What I learned from buying two businesses

By Michelle L. Bender, CFP

Michelle Bender

Michelle Bender

To be honest, marketing is not my strong suit. So when it comes to increasing the size of my business and growing my client base, I prefer buying a book of business instead of marketing. That is why I’ve bought two financial services practices in the past few years. I found that while the buying experience and the structuring of the deal were different for each business, some things remained important in both cases:

  • Similar business and client philosophies with the seller
  • Practice revaluations after a certain time period so I didn’t end up paying for clients that didn’t stay with the business
  • Clear statement of how long the business owner would stay on to transition the business

When I bought my first business, I was still new to the profession myself, and I worked with the owner, who was an MDRT member. It wasn’t easy for him to walk away from the business he built throughout his career, and it wasn’t always clear when exactly he would retire. It took time, but we eventually worked through it. The process, however, would have gone much easier if the terms had been spelled out in the agreement beforehand.

Financing the first business

We did 100 percent seller financing for the sale. This involved more risk for the seller, because if I didn’t succeed in my practice, I would have a tough time paying him. However, it gave me the flexibility to make sure I had the cash flow needed to run the business. I worked with him for five years, building a trusting relationship with his clients, getting to know the clients and their needs and objectives.

Buying a second business

After taking over the first practice, another MDRT member came to me. He was getting ready to retire in the next few years, and he asked me if I would consider buying his business. This business deal appealed to me because he had the staff to help build the business, and he offered to mentor me for a few years through the process. This would allow me both to grow as an advisor and to expand the practice.

Financing the second business

I was more established when I purchased the second practice, so we decided to do a combination financing deal where I paid a portion of the money to the seller up front. This meant I’m paying him in advance as he transitions the clients to me. He’s now working with me to build that relationship with the clients. The risk here is that I haven’t built a relationship yet with these clients, but he still gets a portion of his money up front.  It was a win-win for both of us.

If you’re considering buying a business, know there’s more than one way to do it. Look at your situation, and see what works for you.

Michelle L. Bender, CPF, is the president and owner of Potomac Financial Consultants, LLC, in Germantown, Maryland. Potomac is an individual asset management and retirement planning firm that manages about $220 million is assets for about 300 clients. She’s also a seven-year MDRT member with three Top of the Table qualifications. 


To learn more about buying a business

You can see more from Michelle Bender in the videos


Verified by ExactMetrics