Life (and your business) is better with a great team. In the end, it is all about the people, as you can’t drive results without the right team. When I first joined Raymond James, there were a few surprises (which is not at all uncommon) when I really got into the “weeds” and evaluated the current business and growth levels. Average productivity was much lower than I had expected, and recruiting of highly successful advisors was almost non-existent. As I became more familiar with the quality of the platform and resources, I quickly realized it was primarily the result of a leadership gap and lack of vision regarding the potential for future growth, along with the limited training and development opportunities for the leadership team and advisors.
As a part of our series about “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit”, I had the pleasure of interviewing Bill Van Law.
Bill Van Law is the Founder and CEO of WVL Group, a consultancy committed to helping companies within the financial services and fintech sectors refine business strategy, accelerate growth, and devise innovative solutions for succession and exit planning. Bill is an experienced financial professional with a track record of success and is known for his commitment and compassion as a leader in business and the community. Prior to launching WVL Group, Bill served as President of the Raymond James Investment Advisors Division.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?
My entire career has been focused on helping clients and advisors. I built a million dollar + practice as an advisor at Merrill Lynch in the 90s, which I gave away to pursue a career in leadership. Working with independent advisors at Raymond James, I realized the incredible value of those businesses. The wealth being created by these independent advisory firms is pretty amazing. Being an independent business owner provides advisors with the ability to monetize the value they have built during their career vs. settling for the so-called “sunset” retirement programs created by the large brokerage firms. Understanding the tremendous opportunity in the independent wealth space, I have dedicated my career to providing support and guidance to allow these professionals to realize their full potential as a business owner. At WVL Group, our entire focus is working with Founders and C-Suite Executives in the wealth space, along with those who support independent advisory firms. We also invest directly in select firms to provide unique solutions to succession for the benefit of both Founders and their next-gen teams.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
I have made plenty. While I’m not sure they were all that funny, they do provide some of life’s great lessons! I do feel that we often learn more from our mistakes than from our successes. Thinking back, though I don’t recall the exact issue, one early lesson was the importance of addressing big issues quickly. I was uncertain of the best approach and frankly not terribly excited with the prospect of calling a client regarding a problem with their account. A mentor explained the importance of addressing big issues quickly and directly. He called these issues “Frogs” and provided the following advice: If you have to eat a “Frog”, eat it early in the morning… if you need to eat more than one, eat the biggest one first. This was such a great lesson, as I had learned from experience that little issues just get bigger when they are not addressed. They also tend to weigh on us and take our attention away from other important projects. I have tried hard to follow this advice, as I think it is so true and a great lesson to guide us in dealing with the many challenges that come our way.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
The definition of insanity: “Doing the same thing and expecting a different result”. During my career, I had the good fortune to run numerous businesses. While each situation was different, my focus was the same: leave the business in a better place than I found it and try to make a lasting impact for those on our team and the clients we served.
Ok super. Thank you for all of that. Let’s now shift to the main part of our discussion. Can you tell us a story about how you were able to build a business from scratch, scale and sell it to a bigger firm?
We have worked with hundreds of advisors and wealth firms over the years, helping them launch new firms, accelerate growth, and improve margins. The final step for many is the sale of the firm or transition to the next generation. It has been so rewarding to see this come full circle. We have a real passion for developing next-gen leaders and find the greatest satisfaction in helping them realize this outcome, as an internal transition is often a win/win for clients, founders, and the next-gen team.
Based on your experience, can you share with our readers the “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit”? Please give a story or example for each.
1.) It all starts with a plan. As Yogi Berra famously stated: “If you don’t know where you’re going, you’ll end up somewhere else”. This is so true. Being thoughtful and deliberate about strategy, developing your vision, and creating a tactical plan to achieve your objectives are key to long-term success. We applied this process each time I ran or launched a new business. There are a number of important steps in the process, beginning with an evaluation of the current enterprise, the overall market environment, and industry trends. This included a candid review of our position in the market, as well as the strengths and gaps of the existing team. Once we had a firm grasp on the current business, strengths, opportunities, and key market trends, we then developed a tactical plan designed to leverage our strengths and capitalize on these potential opportunities and trends to achieve market-leading growth. While not easy, the process produces consistent long-term results, and it has been really gratifying to look back and see the impact this has had for clients and our teams.
2.) You can’t improve what you don’t measure. Much has been written about the importance of creating and monitoring Key Performance Indicators, or KPIs. While it has become almost cliché, it remains one of the true fundamentals of long-term success, as tracking outcomes, including individual contributions, is critical to creating a performance-based culture and improving results. Of course, as with many other tools, how they are used is the real differentiator. As KPIs have become more broadly adopted, in many firms, they have become just another report that is reviewed periodically by the management team. In addition, the number of items tracked has often increased dramatically, resulting in diluted focus on the key metrics that ultimately drive results. The top-performing firms understand what is truly important and drive results in these key areas to achieve long-term sustained success. Driving change and seeing the impact on the lives of our team over time has been one of the most enjoyable parts of leadership.
3.) Life (and your business) is better with a great team. In the end, it is all about the people, as you can’t drive results without the right team. When I first joined Raymond James, there were a few surprises (which is not at all uncommon) when I really got into the “weeds” and evaluated the current business and growth levels. Average productivity was much lower than I had expected, and recruiting of highly successful advisors was almost non-existent. As I became more familiar with the quality of the platform and resources, I quickly realized it was primarily the result of a leadership gap and lack of vision regarding the potential for future growth, along with the limited training and development opportunities for the leadership team and advisors.
After crafting a new vision (see #1 above), my primary focus was on recruiting, promoting, and developing the leadership team (we had several leaders with high potential who simply needed the “right” opportunities and development). This expanded team did a remarkable job and achieved one of the most significant transformations in the history of the firm. In just over three years, assets nearly tripled and we opened more than 50 new offices. The success of existing advisors also increased dramatically, as improved training and development impacted results.
Ultimately, the quality of the team will largely determine success in driving change and achieving improved results. It is also important to recognize that each decision has implications, including the decision not to address an issue. Every decision we make sends a message regarding priorities, expectations, and values, so being thoughtful about the potential implications is important. While each item on this list is important, great results are only possible with the right team, and your life and business will certainly benefit from the efforts.
4.) Technology and process drive efficiency. Delivering a world-class client experience consistently, across the organization, has significant implications on achieving sustained growth and profitability. Referrals are a primary growth strategy for many businesses, and the quality of the client experience will make improving results in this important area much easier to achieve. Developing disciplined and consistent processes will also impact margins as your teams become more efficient, reducing time and decreasing costs.
Leveraging technology is another important strategy to improve efficiency and results. Used effectively, technology tools create opportunities to further improve the client experience and implement these processes more consistently. In addition, they provide the ability to monitor results more effectively, providing important data needed to make better decisions.
In our experience, like many industries, the margins for firms in the wealth space can vary widely.
Utilizing technology and creating disciplined processes, when combined with the other items highlighted above, can have significant implications on growth and profitability. One recent example is the RIA custodial business, which I ran prior to launching the WVL Group. We used the processes outlined above to drive significant change and accelerate growth, producing a nearly 4x increase in profits during the final two years. In another, we had a client that achieved gross margins of well over 40% through the efficient use of technology and process, delivered by a quality team.
5.) If it is a great business to own long-term, it will also earn a premium valuation when time to sell.
This was a lesson I learned when I ran my first office in the 90s. Conventional wisdom was to drive short-term results, as these were typically not long-term assignments and most managers simply wanted to demonstrate their ability and “earn” the next larger opportunity. This seemed rather shortsighted to me, as it lacked any focus on the client or the process used to deliver service and advice. I decided to focus instead on process and the potential benefits of an improved focus on planning and advice for clients and their business. While I was hoping to have a longer-term impact, I was surprised that it also resulted in a significant gain in near-term results that were likely much higher than if I had focused primarily on the short-term. While this was an “accidental” lesson, it has had a powerful impact on my approach and still guides me today. In fact, I have used this same longer-term perspective in every role and in each business or organization that I have run. It is a symbiotic relationship, and this focus has continued to deliver solid near-term results, while also providing the opportunity to leave a lasting legacy and build long-term value.
This process has certainly held true with independent wealth firms. The best firms to own long-term are those that produce high current income (IBITDA) with solid growth rates. These same firms also command a higher valuation, as scale and growth will drive a higher EBITDA multiple vs. smaller firms with a lower growth rate. This has resulted in a bit of a dilemma for many founders/owners, as the long bull-market has created attractive earnings and cash flow, while the rising market has helped propel attractive growth rates. That said, trees don’t grow to the sky and as founders/owners continue to age, the potential for realizing the value has become increasingly attractive.
In your experience, is there a difference in approach for building a service-based business versus a product-based business when you have the intent to eventually sell the business? Can you explain?
While each industry is different, in the wealth space, service-based businesses enjoy a significantly higher valuation (EBITDA multiple) than product-based businesses. While this gap will vary by business, it is not uncommon to see valuations that are double for these service-based enterprises. This significant difference is driven by the perceived value of the more consistent revenue stream for the service businesses. In addition, these businesses often enjoy higher margins, further exacerbating the valuation gap between the two models.
How does one go about the process of finding a buyer?
Finding a buyer can be one of the most challenging aspects of the sale. For many, this is their life’s work and finding the right “fit” for clients is one of the primary reasons that many founders/owners have delayed implementing their succession plans. Potential buyers can be categorized into four broad categories including: Internal Successors, Aggregator Firms, Large Strategic Acquirers, and Other Wealth Firms. Aggregators are primarily focused on larger firms, so this opportunity is somewhat limited, with most founders selecting one of the other options. Selling to another wealth firm or large strategic acquirer is an attractive option that is the primary (or perhaps only) choice for many owners. It is often easier, prices are relatively high, and this option involves less risk, as many of these entities are backed by Private Equity and pay the majority of the purchase price upfront. With this option, the firm is merged into the larger entity and the legacy of the founder and firm are gone. The impact is perhaps greatest on the next-gen team, as they no longer have the potential upside of owning the firm, dramatically impacting their future opportunity.
As a result, many founders/owners find an internal succession to be the most attractive option. The challenge for many firms is that while this is the desired long-term outcome, the next-gen team often lacks the capital and leadership experience to run the firm today. This creates a real dilemma, as bridging the financial gap and developing the team requires time, capital, and experience. While we are focused more broadly on issues of succession, our primary mission at the WVL Group is to help address this very issue by investing in select firms and developing the next-gen team. This fits well with the longer-term view highlighted above, as developing next-gen talent has long been a focus of our team.
How can one decide if it is better to build a business in order to exit, or if it is better to stick around for the long term and let the company bring in residual income, or if it is better to go public?
There are benefits to each. For years, the “holy grail” was going public. Given the extremely large private firms operating today in the US, the ability to attract capital, and the opportunity to create liquidity without the added cost and complexity of going public, the best path for most is the private markets. Valuations are relatively high and the interest in larger firms has also continued to expand. While going public will still be the final step for some firms, the majority will either sell to a larger enterprise or raise capital by selling an interest in private markets. This has become an increasingly attractive option, with several firms having already moved through multiple stages of outside investment with higher valuations at each stage.
Can you share a few ways that are used to determine a good selling price for the business?
We are in a very active market for financial services firms, which has helped create greater transparency for both sellers and buyers. We are talking with firms daily about these and other topics, providing perspective regarding both valuation and trends. In general, we have seen an increase in valuations over the past few years. Terms have also gotten more favorable for sellers with a greater portion of total transaction value paid at closing. A larger variety of financing solutions are also available, and banks and other lenders have recognized the value and consistent cash flows created by firms in the financial sector. These lenders can also be a great source of data regarding potential valuations since they see a regular stream of prospective deals. Other good resources for information regarding prices and deal trends include dedicated valuation firms, consultants, and investment bankers.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
What a great question! I have dedicated significant energy over the years to various philanthropic initiatives, with a primary focus on housing, education, leadership, and serving the urgent needs of our most vulnerable neighbors.
If I could inspire a movement, it would be for all of us to realize that the cumulative impact of our daily actions is the legacy we leave behind. Everything else is gone. Be thoughtful about your legacy and recognize that you CAN make a difference. Each and every day, we are putting new blocks on the foundation of our legacy. Being thoughtful about our legacy and how we want to be remembered can help focus our actions in a way that is more consistent with our values and allows us to have impact beyond what otherwise would have occurred. Follow your passion. I highlighted mine above; yours may be different, which is great as there is tremendous need in many areas.
Today, these needs have been highlighted like never before, with both the coronavirus pandemic and Black Lives Matter movement. If we each devote additional time and effort to our communities in a way that is consistent with our passion and values, collectively we can have tremendous impact. Our world will be better, our children and grandchildren will benefit, and each of us will have the satisfaction of leaving a legacy that better reflects our values and what is most important in our lives.
How can our readers follow you on social media?
Thank you so much for joining us. This was very inspirational.