Consolidation is on the increase in the financial planning sector. This trend is set to continue, with a number of practice buyers actively on the lookout for good financial planning businesses that fit their business model.
However, there are a number of things buyers should keep an eye out for in the due diligence process of any potential transaction. I always like to use the housing analogy, because people can understand what they need to do to sell and buy a house.
So if you’re buying a house, you’ve got to know about the suburb and area that a house is in, you would want to get a building inspection done, and you would want to ask some critical questions of the incumbent owners.
In these critical questions lie the holy trinity of due diligence for potential practice acquirers. These questions are: What does the commission statement say? What does the bank account say? And what does the download from the product system say? The answers to these questions all have to match up, so that you can genuinely assess what it is you’re potentially buying.
Using the housing analogy again, this is akin to a surveyor confirming the size of the block of land, and the building inspector confirming what’s actually in the paperwork you’re presented with. You would want to make sure the incumbent owners own the title and that everything in the files check out with the building inspection.
So if you’re buying a house, you would suss it all out. Why would you do anything differently for a business you are buying?
