Top 3 Buyer and Seller Interview Questions
DEAR ADVISORS,
Interviewing people is overwhelming, especially when you’re interviewing potential buyers or sellers for your advisory firm! There’s a lot at stake, and so much you want to know about this other financial advisor! But it really comes down to alignment between both parties on three factors. We’ve outlined those for you, and included a key question to add to your meeting agenda to set you up for a successful exit planning interview!
Personal Question - What's the exit timeline?
From the buyer’s perspective - Sellers often say they’re ready to sell, but one of the most common reasons succession plans fail is because the seller isn’t committed. There’s little motivation to sell when you love what you do and you can see yourself doing it for another few years. If a seller is truly committed, they will have already run the numbers in their own financial plan to know how much they need to retire, and have a plan for what they’re “retiring to” after their exit.
From the seller’s perspective - You’re looking for a buyer who matches your exit timeline. If you’re looking to stay for a few years after the sale is complete, would the buyer be patient and kind enough to be flexible on this? If you’re looking for a quick exit, does the buyer have the time and energy to put in a lot of work in the beginning? While your timeline is the focus of the question, it’s also an opportunity to learn how the buyer communicates, thinks, and negotiates.
Business Question - What are your non-negotiables?
While it may sound harsh, the goal of these preliminary meetings is to find reasons why this partnership WON'T work as quickly as possible. This is the best way to respect each other and move on with your life if it's not a good fit.
If you’re willing to negotiate everything, then discuss your limits. For example, the timeline is negotiable to a certain point, but what are the minimum and maximum number of years you’re comfortable with to get the outcomes you both want?
Another outcome of this question is identifying what success looks like, and what failure looks like. Usually each party describes this differently, and it’s a useful tool to identify what’s most important to each partner and why.
Financial Question - What is the firm’s gross revenue and what percentage of that is recurring?
If a recent valuation hasn’t been done, it’s perfectly reasonable to use an estimate of 2x gross revenue for this first conversation.
From the buyer’s perspective - There is so much more that you want to ask about the details of the firm, but these financial questions come at the end because they aren’t as important to the success of the exit. The revenue of the advisory firm should cover the loan payments, if structured correctly. The factors about the percentage of recurring revenue and average age of the clients will be taken into account when a certified valuation is done. The true purpose of this question is to learn if you and the seller align on service model. If so, that’s great! But if not, you want to gauge if they are open to change and are willing to adapt to your way of servicing clients over time.
From the seller’s perspective - This subject is important to clarify if the buyer can afford to give you the price you want on the timeline you want. More importantly, do you align on client service expectations? If the buyer proposes changing the service model, you’ll need to seriously consider if you believe that’s in the best interest of your clients. If you’re planning to stick around for a few years, you want to find someone you trust to make the best decisions for your clients and the future of your firm.
Interviewing potential buyers or sellers is similar to having a Discovery Meeting with a client to make sure they’re a good fit. Use the 3 questions as a starting point for developing your own Discovery Meeting Agenda for interviewing potential buyers or sellers. Creating a customized agenda for meetings like this is one of the many reasons why advisors choose Ellevate Advisors for exit coaching! This gives you a solid foundation for a succession plan that will secure the future of your family and your advisory firm!
Warm regards,
Brooklyn
P.S.
At Ellevate Advisors, we believe that advisors deserve to retire too. What does that look like for you, your family, and your business? Let’s figure it out together! Click here to schedule an initial phone call with our team today or get to know me on my bio here!