Volume 8, Issue 5, March 9, 2021
As you may or may not know, I have been an advisor to owners of provider agencies supporting individuals affected by an intellectual and/or developmental disability (I/DD) for more than 30 years. I am fortunate in that I love this work. It is enormously gratifying to earn a living by helping others reach their goals. I am able to help business owners reach their financial goals and buyers achieve their growth and value-creation goals while improving the lives of employees and clients alike through the right transaction.
I became involved in this space because I, like many who end up working in I/DD, have family members with behavioral health issues. I have a son with I/DD, so the mission of caring for others is deeply personal. It's been wonderful to meet many truly exceptional people providing quality care for those in need. This is why I chose to make this work my career.
It is this love of my work and the people in the industry I serve that has me alarmed about an emerging trend in the I/DD space — one that is leading to significant emotional and financial stress for owners looking to sell their agencies. This column will hopefully serve to better inform you about the trend and provide guidance that will help you make a sound, educated decision for your agency.
The trend I speak of concerns the number of people who have recently entered the I/DD space as advisors or brokers. Let me first acknowledge and recognize that some of these people are delivering valuable services. I welcome quality competition because it helps all of us deliver better service.
Unfortunately, a majority of the new advisors and brokers entering the space do not fit this mold. Many of the newcomers view this work as an easy way to make money. They lack the necessary qualifications and skills to do this kind of work.
In addition, they lack the understanding that this work should always be about doing right by the client — regardless of how long that takes. Some transactions can take a lot of time. Many hours and many months must sometimes be dedicated before the right buyer is found and the transaction is completed. This time is necessary and well spent when it helps ensure that the interests of your clients are understood and met. But too many advisors are measuring success by how much they earn for the hours invested on a transaction or are simply not willing or able to put the time and effort in to help clients achieve their goals.
Another challenge is that many advisors are representing that they can get a great deal even when they know little about the space. I regularly pick up clients that had been with another advisor or broker who had failed to secure a single offer. In such situations, it's not unusual for the seller to then find themselves forced to wait for their contract with the intermediary to terminate, which can take many frustrating months.
This work is not about having an email list of the largest buyers in your "Rolodex." It is about building relationships with quality buyers over many years and understanding the nuances of every situation. It is about understanding what makes one company more valuable than another to every specific buyer. Only then can you truly serve your client.
I sympathize with those agency owners who have encountered one or more of these situations. I always hope for the best business outcome for those who dedicate themselves to supporting people in need, regardless of whether I serve as their advisor. It must be exhausting as an owner to get inquiries from people claiming to be experts wanting to help. And it's heartbreaking to see people enter our profession and do a poor job. This not only harms the owners who work with these so-called advisors and brokens, but it also casts a negative light on the advisory profession as a whole.
Unfortunately, the recent, negative experiences I discuss here have some I/DD owners contemplating whether to use an advisor/broker or try to sell their agency on their own. Even if I were no longer serving as an advisor, I would still strongly recommend that owners hire one. Let me go over some of the reasons why.
There is no question that the right advisor can be of huge financial benefit to a business owner. It's not a perfect comparison, but if you were interested in maximizing what you could earn from selling your house, you probably wouldn't wait around for a buyer to show up and offer what they say is a fair price and then accept it. And yet that's what I see business owners doing every day.
Rather, if you knew you were going to sell your home, you'd take some time to get it ready for the sale. You might fix it up or take other steps to increase its value, market it to a large number of potential buyers, hopefully get a bidding war started, and then secure the best price possible. Those are just a few of the steps that good advisors will help you take when you are ready to sell your agency. You'll be exposed to a large number of buyers that you never even knew existed.
To demonstrate the value of an advisor, let me share some details about a recent transaction involving a client. This I/DD agency had a buyer come along and offer a price for the business. The buyer was a large competitor and someone our client knew, so they suspected that the offer was in the ballpark of fair market value. But they weren't sure, so they approached VERTESS and brought us on as their advisor.
We then ran the sale process for them. The result: Our client received 3x what that first buyer was offering — in other words, 300% of that initial offer. My fee was 3.5% of the transaction value — a small fraction of the benefit provided.
I have never completed a transaction where I couldn't show tangible proof of the cost/benefit of the service delivered. That should be the case for any advisor you work with, which is why I advise all I/DD agency providers to ask advisors about the deals they have completed in the space before committing to a hire. In addition, ask the advisors you are considering about buyers in the space and comparable transactions completed.
I feel comfortable sharing these details about myself and my work, including the transaction fee associated with the aforementioned sale, because I believe that transparency is essential for the success of any partnership. It's always important to know why someone is doing what they're doing professionally. In this case, are they doing it for the money? Are they hoping to get rich off of closing a large number of transactions and charge high fees? Do they have any long-term plans to commit to working in this space?
I'm 63 years old and am at a point in my career where I can target providers I want to work with. I have also made the decision to keep the fees for our services lower relative to what many others are charging.
Why do I charge less than many of my competitors? As I shared earlier, this is work I love. It has great value to everyone associated with the transaction. My fees are intended to cover our costs, including my time. It allows a business owner — my client — to pocket more of the proceeds from the transaction. I think of this as a way of giving back and showing appreciation to those providers who have contributed to the wellbeing of others.
It's not unusual for me to work with small business owners who have not put aside enough money for their own retirement. I offer assistance by helping them secure the best price for their business and by limiting the costs of the transaction.
In closing, if you are thinking about selling your I/DD agency, I hope you will reach out to VERTESS and find out what we can do for you. I suspect it's a lot. Even if you choose another advisor, I believe that a conversation with us will help you gain a better understanding of what an advisor can and should do for you.
Dave's professional work history includes:
He first became involved in the Behavioral Health space because of the disability of a family member. The mission of these companies is both noble and personal to Dave. He helps business owners with the sale of their business, which means getting them the best value and terms. For him, it means thanking them for making the lives of others better.