“The block of granite which was an obstacle in the path of the weak becomes a stepping stone in the path of the strong.”
The exiting owner of a newly acquired firm can be a hugely valuable asset (or a total liability) to your firm’s profitability and success.
Harnessing the Retiring Proprietor (as an Advisor)
As well as a leader, your proprietor is a skilled technician and he is the keeper of a gold mine of opportunity for you in terms of the years of goodwill and the solid relationships he has built up.
Anxious to achieve the best price, the exiting principle is always happy to add value to his business sale by conducting a full handover (presuming good health & availability et al.)
Given these facts, why do so many buyers not get full value from their exiting principle then?
It’s a question of turning genuine goodwill into meaningful specifics. Your exiting proprietor is doing a job for you (the handover). Agreeing the purchase is one thing, agreeing the specifics of the handover job and the definition of success is another.
Example: Wrong Agreement
The vendor agrees to do a full handover for 3 months on the 200 clients constituted in this agreement; the vendor will take all reasonable steps to ensure the clients remain with the acquirer.
Example: Correct Agreement (Specifics!)
– 12-week handover – minimum of 4 hours in the office per week.
– 5 appointments per week (60 joint appointments)
– Agreeing to the buyers plan for joint meetings and definition of success.
– 140 other clients telephoned to inform of the sale, present the buyers business and left a message if unavailable.
– A Log created on each call or message and followed up with a letter on the buyers headed paper and signed from the exiting proprietor.
– Availability for up to 1 hour per month on the telephone after the 12 week handover to deal with any clients requiring assistance from the exited principle for the next 24 months.
This last (often-overlooked) point delivers 2 benefits.
Firstly, if something goes wrong with any client meetings (clash of personality, poor investment performance etc.) the buyer can benefit from the exited technician using his relationship to smooth things over. Secondly, this enables the buyer to give clients the truthful impression that the exited principle is still involved in the business as a part time consultant. This feeling of continuity to clients will reap benefits right up until the point when the client is fully “under the wing” of their new adviser.
These points are important for the exiting principle too, (who will want clients to stay where they are, both from a professional pride point of view and the obvious potential liability of orphaned clients floating around.)
Remember, the more black and white rather than “wishy washy” areas you both have then the less chance for errors, resentment and lost value later on.
Of course all this needs putting into legalese but this is a personal handover and the “handover job description and handover targets” should be agreed before costly technicians are appointed.
Ok, so how should the handover actually be done? What is the most effective method of transferring all this good will into the buyer’s hands?
Well of course, its all very different pending on client and the exiting owner. Principles remain constant though and these should be easy to grasp from the following example script.
Retiring Owner: I was just trying to tell John here how long we have known each other Mr. Client….How long actually is it now?(A Scene Setter)
Retiring Owner: The advice I’m going to give you now is probably the most important piece of advice I have ever given you…(An Interest raiser)
I’ve been looking around the industry for a long time to find the right person to look after you when I retire and John here is the right person. The reasons I have chosen him are…. (A Presentation)
Presuming that type of introduction is from a liked and trusted adviser, you should grasp how this gives expanding advisory firms a warm, pre-sold client. As one of my best clients put it, “you’ve got to really try hard to mess it up from there”.
The Retiring Owner as a Leader
Leading his staff the exiting principle exerts an enormous influence by what he says and (most importantly) his behaviour after the sale. Faced with an unfamiliar environment and new situations, staff will be prone to mimic his response to their new world.
People subconsciously align into tribes or social groups, think of your local football team supporters or observe the consequences of a child in the wrong uniform (or even wrong pair of trainers!) at school.
Presuming we are not leaving the business running as a completely separate model then moving immediately to merge and take down the barriers between “them and us” is vital. Simultaneously, habits or work patterns must be replaced which are not in complete synergy with the current systems. Failure to do this singularly results in the vast majority of failed M&A.
How do we tear down the barriers of “them and us” and insert new friendships and cliques across both organisations to create a singular team that pulls together and maximises profits?
Academics and sociologists have long been seeking a remedy for schools where racial and cultural differences between pupils had manifested in unhealthy tension. The most effective solution they have found is called the jigsaw method.
Teams are created across the divisions and given a unified goal, which benefits every member if achieved.
The technique is so called the jigsaw method because teams should be thoughtfully selected so each member holds a piece of the overall puzzle vital to complete the incentive.
A few work-based socials should provide the right environment for cross tribal friendships and alliances to take shape and the real merger to begin in earnest instead of remaining just in the head of the strategist.
We have covered a lot here, the opportunity is now; the client land grab of the new world has begun.
Wishing you continued success,
PS An eBook detailing how to bring on board new staff and merge groups quickly is available, so get in touch to grab one, it’s provided at my expense.