When a sudden emergency or a collapsed deal forces you to sell quicker than expected, you'll need to act fast to preserve the value of your business. Here's how to execute a successful sale – even if it's rushed.
Selling an advisory business is meant to be the final chapter of your entrepreneurial journey. But sometimes, life throws curveballs, and even the most thoughtful succession strategy can unravel if something unexpected happens. Sudden illness, a deal that falls through or another unforeseen event can force you to pivot or sell sooner than you’d planned.
In those situations, the long-term equity you’ve built can quickly slip away. “The value of your business literally declines every day that passes without someone looking after it,” says Ken Lofranco, IPC’s Vice President, National Advisor. “What someone will be willing to pay for your business starts falling fast.”
Here's what to consider if you have to sell your business faster than planned.
When you can't work:
There is no shortage of stories – inside and outside of the financial advisory industry – of business owners having to sell because they can no longer work. That often happens when someone faces a sudden illness, a debilitating disability or an unexpected death.
There's not a lot you can do if it gets to this point, says Lofranco – the value of your business will almost certainly decline if there's no plan in place to deal with an unexpected event. “There may be liquidity needs, trades that need to be placed or time-sensitive services to be performed on a client account,” he notes. “It’s pretty hard for a buyer to come in and repair what's gone wrong.”
It helps if you have an associate who can quickly step in, but even then, engaging in a sale can be challenging if you're not around. In this situation, it’s less about what you or your family can do after an incident – you’ll most likely have to sell at a lower price and quickly – and more about what you can do before an emergency occurs.
Solution: Create a business continuity plan
Long before you decide to sell the company, you’ll want to create a business continuity plan. This document will help protect clients and keep your business going if the unexpected happens.
It should include information on:
- Who will run the business
- How clients will be supported
- How financial and human resources will be allocated
- How value will be protected if you're unable to act
With this kind of guide, someone can step in right away and know exactly what to do to keep clients happy and the business running smoothly. That helps protect value and allows you or your family to sell when the time is right.
“We've had situations where an advisor suddenly became ill or had to step away, and our team was able to step in and help protect the value of the business,” Lofranco says. “The more we know ahead of time, the more help we can be. Ask yourself today: What would I need — in 10 years or three days — to prove to a buyer that my business is ready?”
When a Deal Falls Through:
Having a solid succession plan in place doesn’t guarantee that a deal won’t fall through. When that happens, retirement plans can go awry.
I’ve seen people who were ready to retire, but their plan fell apart,” Lofranco says. “They were relying on it for years, and suddenly they were stuck searching for a new successor.”
A buyer might lose financing, get cold feet or run into compliance issues. Sometimes it's the advisor who hesitates — maybe the timing feels off, the fit isn’t right, or they keep holding out for something better — and the deal never gets finalized.
A stalled transition doesn’t just put a damper on your plans; it can make your business harder to sell to someone else. Clients can start to lose confidence in your leadership, and prospective buyers may question whether the opportunity is worth pursuing. “It's not as though there is a ready market of qualified buyers who are prepared to buy your business in its current state right at the unplanned moment when you may need to sell it,” Lofranco says. “The buyer is in a position of power here.”
But the end of a deal doesn’t have to mean the end of your options. What matters is how you respond:
· Analyze the breakdown: Instead of jumping at the first new buyer, step back and consider why the first plan broke down. Financing, timing and fit all play significant roles, and missteps in any one of these areas can derail a sale. Learning from the experience is what makes the next attempt more likely to succeed.
· Define what matters most: Maybe you want a deal closed fast, the highest payout or ensuring client continuity (or, likely, all of the above). Without clear priorities, it’s easy to hold out for the “perfect” offer and end up with nothing, something Lofranco has witnessed more than once. Advisors become so focused on what might come along that they pass over buyers who could close the deal today. “You may not be able to be too choosy at this point,” he says. “I've seen advisors stall their own exits because they keep looking for something better. They end up missing what's right in front of them.”
· Execute immediately: If speed is a top priority, focus on finding a buyer who can close the deal quickly and reliably.
Understanding Your Quick Sale Options:
Whether you’re facing an unexpected inability to work or the collapse of a deal, most advisors will weigh three buyer options in a quick-sale scenario: An internal peer, an external peer or a corporate buyer. Peer deals can feel like a natural fit, especially when there's an existing relationship, but they come with their own set of risks. For example, financing can fall through. In other cases, share purchase agreements can consume unanticipated time and resources for due diligence, valuation and legal review, all with very little return on the effort. In many cases, sellers may be expected to stay involved longer than they'd like to support the transition.
When time is short, institutional buyers can often move faster than peers and can be more flexible about how long a seller stays involved. That flexibility helps advisors shape the transition in a way that works for them.
Lofranco recalls an instance when an advisor’s succession plan collapsed after his buyer backed out. The advisor, who believed his retirement was already secured, suddenly found himself without an exit plan. IPC was able to step in and provide an alternative path forward. “We had an offer in his hands within a week,” Lofranco says. “Three weeks after that, the deal was signed, and we were bringing on his staff and transitioning clients.”
Why fit still matters
Even if you're under pressure to sell, the buyer’s approach must still make sense for your clients. A strong offer won't mean much if the new fee model or service style drives people away. “Let’s say you didn't do your due diligence, and the buyer starts charging excessive or egregious fees," Lofranco says. “You might not notice right away, but over time, clients will. And they’ll start walking.”
Communication is key
Think carefully about how to prepare clients for what’s ahead. Silence leaves room for worry, which is why communication is a vital part of the process.
- Be honest and transparent. Let clients know why the change is happening and what they can expect from it.
- Offer reassurance. Communicate what will stay the same and what will change.
“If you’re not giving your clients information, they’ll fill in the blanks with their own fears," Lofranco explains. “If you communicate the plan and follow through, you prevent the introduction of cause for the emotional temperature to go up, and it makes it easier for them to feel good about the change.”
Expect the unexpected
No one wants an urgent exit, but proactive preparation can help you move quickly in an unforeseen circumstance. While it won't eliminate all risk, having a plan gives your business the best chance of maintaining its value and supporting clients while you navigate a difficult situation.
