Unless things drastically change, the business owners that intend to retire in the next decade are going to run into a lot of trouble. Think about it – you have no doubt informed many of your clients to make sure they do not become too emotionally attached. You have probably informed them that they need to act dispassionately and rationally as circumstances and the market dictates. It is crucial that you do act in the same manner. Of course, it can be difficult to think about selling your business, as you have, no doubt, become so attached.
You need to be honest with yourself, though, is it better to start transitioning out of your business when you are 60 years old, when both you and your clients are in good health? When you are fully engaged in your business and you still have positive net AUM growth? Or, would you prefer to wait until you are 70 years old, watching your assets drain away? At this point, your ability and desire to gather assets will have fallen, and you may even have health issues to contend with too. Of course, we cannot always predict when we will need to sell our business. Unforeseeable circumstances can see us selling a lot quicker than anticipated. For example, you may need to free up funds so you can make the most of the advantages of independent living if a loved one has recently been involved in an accident and has a disability.
You also need to consider the fact that an aging client base will mean that the value of your business is decreasing. Let’s go back to advisors, the average client “sweet-spot” is wealthy clients that tend to be around five to ten years older than they are. What this means is, by the time you are thinking about selling your firm, a lot of your clients will be in their retirement phase. Their assets will be depleting, and this can reduce the value of your business as a whole, as your clients are no longer as valuable so to speak.
Of course, there is no magic formula when it comes to working out when is the right time to sell your business. It is a decision that is personal and often emotionally charged. Nevertheless, you do need to be realistic with yourself, and ensure you do not stay involved in the business for too long. Being honest and rational and knowing when to call it quits is something you teach your clients to do, so make sure you take your own advice.