As a financial planning business owner approaching retirement, planning your exit can be challenging. This article, the second in a three-part series, focuses on client fees and their impact on selling your business.
Today’s Client Fees
Client fees significantly influence the price offered by potential buyers. In my consulting business, common feedback I hear from buyers includes:
- Average revenue per client is too
- Many clients are paying fees that are too
- Older clients are paying high
- Concerns about percentage-based fee
When feedback from a potential buyer is unfavourable, it’s reflected in the price and terms offered. But you can improve your financial outcome, consider these options:
- Convert clients to the buyers pricing model during the transition
- Include fee increases in the Rise and Fall
- Negotiate a higher price paid in
- Avoid discussing averages. Understand and price your business segments appropriately.
Before implementing changes, ensure you understand the requirements and conditions of the purchasers Financial Services Licence. These requirements will impact your options. It’s crucial for sellers to understand the requirements to ensure a smooth and compliant transition of the business to the new owner.
When selling your financial planning business, the fees you charge can significantly impact buyer interest. Think of it like a sports game plan: the smoother the handoff, the more likely you will score. In financial planning, this translates to more interested parties willing to pay a higher price.
The key to avoiding price disappointment lies in preparation, generating interest, and presenting your business effectively to buyers. For a confidential chat about your options, please reach out to me on 0478 321694 or jon@remmingtonconsulting.com.au.
Fees of the Future
The future of financial planning fees is likely to involve:
- Clearer separation between advice and investment
- More precise pricing structures.
- Identical fees for each service
To raise professionalism, fees should be flat, well-defined and consistent, reflecting the service provided rather than the investment amount. This approach simplifies the fee structure for both clients and potential buyers.
A service package should be a commitment to deliver a defined job, at a fixed price, similar to how a dentist charges the same fee for the same service regardless of the patient’s income.
The industry may also move towards a hybrid fee model, combining fixed fees for strategic advice and a small percentage for risk and portfolio management.
Every seller wants the best financial outcome possible, now is the time to act differently.
In Summary: Optimizing Your Fee Structure
To enhance your business’s premium value:
- Clearly identify your value
- Implement consistent and individually profitable fee
- Focus on the fee model of the future, not just current
A well-structured fee system that demonstrates value and consistency will attract more interested buyers willing to pay a higher price.
For a confidential chat about optimising your client fees before selling your business, please contact me at 0478 321 694 or jon@remmingtonconsulting.com.au
Stay tuned for the final article in this series which will address the importance of data management during your business transition.
