How to make your will writing business saleable

Many will writing businesses are classed as lifestyle businesses – that means they support the owner and when he or she decides to retire the business has little or no value.

Most business owners would like to have a business that is saleable and so this short article looks at some of the aspects of selling a business and in particular a will writing business that may help you when you come to sell.

It is based on my experience of buying many will writing businesses of varying sizes for three different companies over the past 15 years. The first was a major Trust Corporation with hundreds of millions in assets in 2000 for a major stockbroker, the most recent was a much smaller retirement sale a few months ago.

There may be times that you need to pass your business on to someone else, perhaps as a result of illness or simply a desire to go and do something else.

Will writing businesses have unusual characteristics, some of which help a potential sale and some of which hinder it.

Preparation

It’s unusual for you to receive an offer out of the blue but it may happen. So it’s important that your business is in a decent shape to be sold pretty much from the day you open the doors. Business advisers would suggest you put as much as two years into preparing your business for sale.

Can you demonstrate years of growth in turnover and profit? Are there any hidden issues that lurk in your mind as you go to sleep…if so clear them up and make sure that the business you run today is one you would be interested in buying down the line.

What first impression would you make? How is the website looking — is there a website?

What would a prospective purchaser think if he turned up at your door wanting to talk to you?

How is the business valued?

Always a difficult one- there are no hard and fast rules for valuing a business, the old adage of ‘it’s worth what someone will pay for it’ rings true.

Initially any prospective purchaser will look at profits over the past few years and apply a multiple to them. However there are many variables and what on paper may not look great, might turn out to be very good indeed.

I mentioned earlier the unique characteristics of will writing businesses. Most of those are to be found in the Willbank. Unless of course you have a good salesforce that can be moved.

The market generally will look at either a multiple of your profits or a multiple of your storage revenue (ex VAT).

Why is my Willbank important?

If you are a sole trader or small business, your Willbank is likely to be the saleable asset.

Is your company appointed as executor for any of the wills?

What recurring revenue (ie storage fees) do you generate each year?

How many people from your Willbank die each year?

How many of these are you currently doing probate work for or do you outsource this? If so what are the revenues?

If the answers to the above questions are positive then the Willbank is likely to be the key asset in your business and the one that will interest a prospective purchaser.

The market today tends to value Will writing businesses on a multiple of either profits or of their storage revenue.

Don’t expect to see huge multiple as these are reserved for internet start-ups that promise the earth moon and stars or well established organisations that generate many millions in profits each year.

Realistically you could expect to receive around 3x your net recurring storage revenues.

Positive characteristics of a Will writing business

Ongoing cash flow from storage

Potential Probate revenue from Willbank

Possibly an established name or brand in a local area or a known national name

A market that replenishes itself

Potential for cross sales

Attractive market position (later life)

Can it run without you?

Negative characteristics of a will writing business

Is it dependant on you?

Potential for future negligence cases

Threat of technology- digital wills anyone?

Threat of future legislation — who saw 2007 coming?

I began by talking about preparation, this is important and many people these days will have two businesses, one which deals with the day to day writing of wills/LPAs and trusts with a separate one for document storage. This enables you as a seller to package up your business in such a way that a buyer may find more attractive.

If you are planning an exit or would like to sell it on and want some guidance on value or process I would be happy to have a confidential discussion at any time.

David McMaster

CEO Just Wills and Legal Services Ltd

[email protected]

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