In a recent adviser poll conducted by M&G Wealth, over half (51%) of business owners said that they expected to exit or sell their business in the next five years, with 16% of them saying they want to do so in the next two years.
The poll of over 150 UK advisers took place during a webinar ‘Future proofing your business for a sale - now or in the future' which was jointly hosted by M&G Wealth and The Exit Partnership.
When asked about their current preferred exit route, the majority, over two-thirds (67%) of advisers polled would opt for a sale to a privately-owned business. 18% would opt for an internal management buyout, 9% for an external sale to a private equity/venture capital owned firm and just 6% for an internal sale through an employee ownership trust.
In terms of whether advisers feel their business is future proofed for imminent sale, only one in 10 advisers polled agreed. Over half (53%) said that there are a couple of areas still to improve and over a third (34%) admitted they still have a lot of work to do.
Campbell Stanners, business development director at M&G Wealth Advice, said: "Given the demographic of advisers in the UK, it's not surprising that around half of those we asked are looking to exit the industry in the next five years. It's clear there is a collective need to onboard a younger adviser population to service both existing and growing client demand.
"For advisers seeking to retire, investing time to understand the various exit options is vital. A good deal is more than looking at multiples - culture needs to come before cash.
"Good data is key. The work that advisers will have been doing to prepare for Consumer Duty, in terms of better understanding client segmentation, service and fees will be hugely beneficial here.
"In an industry, where personal relationships are so important, careful planning and getting the right fit for any business, no matter which route is chosen, will help to ensure the deal is financially beneficial for everyone involved."
Victoria Hicks, managing director at The Exit Partnership, said: "It's never too early to start planning your exit strategy - at the end of the day everybody exits at some point. The more time you have to plan, the more options that are available to you when the time comes.
"There are two success factors when it comes to exiting an advice business The first is getting the structure of the deal right - this includes terms and conditions, warranties and liabilities etc - and the second is succession planning.
"Essentially this boils down to making yourself, as the business owner, the least important person in the firm and creating the ability for the business and client bank to run successfully when you're not there. This could involve the recruitment, training and development of members of staff, as well as investing the time to migrate client relationships to the new owners and advisers."
Colin Simmons, business development manager at M&G Wealth, added: "Futureproofing your business is about understanding its value, the service you provide - ensuring it's consistent, appropriate and repeatable - and creating a predictable revenue stream that's focused on profitable clients on the back of delivering outstanding services and experiences for them.
"For many firms the next generation of clients will be the children of existing clients. Being able to demonstrate that you work with families to support intergenerational planning, knowing and understanding the needs of the younger generation, will help to demonstrate the future value of your business."
