Understanding an advice practice’s long-term objectives is just one factor of many to be considered before taking on the big step of merging businesses, according to this paraplanning firm.
“In recent years, many financial planning firms have struggled to meet their business goals. Things like changes in legislation, increasing costs, and the global pandemic have put extra strain on practices everywhere,” observed Mutual Paraplanning Services.
“Because of this, some business owners feel stressed and explore their options. One thing some consider is merging their business with other like-minded practices.”
Although a merger might make sense in the short term, the firm emphasised the importance of a long-term outlook to understand if the business partners have similar visions.
“You might find that you and your potential business partner don’t agree on the same long-term goals. This could be detrimental to your business as well as theirs,” it said.
Additionally, beyond broad ideals and principles, close alignment of values was crucial.
Mutual Paraplanning Services explained: “You must take time to get familiar with each other’s business practices and understand any differences and similarities. Your values should closely align, but you should also make sure that both businesses fit together culturally as well.
“If you’re going to be working side by side so you should make sure key parties get along.”
With this familiarity of practices, it encourages looking for economics of scale and ways to complement each other’s practices.
“Consider things like paraplanning staff, administrative and HR functions, office space, software subscriptions, website and marketing, and business processes. As you merge, your business’s current clientele might also complement the merging practice. This can create more business opportunities as you move forward,” it said.
With the big step of a merger, firms also need to plan for potential fallouts, such as potential loss of clients, by ensuring all stakeholders were on board with the move.
Finally, it is important to have in place a mutually agreed upon business strategy in the event the merger would not go through.
“Even though you’re committing your business to merge with another, it can be best for both businesses to have an agreed-upon exit strategy, providing them the option to split the business again or to separately sell their interests at some point,” Mutual Paraplanning Services said.
“This is an in-depth topic that should be discussed and documented in detail before the merger. It can also help put your clients and workers’ minds at ease.”
For those still on the fence about exploring a merger of advice businesses, another method could be reaching out to other business owners who had once been in the same boat, Mutual Paraplanning Services added.
“You can get a better picture of what they learned through the process and decide if merging practices with another business owner is right for you,” it said.
