Don’t just sell to the highest bidder

Not a week goes by that I don’t see an article about how advisory firm valuations are at all-time highs.

This hot market has convinced a lot of advisers to consider selling. If this is you, don’t let price be the determining factor.

For a little background, my business partner and I sold a controlling interest in our company to a private equity firm two years ago. We’d been approached by several potential partners, acquirers and financiers before deciding on this firm.

Price, while of course important, was not our primary motivation. In fact, we probably could have put more cash in our pockets two years ago if we had gone a different route.

[Recommended video: Amy Webber on Goldman Sachs United Capital deal and RIA valuations]

If you’ve developed your business to the point that someone wants to buy it, good for you. But I encourage you to consider these three areas before you sell.

First, think about your clients.

As advisers, we provide confidence and peace of mind. We sell ourselves. Your clients deserve continuity and if you sell, selling the right way can mean you, and your staff, stay in place and continue to serve the people who count on you to guide them into the future.

Next, consider your employees. Our employees are the backbone of our business.

We built our firm in a deliberate way, and we did that by hiring a certain type of person. Some purchasing entities want a partner to grow with and are in it for the long term. Others just want your assets (clients).

I suggest you think twice before selling to a firm that will immediately clean house and, frankly, erase everything you’ve built while negatively impacting the lives of the people who helped you build it.

Lastly, consider your role. Both my business partner and I are in our 50s and neither one of us has any intention of retiring. When we sold a controlling interest, our organization was already highly developed, which enabled us to continue working while focusing only on the areas within our strengths.

Something I see a lot of is advisers who have hit a growth wall due to time constraints. They don’t have time to market, they no longer enjoy what they do, and they instead spend all their time and energy running the business and not marketing or working with clients.

Selling means thinking about your role and where you want to be in the future. Our situation is such that we’ve partnered with a fantastic entity, maintained some ownership and spearheaded the acquisition or merger of half a dozen other firms across the country.

We’re growing both organically and via mergers, and we’re having a blast doing it because we chose the right kind of partner and because we considered more than just price when we decided to sell.

[More: Lessons learned from 21 deals]

If you’re considering a sale, I encourage you to not be shortsighted just because one offer is higher than another. The right kind of sale will free you up to do what you do best and keep your clients and your employees both happy and in the fold.

[More: Selling your firm, even if you’ve never thought about it]

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $4.5 billion in AUM.