If you have found yourself wondering whether merging with another financial planning advisor or business is right for you, you are in the right place. Here, you will learn some of the reasons why more and more advisors around the world are merging with others to increase their market share.
Understanding Market Share
To put it simply, market share is the percentage of the entire market you control with your products and services. For example, if you run a bakery and you sell $100,000 a year in products, but bakeries across the country sell a total of $10 billion in products each year, then you have a market share of about 0.01% – only a tiny fraction. The same can be said for many of the solo and small-business advisors out there. Mergers can help improve this market share either a little or a lot, depending on the risk you are willing to take and the capital you have available to you.
Merging with Competitors
One of the ways in which advisors are improving their overall market share involves merging with their toughest competitors. Using the bakery scenario, imagine that another bakery a few streets over also has 0.01% of the total market share. Because both bakeries compete so strongly with one another, the two bakeries combined would compete even more strongly against even larger competitors. Thus, merging the two bakeries will improve the overall market share for both simply by combining forces. Financial planning businesses work and grow in the same way.
Merging with (Almost) Failing Startups
Trying to merge with a startup financial planning firm is a bit of a risk. You have to keep in mind that you may be merging with a company that has generated a less-than-stellar reputation, whether due to the lack of knowledge and experience or even poor customer service. The good news here is that any merger is an expansion, so you can impose your more successful company’s name onto that business, essentially placing it “under new management” to set consumers’ minds at ease. Although it is risky, it pays off quite frequently. What’s more, you can usually merge with these struggling companies for very little capital.
If Your Business is Failing
Sometimes, attempting to start your own financial firm does not go as planned. You may have a hard time keeping employees, finding clients, or even finding the funds to market the way you should. Instead of filing bankruptcy on your business and considering it a lost cause, consider merging with a larger firm. Not only might this save your initial investment, but it may also boost your revenue by giving you access to a bigger chunk of the market. Although finding a company willing to merge with you might be difficult, it is not impossible.
As you can see, financial advisors merge their financial planning businesses with others for a multitude of reasons and in many ways. In some cases, competitors merge to ease market strain. In others, large companies simply absorb smaller ones due to the low price and additional resources. In either case, mergers almost always result in improved market share percentages.