How do I sign up for membership?
What services are available on the Ameriprise Practice Transitions site?
What is a financial practice worth?
What is the Knowledge Center?
What types of practices are available on the Ameriprise Practice Transitions site?
Can my practice be listed anonymously?
Why sell my practice through Ameriprise Practice Transitions?
What is the ratio of buyers to sellers?
What are the basic steps to buying a practice?
What are the basic steps to selling a practice?
How long does it take to buy or sell a practice?
What are typical terms of a deal?
How is a seller taxed on the purchase price?
How do I make sure my clients transition to the new buyer?
What documents and agreements are available from Ameriprise Practice Transitions to help buy or sell my practice?
Can Ameriprise Practice Transitions help with financing?
What is "due diligence" and how do I handle the process?
What is the difference in buying assets vs. stock?
How do I sign up for membership?
To sign up with Ameriprise Practice Transitions, simply visit our Membership Signup form here.
What services are available on the Ameriprise Practice Transitions' site?
The Ameriprise Practice Transitions site has several consulting services for financial advisors that include the following:
* Valuation
* Deal Support
* Internal Succession Planing
* Continuity Management Program
* Business Launch System
* 2007 FP Transitions Report
What is a financial practice worth?
There are a several different techniques available for determining the price of a financial practice. Keep in mind that the price you pay (or sell for) is usually based on the future expected income, and that the ultimate price paid is usually dependent on the amount of assets or clients actually transferred after the sale has closed. The various pricing models fall into one of several categories:
* Discounting future cash flow to present value, or capitalizing cash flow by an acceptable rate of return, i.e., "free cash flow"
* Comparative pricing based on the selling price of other businesses sold within the industry
* Rule-of-thumb formulas where an income stream is multiplied by a factor to determine the selling price
Picking the right technique for your situation depends on the size of the practice, the complexity of the cash flow systems, and the amount of time and money available to engage a professional valuation expert. No matter what technique you use, you must always remember that you are buying the future. Past performance is an important indicator, but you must be able to confidently assess the future financial performance of the business or practice at issue.
The value of a professional practice is dependent on a number of factors including:
* The number of clients transferred to the buyer;
* The terms of the deal, and;
* The tax allocation of the purchase price.
Comps, or comparables, refer to the process of studying similar practices to see what they sold for. If you can find a practice that is similar to the one you are looking to buy, and it is sold or pending on this site, you have at least some idea what other buyers were willing to pay. Although most practices listed on the Ameriprise Practice Transitions' site sell for at or near the listing price, many practices are purchased on the basis of an earn-out that makes the exact selling price unknown for 3 to 5 years. Also, the terms of various sales may vary significantly. Using comps tends to work best when used in conjunction with a more formalized and professional valuation.
One of the biggest factors influencing the sales price is location. Practices in metropolitan areas tend to sell for more than practices in rural areas. Larger practices (more than $1 million gross annual revenues) tend to sell for more than mid-sized to smaller practices. Mid-sized practices (from $400,000 to $1 million gross annual revenues) tend to sell for more than smaller practices. Practices in desirable areas, such as warmer climates or retirement communities, can often command a higher price than practices located elsewhere. Sellers who are willing to take an active role in transitioning the clients to the new buyer after closing will also do better, as will sellers willing to take longer payouts and earn-out arrangements.
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The Knowledge Center is published 365 days a year, combining real-time information from industry experts, experienced buyers, sellers, business owners, and even employees, along with access to the most comprehensive succession planning materials in the industry today. Access to the Knowledge Center is included in a membership to any of the listing groups on Ameriprise Practice Transitions and includes Articles , Podcasts , Deal Calculators , and more.
Back to TopWhat types of practices are available on the Ameriprise Practice Transitions' site?
The Ameriprise Practice Transitions site includes listings for buyers or sellers of the following types of practices:
* Financial Planning
* Registered Reps
* Fee-based
* Estate planning
* Insurance
* Accounting
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Can my practice be listed anonymously?
Yes. As a seller, you complete a detailed Listing Form describing your practice. When you list with Ameriprise Practice Transitions, a potential buyer is able to initially view and learn only the city, state, type of practice, listing price and some basics about your business. From this detailed description, both a "one-line" and a full-page listing are generated highlighting specific information about your practice. Your name and business name, address and phone numbers are not provided to a buyer by AmeriprisePracticeTransitions.com and remain completely confidential until you choose to proceed and communicate directly with an inquiring party. We even provide you a means of responding to an inquiry via e-mail in an anonymous and confidential manner.
Interested parties communicate with you through our system by submitting their contact information on-line to AmeriprisePracticeTransitions.com. This contact information is then sent directly to you via e-mail through our secure server for viewing in the privacy of your office. Buyers are not given a seller's name, address or phone number by anyone except the seller. As a seller, you respond to all inquiries directly using a confidential e-mail system, phone or fax.
As a buyer, the first step in the listing process is to complete a short form detailing your needs in our exclusive Transitions Flash! system. Once completed, you will be immediately and automatically notified of new listings entered in our system that match your criteria and location.
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Why sell my practice through Ameriprise Practice Transitions?
First, and most importantly, we are experienced. Our credentials include a JD, CPA and MBA, all with proven experience in transitioning financial service practices. We have worked with financial agents, CPAs, RIAs and independent reps from across the country. Our staff has experience in the following areas to assist you: mergers and acquisitions, SBA and conventional financing, NASD and State securities and financial regulations, licensing, tax, legal, title and escrow, and UCC requirements.
Second, we provide a complete "Transition Package" that greatly simplifies and standardizes the selling process. Included in our services is a confidential and automated listing system, a complete library of form contracts, personal guidance and support through the entire process from start to finish, and closing services. All of these services are included in our fee.
Third, we bring you a great tool - Transitions Flash! Just tell our system about the type and location of the practice you want to buy or sell and you will be automatically and instantly notified of new listings minutes after they become available via e-mail. As a seller, your confidential listing is in front of hundreds of buyers instantly. Many of our sellers receive 10 to 25 buyer inquiries in response to their listings. This helps to ensure fair market value and selection of the very best buyer to succeed you.
Fourth, our system is built to deliver fairness in the transaction. The best transition results are obtained when both the buyer and seller achieve a fair, balanced deal with equal and strong post-closing motivations. Our fees are divided equally between buyer and seller. As a seller, you will not find lower fees anywhere. As a buyer, our system is built to help you obtain the highest rate of transitioning clients and revenues.
Fifth, we are an independent company. We allow you to buy from or sell to virtually anyone that you choose. This means that market value determines your price. On our site, there is no hidden, single buyer to keep your sales price down, nor is there any hidden recruiter behind the scenes.
In addition, whether you are retiring from your practice or just want to reduce your client base, Ameriprise Practice Transitions offers these other important advantages:
* Confidentiality and convenience of e-mail inquiries
* Listings that provide nationwide exposure
* Independent valuations
* Closing services
* Refundable listing fees at closing
* Password-protected listings that you can modify at any time
* On-going studies and publication of data including transition rates after closing to valuation multiples.
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What is the ratio of buyers to sellers?
At this time, there are approximately 40 buyers for every seller. This ratio allows a seller to carefully select a buyer who is a close match in terms of personality, location, business model, price and terms.
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What are the basic steps to buying a practice?
In general, these are the simple and basic steps most successful buyers take to acquire a practice:
1. Go to the Ameriprise Practice Transitions' site.
2. Contact sellers directly through their Practice for Sale listings.
3. Most of the sellers on the Ameriprise Practice Transitions site will receive from 10 to 25 inquiries from interested buyers. It is not necessary to be the first buyer to inquire, nor does it help to send in more than one inquiry in most cases. Failing to provide sufficient information to a seller will usually result in the seller spending time with prospective buyers who complete their inquiry forms. Please take the time to provide each seller with enough information to fully evaluate your inquiry and qualifications.
4. Begin discussions/negotiations with seller (this step is initiated by the seller).
5. Begin the due diligence process.
6. Contact Ameriprise Practice Transitions to complete a Letter of Intent from our Contract Package.
7. Once a signed Letter of Intent has been received back from the seller, the facilitation staff will instruct you on how to proceed and will begin preparations for closing.
8. Obtain, negotiate and sign Purchase Agreement and related documents.
9. Work with Ameriprise Practice Transitions to develop a detailed Transition Plan.
Our Customer Service staff is always available to answer specific questions or concerns about these steps at 1-800-934-3303.
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What are the basic steps to selling a practice?
In general, these are the simple and basic steps most successful sellers take to sell their practices:
1. Go to the Ameriprise Practice Transitions' site and complete the Seller Listing Form (you can complete the listing at any time). This enables buyers in your geographic area to find you and assess the potential for a transition. Your listing will not be activated until you have approved it and an initial interview is conducted to help assess if the process is right for you.
2. Begin discussions/negotiations with buyer (the buyer does not know who the seller is until the seller responds and identifies him or herself).
3. Begin the due diligence process.
4. Once a signed Letter of Intent has been received from a buyer, the facilitation staff will instruct you on how to proceed and will begin preparations for closing.
6. Obtain, negotiate and sign Purchase Agreement and related documents.
7. Work with Ameriprise Practice Transitions to develop a detailed Transition Plan.
Our Customer Service staff is always available to answer specific questions or concerns about these steps at 1-800-934-3303. In addition, our Transition Staff will work with you to organize a Transition Plan to increase the successful transition of the seller's clients to the new buyer.
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How long does it take to buy or sell a practice?
The timeline varies from case to case. However, the average time frame to buy or sell an financial practice and the multiple processes at work currently lasts between 6 and 8 weeks, from the date the listing is activated to the date final deal documents are signed.
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What are typical terms of a deal?
Most sellers receive between 20 to 50 percent in a non-refundable, cash down-payment, with the balance paid over 2-5 years. Please see our Practice Transitions Report for more complete information. In general, the greater the amount of recurring revenue is, the greater the down payment (up to about 50%).
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How is a seller taxed on the purchase price?
We recommend a tax structure for most of our deals based on what the seller is selling. Many sellers can receive capital gains tax treatment for the majority of the sales price. We assist the buyer and seller in understanding and applying a reasonable tax allocation structure to their deal.
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How do I make sure my clients transition to the new buyer?
Buyers and sellers spend a lot of time trying to figure out what a financial planning practice is worth prior to closing the deal. Value, including the listing price, is a function of the revenues and clients that successfully transition to the new buyer after closing. Unlike buying a house, a seller usually doesn't begin to actually deliver any clients to a buyer until the deal is completed. Imagine how differently one would value a practice in which only 75% of the assets actually transitioned as opposed to a 98% transition rate. We hear from buyers and sellers around the country who report that anywhere from 60% to 100% of their assets and clients were still with the new buyer one year after closing. In our experience, buyers and sellers who work with us and utilize our Transition Package, have an average transition rate between 80 to 90 percent of the revenue stream and client base six months after closing. We will continue to study the results of our closings and will update this information as it changes.
A successful transition of assets and clients to a new buyer takes skill and coordination on everyone's part. At Ameriprise Practice Transitions, we begin working towards a high transition rate immediately upon engagement of our services by educating the buyer and seller about this part of the process. Our average seller has between 10 to 25 qualified buyers to work with, helping to ensure that the best match is found. The next step involves structuring the financing aspects of the deal to maximize the motivations of both buyer and seller to work hard after closing. We take the time to study the results of our closings and then upgrade our systems and forms in an effort to constantly improve your transition rates. We work with our buyers and sellers to explain what others have done and what we suggest for a given situation. Our contract package even provides sample letters from the buyer and from the seller to the clients informing them of the transition.
Most sellers incorrectly believe that they will have to stay employed in some fashion with the new buyer for several years after closing to make sure the client transition proceeds successfully. While the seller's continued assistance is essential, our buyers and sellers report that the time spent by the seller is maximized for the first 2 to 3 months (depending on the number and location of the clients), then falls off rapidly. Most sellers maintain their license for up to a year after closing and make themselves available for trouble-shooting or further client meetings where necessary.
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What documents and agreements are available from Ameriprise Practice Transitions to help buy or sell my practice?
Ameriprise Practice Transitions offers its listing customers a complete contract package to buy or sell an financial practice. These contracts are specifically designed for Ameriprise Practice Transitions and offer maximum flexibility in the structuring of a deal. All contracts and forms are available through Ameriprise Practice Transitions upon submission of a signed and accepted letter of intent (or similar document) that involves the purchase or sale of a practice on this site.
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Can Ameriprise Practice Transitions help with financing?
Yes. But with the benefit of our experience, you'll learn that financing issues, especially involving a bank or credit union can be daunting. We answer questions on this area daily. Most deals that sell for less than $500,000 do not involve bank financing. Deals that do require a bank to get involved must be properly structured from the outset or both buyer and seller will end up wasting a lot of time, money and energy. Regardless of whether the bank offers loans guaranteed through the Small Business Administration, all banks are not created equally. If your hometown bank or your loan officer friend says he or she can help, ask if they've ever loaned on a financial planning practice before. If they haven't, you're probably going to be disappointed in the results.
When bank financing is involved, full transition support by our staff is needed throughout the transition process to coordinate the loan application, to prepare the valuation so that it supports, rather than undermines the sales price, and, most importantly, to educate the seller on how long the process takes and the areas the seller will still have to make up through an earn-out or other financing efforts. Too many sellers walk away from their buyers after two to three months when the bank loan comes through but fails to meet expectations and needs.
The most important aspect of successfully obtaining financing is education and experience. Both buyer and seller need to know what to expect from the financing effort and how to adjust the deal, before anyone invests time and energy into the loan application process. Bank financing can be an essential component of the deal, but it is does not always carry the deal as you might have experienced in a home sale. We work as neutral intermediaries to help, support and educate both buyer and seller. Because we're paid by the buyer and seller both, both sides tend to listen to us. That's why we get deals done when others can't.
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What is "due diligence" and how do I handle the process?
Due diligence refers to the review process performed by a buyer to verify the underlying aspects of a seller's practice. During the review process, the seller is expected to disclose proprietary and confidential information. The purpose of due diligence is to help the buyer determine the benefits and liabilities of a selling practice by inquiring into all relevant aspects of the past, present and predictable future of the business. Due diligence will help a buyer decide whether they want to go forward with the transaction or whether they want to renegotiate the price and terms of the deal based on the results of the review. Sellers generally assemble a complete packet of due diligence materials using the Due Diligence Checklist and make several copies of the entire packet in order to quickly provide the needed review materials to a waiting buyer. It is normal for a seller to have several interested buyers conducting due diligence at the same time. Due diligence typically occurs both before and after a Letter of Intent is signed by buyer and seller, with about one-quarter to one-third of the process completed before the written offer is made. To help you complete the due diligence process, it may be wise to engage the services of your CPA, accountant or attorney. NOTE: It is quite normal to find "red flags" in the due diligence process - that's what due diligence is for - because every business has its weak points. As the buyer, your job is to determine what those weak points are before you buy, plan for them after the acquisition is complete, and to consider the impact of such points in the final price you will pay for the business.
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What is the difference in buying assets vs. stock?
It is very important that a buyer and seller discuss between themselves early in their negotiations whether a proposed transaction will be structured as an asset sale or a sale of stock. Both buyer and seller need to take the time to fully understand the ramifications of this decision and, if necessary, consult with a qualified attorney or CPA to address this issue. We work as neutral intermediaries to help, support and educate both buyer and seller on these issues. Generally, if the seller is structured as a C-corporation, the sale will proceed as a stock sale, at least in part. Buyers and sellers facing this situation need to accommodate the full range of issues in the deal structure and price from the beginning of the process.
Buyers almost always want to buy the assets of a business, because purchasing only assets usually avoids most potential lawsuits from inherent corporate liabilities and buyers get a step-up in basis on the assets purchased, allowing greater depreciation to shelter future earnings from the new acquisition. Sellers who operate as sole practitioners, partners, S-corporations or as limited liability companies typically sell only their assets. Conversely, sellers of C-corporations usually want to sell their stock, because for a C-corporation a stock sale results in only one tax (compared to a double tax on the sale of the corporation's assets). Stock sales can be much simpler from a seller's point of view, because everything in the way of assets (and liabilities) is transferred at the time the stock is purchased by the buyer. The impact on a buyer, however, can be significant and detrimental compared to the purchase of assets.
Whether you choose an asset sale or stock sale, the Ameriprise Practice Transitions' contract package provides a buyer and seller with either an Asset Purchase Agreement or Stock Purchase Agreement option, and attachable addendum pages to help you or your counsel construct a clear, concise agreement. Buyer and seller can easily adapt and modify the contract terms to fit their needs by selecting among a variety of alternatives and suggestions in a "check-the-box" and "fill-in-the-blank" format.
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Have a question that wasn't answered here? Contact Us or call 800.934.3303 for more information.