By Mark C. Tibergien and Owen Dahl
Reviewed by Gary W. Silverman, CFP®
I love books that require no review. So if you want to save time and not read my verbosity, then just read the title: How to Value, Buy, or Sell a Financial Advising Practice: A Manual on Mergers, Acquisitions, and Transition Planning. There, that's what the book's about. And it does a good job of it.
Nevertheless, my book review boss is a little more demanding of me than one paragraph can fulfill. So let's look at the book in a little more detail.
How to Value, Buy, or Sell a Financial Advising Practice is written by Mark Tibergien and Owen Dahl. In case Mark's name sounds familiar, he's a principal at Moss Adams, the folks who have given the financial planning world fiscal insights into itself. If you own a financial planning practice, then I know you have put a lot of your being into creating what it is today. That's worth a lot to you—after all, it could very well represent the culmination of your entire life's work. That makes your practice valuable—very valuable. The question this book tries to answer is How valuable is your firm to a potential buyer? And if you are the buyer, you wonder how much of the practice you are considering buying will survive the transition. The book covers both multiple-partner firms and sole practitioners (after all, we haven't gone extinct yet.)
The book's chapters cover the valuation process and the factors that drive practice value. It details the mechanisms of valuation, deal structure, and myriad other factors that will help both buyers and sellers in this process.
Much of the book takes a subject, dissects it, looks at common ways of approaching the tasks, and discusses how specifics of the buyer and seller warrant modification. It also does a good job of debunking many of the rules of thumb used to value a business.
Mark and Owen do not put much stock in rules of thumb or industry benchmarks to judge a firm's value. After all, "Not all practices are equal." This is refreshing because you might suspect that a book by two Moss Adams folks would mostly sing the praises of their research. While they do use it as a tool, this is definitely not an advertisement of their benchmark study. Ever wonder how to use the annual Moss Adam's study? Well, Mark and Owen should know. The chapter, "Evaluating Fiscal Health," goes into detail on how to compare and contrast your firm's financials to the averages shown in the study.
The chapter on buy-sell agreements departs a little bit from the rest of the book's format. It is not a step-by-step procedure guide. Nor is it filled with examples. Neither observation is a complaint, for what does fill this chapter is wisdom. "Common problems…," "Experience teaches us…," and many "for example" phrases are followed by tidbits of overlooked or misapplied classes that can save or destroy what should be a smooth transition. As the authors note, "The Devil…is in the details."
Even if you don't plan to sell your business any time soon, going through the exercise of valuing it can reap tangible benefits. A great chapter in this regard is "Building Value: The Firm That Sells Itself." The book will force you to get your accounting in order (planners who don't have to have audited financial statements tend to get sloppy in this area). It also helps you focus on where the financial value truly lies in your practice. How can that not be valuable?
Gary W. Silverman, CFP®, owns a fee-only financial planning firm in Wichita Falls, Texas. He is the host of the television show Falls Informer, editor of the financial newsletter Personal Money Planning, and a frequent contributor to the print and broadcast media. He also teaches university courses in finance and management.
$95.00 U.S., $129.95 Can.