Our independent nature

Most of the 70% of advisers who are solo practitioners are solo practitioners by choice. Your grit, determination and dedication have brought you the success of your firm, the trust of your clients and pride in the practice you have built. You have harnessed the benefits of technology, your custodians, broker-dealers and product sponsors.
You feel your Achilles’ heel when you lose a potential client, though — usually a sizable one because you are a solo practitioner. The ensemble firm wins the client when the idiom surfaces: “What happens if you get hit by a bus?” Your strength is also your vulnerability. You understand this better than anyone.

The next step

What’s challenging is the next step: buy, sell, merge, join, partner? It seems more like a leap than a step. While a leap of faith is part of the process, there are intermediate steps to test the success of a future partnership.
Let’s assume that you have a short list of potential partners and you are ready to narrow the playing field. Resist your instinct to begin a dialogue focused on revenue multiples. While this concrete approach has merit, it is but one piece of the puzzle — and it’s not the first piece.
Consider interim steps such as collaborative work, shared office space and other shared costs. Keep a detailed journal of your discussions to provide clarity and documentation. Involve a third party to help both firms throughout the process.

Get to know each other

Determine if you like each other and can work together. This is a soul-searching exercise similar to contemplating marriage.
• Identify what you each hope to gain.
• Identify what you each are willing to give up.
• Have lunches together.
• Play together — basketball, golf, fish, hike or go for a run.
• Attend conferences together.
• Observe the leadership style of the other.
• Observe how the potential collaborator speaks about and acts toward staff and clients.
Throughout this process of give and take, you will find out quickly what the other’s character is made of and how the other person works.

Get to know each other’s practices

Identify synergies between the two practices: complementary skill sets, redundancies in your practices. Get a clear understanding of each other’s business model, services offered and products used. What is the other firm’s investment philosophy?
Develop a clear picture of the other firm’s client base and client retention, their systems and procedures, and their overall financial picture.
Cultural alignment is critical — it will determine the success of a match every time. Gauging this alignment is trickier than it seems. Learn about the other’s client service experience, and the dynamics and culture of the staff.
Spend time with each other’s staff and find areas for collaboration. Identify how you can work together on existing clients, and establish a project to develop new joint clients. Form or join a study group together.
Sharing costs ultimately will contribute to combined profitability. Give it an early shot by sharing office, staffing and technology costs while remaining separate entities.
Creating a joint vision will put your companies on a path to success. Include your expectations, define the metrics of success and document your shared vision. Include the two teams in the vision exercise and allow time to merge and form a new company culture.

Merge slowly

Give each of these phases some time. If you work successfully through each phase, the final merger will be the next logical step, not a leap. Don’t let the momentum of the deal get ahead of you — be willing to walk away if your instincts are on alert. A breakup is much easier than a divorce. But be willing to meet in the middle — let the other party set some of the parameters, even if you are bigger.
At this level of joint effort, understanding and vision, a discussion of revenue multiples and firm valuations can be made on the strength of your relationship.

Mary Ann Buchanan is chief executive and co-founder of RIA Match (riamatch.com), an adviser matching service. Visit riamatch.com/knowledge_and_insight to see a version of this blog post and additional content on succession planning and growth strategies.