But when it works well, yeah, absolutely. It’s a bigger business. It’s got more scale and resources, and probably less stress on the principal than a sole practitioner.

Ben Marshan

Have you got any examples where somebody came to you and said, “Look, I’m looking to sell my business,” and you looked at it and went, “Not good, this isn’t going to go particularly well,” but you were able to work with them over six months, 12 months, two years or something to turn it around?

Yeah, look, we certainly, because in fact, it’s probably similar to the work we do with all the practices we work with. Because as I say to all my clients, a good business to work in is a very saleable business because you think of all those things we talked about that are going to maximize value, having a clear value proposition at a target client-base, they’re all paying equitable commercial fees that are profitable, that’s a good business to work in as well as one that is very saleable.

So, all those things that reduce risk are… So, it’s all the things we work for with our practices, and they improve over time, they get extra revenue, they’re probably working less hours than what they were to generate the revenue before, even though they are more profitable. And then over time, if they had sold, then they’ve got a much higher purchase price than what they would have before. But funnily enough, some that have said, “Ah, I’m looking to wind down,” we’ve actually improved their business so they’re actually enjoying being a financial planner again, and they’ve actually sort of got their mojo back.

Ben Marshan

Yeah, absolutely.

Graham Burnard

So, some of them said, “Actually, I’m happy to defer because I’m actually quite enjoying this again.” They’re less on that treadmill of just pumping through reviews and not having a chance to engage with clients, and all these things which would distract them and all the compliance burdens, and some of them have turned around and said, “Yeah, actually I’m actually enjoying being a planner.”

Ben Marshan

I guess, have you seen any disasters? Anything gone the absolute opposite way?

Graham Burnard

Fortunately, none that I’ve worked with closely, but I’ve sort of seen from the outside, certainly some. Look, I’m aware of one where an advisor sold his business and was fully expecting to stay working in the business. Within two months, he was out because basically he was pushed out of the business, and it was clear the purchaser never had any intention of them working in the business for any length of time. And again, this is why it’s so hard to contractually protect against those sorts of circumstances because a purchase can always make your life pretty miserable if they’re the majority owner. So, it really just reinforce, understanding that culture, the values, their strategic direction. You never remove all the risks but don’t just take things at face value. That’s important. And I have heard of certainly what was dressed up as the post-sale world ended up being something very different when reality hit, and I’m sure most people have heard of those sort of circumstances from others in the industry that still carry the scars.

Ben Marshan

Is there anything else you wanted to share or cover with members selling their businesses?

Graham Burnard

Look, I just think at the moment it’s still, it is a really active market, isn’t it? There’s certainly lots of people because there’s pressure from licensees on getting practices to merge. But even as one of the lenders pointed out to me the other day, they’re now not lending money to sole practitioners because they’ve seen the risk that if you’re a sole practitioner in the business and something happens to you, you got COVID, and you couldn’t work for 2, 3, 4 months, that revenue could well be turned off. The licensee could say, “You’re unable to service those clients. We not going to take that risk of fee for no service. We’re going to turn that off.” And suddenly, you haven’t got a business.

So, all of this pressure on sole practitioners to have an alternative advisor in there and all that sort of stuff is just amplifying. So, the need for scale and efficiency, the advice [inaudible 00:39:11], we’re seeing massive pressure on consolidation for all these reasons. And so, I think if you’re not there already, you need to be starting to think about this, and not if, but how you’re going to get that scale. Is it bringing someone into your business? Is it merging? Is it becoming a tuck-in under a large corporate owner? Again, there’s a number of scenarios. You’ve got to work out what’s going to be right for you, but the status quo probably isn’t an option.

Ben Marshan

Yeah, absolutely. All right. Well, thank you, Graham, for sharing your insights and tips and tricks for getting your business ready for that sale process and then making it as  successful as possible when you do it. Where can members find you if they want to find out more from you and what you’re up to?

Graham Burnard

Yeah, so certainly go to the Elixir website. My contact details are there. You can even book in a free appointment time. We can spend half an hour just chatting about your circumstances, and I can share any thoughts then about what you might want to look at and think about if you are going down this path. So, always happy to have a conversation, always enjoy chatting to advisors. So, just go to the elixirconsulting.com.au website, and yeah, make some contact.

Ben Marshan

Thanks, Graham, and I think just to summarize everything, it’s prepare, prepare, prepare, prepare, and then you should have a successful transition there.

Graham Burnard

Exactly. And yeah, and really think through… Yeah, put your black hat on and go, “What could go wrong?” I think is the important thing. It’s easy to have the rose-colored glasses and be focused on what’s going to go right. And this is where the beauty of talking to a lawyer is. They’ll always flick to the back of a contract and look at the things about when things go pear-shaped. You need that mindset to say, “What if? What if it doesn’t work? What if this happens? What if that happens?” So, you go in with your eyes open and fully aware of all the risks.

Ben Marshan

Yeah, absolutely. All right. Thank you for joining us, Graham, and thank you, FPA members for listening in to the FPA podcast. I’m Ben Marshan, and you can find us and me and join the conversation on FPA Community. Have a great day.

Graham Burnard

Thanks, everybody.