Amber: Hello TPR Nation. This is Amber Kuhn. Thank you for
joining me on today's Follow up Friday, where I'll be recapping
this week's episode highlights and action items. On Monday,
Matt was joined by Ted Jenkin from Oxygen Financial Exit Stage
Left Advisors and JPTD partners to talk about the reality of
valuations in the RIA space. Ted shared that most advisors are
operating under this assumption that practices are valued at
around 3x using those traditional methods, but he said
the number is a way off from what some buyers and private
equity firms are actually paying on the open market. He said the
way to maximize your valuation is through the marketplace, and
that you could get a much higher multiple than you would by
selling it to just someone down the hall. For those larger RIAs
over 500 million Ted said those multiples can reach 14 to 17x
cash flow, and that the driver is arbitrage. These buyers can
acquire the firm at a lower multiple and then realize higher
valuations by tapping into capital markets. Ted shared that
as an advisor, you need to evaluate the velocity of money
to maximize your own net worth and consider what's going to
build your net worth the fastest. Matt and Ted also
talked about Gen 2 advisors and how they don't necessarily have
to buy a practice. Ted said some buyers will offer Gen 2 advisors
the chance to receive equity in the practice after a period of
time as an employee and potentially resell it. So
selling to those external buyers could end up being better for
Gen 2 advisors than an internal succession. Now for advisors
still in a heavy growth mode, Ted recommends considering
acquiring undervalued practices to create your own arbitrage
play, or, he said, better yet, if you can prove you have
organic growth, you then have the opportunity to get more for
your practice relative to just the numbers. Matt and Ted
wrapped up by pointing out how cultural fit and alignment on
things like investment velocity are critical to ensuring that a
sale doesn't end up becoming a nightmare scenario. Let's get
into action items. Listen to Ted's Kitzes episode, which we
have linked in Monday show notes, visit
JPTDpartners.com/theperfectria, and this will include a T minus
two year checklist to prepare yourself if you want to go to
market and test it out and then a list of the top 10 client
acquisition techniques from Ted. On Thursday, Jamie was ready to
talk about S corps, but she said what s really stands for is
shenanigans. Because she said that's what she sees a lot of
business owners do, over and over again. She then went into
the conversations that she has about how to design and
structure different entities. One of the key points that she
made was that importance of having a clear long term vision
and strategy when you're starting that business. She
said, Look beyond that initial setup and consider factors like
exit strategies and succession planning from the very
beginning. So the first thing that she does is take a legal
assessment, so how many people are coming into the
organization? She then wants to get what the goal is in the next
five to 10 years, and what's that ultimate outcome. The
reason is because many people start an organization, but they
don't get themselves an exit strategy. She likes to do a lot
of vision mapping, as opposed to creating a business plan. And
this will focus on what things look like long term. From there,
Jamie will do a SWOT analysis, and she pointed out that she'll
put the business owner's name and her strengths and
weaknesses, because she said the success hinges on that person.
She wants to identify that and get the owner thinking about how
their business is bigger than them. After that, Jamie wants to
choose a legal structure. She said this is where you want to
bring in a business attorney. Also during this time, she said
that you'll hear the reasons why an LLC protects people, but also
about piercing the corporate veil. She said, if you set up
LLC, you then have to abide by those laws and regulations and
how it should be operated, and if you fail to do the work to
create and maintain it, then you've pierced the corporate
veil, and then you lose that liability protection. She talked
about how things can get sloppy for you and your clients when it
comes to commingling assets, and when those personal and
corporate assets are mixed and money is being transferred, or
when deposits are made in a personal accounts, because then
it just makes it hard to distinguish the two. Jamie
mentioned a couple of other ways that advisors get sloppy with S
corps. She said, What are you doing on the profit and loss
sheet, where you're writing things off just because you're
getting a business deduction? Said, it's great to get this
legitimate tax write offs, but you need to document things. The
other way that people get slobby is the failure to have a
succession plan in place. She said, You need to look at what
you're doing with how are you transitioning your clients, you
also need to have disability insurance on yourself now. With
succession, she said consider what agreements you have in
place right now, and what do your clients know about it. She
reminded everyone that you're required to disclose your
disaster recovery, so make sure that you not only have this map
out, but that you've communicated this with the
people involved. She said that regardless of your long term
plan you want to build a business that you could sell
tomorrow. So keep your financials clean. Everything
needs to be evidence and verifiable. Let's get into
action items. Review your financials. Look at whether you
could potentially have your own corporate vail pierced. So if
you're not operating efficiently, what do you need to
do today to make sure that you are, what write offs are you
taking that you need to document and show justification for? And
lastly, what is your succession plan? Make sure that you have it
documented, communicated, and that it's part of your long term
cleaning strategy. Before we go TPR Nation, we just wrapped up a
Nation Power Session this week, and enrollment is open through
Monday, June 17. If you're looking for how you can double
your practice in 12 to 36 months, reach out to us at
lifestyle@theperfectria.com. Thank you for joining me today,
and be sure to give us five stars wherever you're listening
and share this or any of our episodes with another advisor or
team member who you think might benefit. Until next time, happy planning!