Clockwise from top left: Fran Hughes, Steve Prendeville, Tim Lane and Paul Black.

If you’re contemplating taking on an investor in your advice firm, bolstering the value is critical.

Whether you’re looking to sell your business, take on equity partners or you perhaps want to implement a succession plan, there are steps you can take to making an advice firm more attractive to other investors.

Firstly, bear in mind that a well-run business will attract a higher valuation and new investors, Fran Hughes of Nexia Perth says.

To get your advice firm ready for sale, make sure you have clear systems and processes in place that are documented to create efficiencies. This in turn should reflect in a high quality compliance rating, Hughes says.

New investors are looking for a return on investment and willing to pay a higher multiple on profitable businesses. A benchmark to strive for of earnings before tax is upwards of 30 per cent, she adds.

“Seek the right buyer that will fit your business – individual, strategy or professional buyers,” Hughes tells Professional Planner.

“Individual buyers may be other financial buyers seeking a client book to bulk up their existing advisory firm. Strategic buyers may be existing shareholders within the advice firm that you may wish to acquire your shares. Professional buyers are private equity groups or aggregators driven by strong financial returns.”

Investing in advice practices has become an attractive proposition since the fallout of the Hayne royal commission has simmered.

Overseas investors are looking to get into Australia’s advice market, either directly as in the case of Koda Capital or via proxy as is the case with Italian-backed AZ NGA which holds capital in almost 100 advice and accounting practices.

Even domestically, licensees like Count, Diverger and Sequoia have all started taking stakes in advice practices.