Selling an advisory business is not like offloading a physical asset like a property or car. It is more like an engagement.

Transactions are usually complex and multifaceted, and can lead buyers and sellers down a psychological rabbit hole.

In most cases, both parties are tied to each other for years so their partnership should be a good fit.

Yet many sellers, particularly first-time sellers, fixate on price without giving due consideration to other important factors such as a buyer’s motives, character, history and plans for the future. That is as intelligent as choosing a romantic partner based purely on looks.

Experienced, discerning vendors are less likely to make this mistake. They understand the pain of watching their life’s work taken over and mismanaged by a party they welcomed with open arms.

According to Adviser Ratings, adviser numbers are set to fall 36 per cent to less than 15,000 by 2025. This follows a 15 per cent drop to 23,000 in 2019.

That means thousands of advisers will be looking to sell their business or client book over the next five years.

Quality firms will be courted aggressively by a variety of buyers including private equity firms, product manufacturers, other advisory groups and international investors.

They should take time to understand the strings attached to each source of capital because ALL capital comes with strings attached.

Some capital suppliers will expect acquisitions to use related-party products and systems. Others may have a command and control mentality, unrealistic expectations and/or a short-term outlook.

There are also less obvious risks to consider such as a fragile capital supply or potential threats such as regulatory, structural and leadership changes.

As such, sellers need to understand each buyers’ strengths and shortcomings, and ensure an alignment of values and interests – see points below.

Ideally, they should have a clear picture of what they want to achieve from a transaction before starting the sale process. Price is important but so are non-financial factors such as the freedom and time to pursue other interests, and retire by a certain age.

This is important because most deals include an earn-out provision to help mitigate risks.