Late last year, a highly successful mortgage broker approached me with a common but complex challenge: they wanted to buy out a group of investors who had provided early-stage capital to launch the business.

The brokerage had scaled significantly, was highly profitable, and the investors had no operational involvement. On the surface, the broker’s plan made sense – consolidate ownership by increasing the equity stake held by those actively running the business and exit the “sleeping partners”. However, there was one major obstacle: the valuation of the business had grown substantially, making the buyout a significant financial undertaking.

Evaluating the Options

To fund the investor payout, the broker’s initial instinct was to sell a portion of their trail book. The logic seemed sound – sell a portion of trail revenue while retaining client relationships, generating the necessary capital without fundamentally altering operations.

However, this approach raised a critical question: What impact would this have on the company’s valuation? On the surface, client relationships remained intact, but the reality was far less favourable.  Also, who was going to want to just buy the trail when the relationship still rested with an active broker who could just rewrite the loan?

Mortgage brokerages have as their core asset a trail book.  The bigger the trail the higher the value. Selling off trail meant reducing that revenue base, directly impacting the overall valuation of the whole brokerage. In short, while the ownership percentage of remaining shareholders would increase, the total value of the business would decline, potentially negating any financial advantage of the buyout.

The Hidden Cost of Selling Trail

The maths in this scenario is particularly compelling: The broker was negotiating the investor buyout based on a valuation of 2 x annualised trail revenue. However, on the open market, given the size and efficiency of the business, a full sale would likely command a multiple of 3 x, 4 x, or even 5 x. Selling trail at a 2 x multiple while simultaneously eroding a future exit valuation of 4 x or 5 x is a costly miscalculation.

Could the broker replace lost trail over time by writing new loans for existing clients? Possibly, but the reality of run-off rates presents a serious challenge. Our recent analysis of over 200 trail book valuations conducted over the past 2.5 years shows an average annual run-off rate of 25.4%. In other words, even in a best-case scenario, it would take at least a year to recover just a quarter of the lost revenue and some clients would never return. The risk is substantial.

A Smarter Alternative: Borrowing Against the Trail Book

Rather than selling trail and sacrificing long-term value, the broker secured a business loan against the trail book, arranged through TrailBlazer Finance. This approach allowed them to pay off investors in one transaction while preserving 100% of their trail revenue.

The financing solution was structured as a low-doc business loan, ensuring a fast and seamless approval process. Additionally, because the loan was used for business purposes, the interest and fees were tax-deductible. The repayments were comfortably serviced by the existing trail income, ensuring minimal disruption to cash flow.

Maximising Future Value

By opting to leverage their trail book rather than liquidate it, the broker not only retained full ownership of their revenue-generating asset but also positioned themselves for a more lucrative exit down the track. When the time eventually comes to sell, the multiple will apply to the full value of the business, not a reduced version that was unnecessarily diminished to fund an earlier buyout.

For brokers considering their own growth and succession strategies, this case study serves as a valuable reminder: selling trail may seem like a quick solution, but it often comes at a steep long-term cost and it could have adverse tax consequences. Exploring financing options that allow for business growth while preserving value is usually the smarter move.

Written by Simon Lewis, Sales and Growth Strategist

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Are you tired of chasing lenders, navigating endless hurdles, and fighting to get deals across the line? Feeling burned out or wondering if mortgage broking is where you see yourself long-term? If you’ve been toying with the idea of leaving the industry, now is the time to take action—and it could be the smartest move you’ll make.

In the mortgage broking world, selling a trail book can be a game-changing opportunity. Right now, the market is hotter than ever, and the conditions are stacked in your favour. The demand for quality trail books is soaring, and buyers are willing to pay record-breaking prices.

Let me show you how to turn this moment into a life-changing decision:

Why Now Is the Perfect Time to Sell

1. Unprecedented Prices:
   Trail books are commanding multiples higher than ever before. With the right preparation, you could achieve a return on your investment that sets you up for financial freedom.
2. Surging Buyer Demand:
   The market is teeming with eager buyers actively seeking high-quality trail books. This strong demand has created a seller’s market—your book could spark a bidding war.
3. Record-Breaking Sales:
   At Trailblazer Finance, we’ve recently helped sellers secure record prices for their books. We have a database of ready-to-buy, pre-funded purchasers who are serious and ready to act.
4. Competitive Buyers:
   Buyers who missed out on previous opportunities are more determined than ever. This pent-up demand can drive up offers, giving you the chance to achieve top dollar.

Key Strategies to Maximise Your Sale Value

1. Maintain Accurate Records:
   Buyers value clarity and reliability. Document your loan performance, client interactions, and refinances carefully. Show how each refinance fits into a long-term strategy.
2. Present Strong Analytics:
   Visual reports that showcase the strength of your trail book build buyer confidence. Data-backed insights can set your book apart.
3. Strengthen Client Relationships:
   A loyal client base increases your book’s value. Regular, meaningful touchpoints—like birthday greetings—enhance retention and loyalty.
4. Ensure a Smooth Transition:
   Offer to assist the buyer during the handover. Transitioning relationships smoothly increases the perceived value of your book.
5. Be Transparent:
   Build trust by disclosing any potential red flags upfront. Buyers appreciate honesty and are more likely to pay premium prices for trustworthy sellers.
6. Focus on Retention:
   Clients who stay mean a stronger, more attractive book. Invest in retention strategies now to maximise your sale price.

Are You Ready to Make a Change?

1. Are you over the constant hurdles and lender negotiations?
2. Burned out from the demands of mortgage broking?
3. Wondering if you can keep doing this for another year?
4. Imagining a future beyond mortgage broking?

If any of these resonate with you, it’s time to explore your options. Selling your trail book could provide the cash flow, freedom, and clarity you need to step into the next chapter of your life.

Trailblazer Finance: Your Partner in Success

Selling a trail book isn’t just a transaction—it’s a strategic process. With Trailblazer Finance, you’ll have the support to navigate every step, from valuation to settlement. Our pre-funded buyer network ensures your book gets the attention and value it deserves.

💡 Find out the value of your trail book with our Free Valuation Calculator click here. 

Ready to talk? Let’s organise a call to discuss how we can help you maximise the value of your trail book and take full advantage of today’s market conditions.

Let’s make this your next big move. Reach out today:

Looking for more insights? Find out more how to take full advantage of today’s market conditions here. Reach out to us today to see how we can help you maximise the value of your trail book.

Book a call to discuss further. 

Acquiring a trail book or business can be a rewarding investment opportunity, but it requires careful planning and diligence. By understanding the high-level steps involved in the acquisition process and the potential timeline, you can navigate the journey more effectively and minimise risks along the way. Whether you’re a seasoned investor or a newcomer to the field, comprehending the acquisition timeline is imperative for ensuring a smooth and prosperous transaction. If you need help, the experts, TrailBlazer, are always on hand. 

In this blog, we’ll delineate the high-level steps involved in acquiring a trail book, offering professional insights into the timeline and potential challenges that may arise along the journey.

Step 1: Identifying the target

The journey begins with identifying the target asset – whether it’s a trail book, business, or company. This involves entering into a commercial agreement for the acquisition. However, keep in mind that this step is often subject to subsequent stages, such as due diligence or obtaining funding.

Step 2: Due diligence or obtain funding

Step two may involve conducting due diligence or securing funding for the acquisition. Due diligence is critical for assessing the target’s financial health, potential risks, and compliance with regulations. It’s also essential to address any outstanding issues, such as removing existing security or resolving legal matters before proceeding further.

Step 3: Legal contract stage

Once due diligence is complete and any necessary funding secured, the next step is the legal contract stage. This involves drafting or reviewing legal documentation to reflect the commercial terms of the transaction. Working with specialist advisors or lawyers can ensure that the contract provides the necessary protections, including warranties and indemnities.

Step 4: Settlement stage

The settlement stage marks the actual transfer of ownership. Any issues identified during due diligence are addressed, and final preparations are made for the transaction. This may include preparing necessary documentation, meeting with clients or staff, and finalising payment arrangements. Settlement can vary depending on the nature of the assets involved, but it typically involves the transfer of funds once legal requirements are met.

Step 5: Handover

After settlement, the focus shifts to post-settlement activities, including the handover process. This may involve transitional consultations with the vendor to ensure a smooth transition of ownership. Collaboration and cooperation between the parties are essential during this phase to address any remaining concerns or facilitate a seamless handover.

While deals can sometimes be rushed through, especially if they are straightforward and the parties are experienced, attempting to expedite the process without proper preparation can lead to complications and delays. Transactions involving third parties, such as aggregators, franchisors, or legal and financial advisors, may take longer to finalise.

It’s important to recognise that the acquisition timeline can vary significantly based on various factors, including the complexity of the transaction, regulatory requirements, and the cooperation of all parties involved. While some transactions may be completed in a matter of weeks, others may take several months to finalise.

Ensure to seek expert guidance when necessary and approach the process with diligence and patience to guarantee a favourable outcome. For finance professionals gearing up for an acquisition, our team provides discreet consultations customised to your specific needs. Alternatively, delve into our extensive eBook, “Acquisition Ready,” to delve deeper into the acquisition process and arm yourself with indispensable knowledge for achieving success.

Navigating the process of buying or selling a mortgage trail book doesn’t have to be overwhelming. To streamline the process and enhance the certainty of a successful sale, consider these top 10 golden rules.

1. Identify Approval Requirements Early

Determine early on which approvals are needed from key stakeholders, including directors of the selling entity and the trail book’s owner. This proactive approach will set the stage for a smoother transaction.

2. Understand Your Duties Under the Aggregation or Licensee Agreement

Before finalising the sale, confirm your obligations under the aggregation/licensee agreement, as the sale often depends on aggregator approval. Knowing these requirements in advance will help avoid delays.

3. Clarify Included Clients

Ensure you have a clear understanding of which client files are part of the sale. A well-documented client database is crucial, so review the records carefully before proceeding.

4. Draft a Comprehensive Deed of Assignment

Create a Memorandum of Agreement or Heads of Agreement outlining key terms before engaging legal services to draft the Deed of Assignment. This preparation can save both time and money by addressing essential terms upfront.

5. Obtain an Independent Valuation

Book valuations are complex and influenced by various factors. To achieve the best sale price or mitigate purchase risks, consider getting an independent valuation. Trailblazer Finance offers expert valuation services to help you accurately assess the value of your book.

6. Identify Loan Originators

Ensure you know who wrote the loans being bought or sold. Implement strong agreements with employees and contractors to prevent client poaching and protect your newly acquired asset.

7. Negotiate Clawback Costs and Retention

Discuss and agree on how future clawbacks will be handled and what retention forms part of the consideration. Addressing this issue early in negotiations is crucial for setting a fair purchase price.

8. Understand Paperwork and Fees

Be aware of the paperwork and fees involved in the transfer process. Consult with the aggregator about associated costs and approvals to ensure a smooth transaction and to allocate responsibilities between buyer and seller.

9. Determine Required Insurance

Ensure the vendor provides run-off PI insurance cover if exiting the industry. Agree on the coverage amount and duration in advance to meet any aggregator or funder requirements.

10. Choose Your Advisors Wisely

If you’re new to the trail book market, seek the assistance of experienced advisors. Their expertise can guide you through the process or manage it from start to finish.

To get started on the right foot, use Trailblazer Finance’s free trail book valuation calculator to estimate the value of your book. For more personalised advice and expert guidance, contact our team at 1300 139 003. Our professionals are here to ensure a successful buying or selling experience

In the arena of acquisitions, mistakes can be costly and detrimental to the success of the transaction. At Trailblazer Finance, we’ve witnessed a multitude of errors over the years, ranging from avoidable missteps to unforeseen challenges. These mistakes often fall into distinct categories, but with the right approach and expert guidance, they can be navigated effectively. Let’s explore the most common pitfalls and how Trailblazer Finance can assist you through each stage of the acquisition process.

1. Poor Due Diligence

One of the primary mistakes we’ve observed is the failure to conduct thorough due diligence. Without a comprehensive understanding of the target asset, subsequent actions may be based on incomplete or inaccurate information, leading to unfavourable outcomes. At Trailblazer Finance, our team emphasises the importance of meticulous due diligence, ensuring that our clients have a clear picture of the opportunities and risks associated with the acquisition.

2. Inappropriate Restraints

Inadequate or absent restraints from the vendor can pose significant challenges post-acquisition. Without appropriate safeguards in place, vendors may seek to undermine the integrity of the acquired business, jeopardising client relationships and revenue streams. Trailblazer Finance assists clients in negotiating and implementing robust restraints to protect their investments and uphold the integrity of the acquired entity.

3. Ineffective Legal Contracts

Legal contracts that fail to confer clear title or are overly vague can create uncertainty and render agreements unenforceable. This leaves purchasers vulnerable and without recourse in the event of disputes or breaches. Our team at Trailblazer Finance ensures that legal contracts are meticulously drafted, providing our clients with the necessary protections and legal clarity throughout the acquisition process.

4. Clawbacks

Failure to account for clawback provisions, particularly in mortgage trail books, can result in significant financial losses for purchasers. Without appropriate safeguards in place, purchasers may find themselves liable for clawback repayments, further exacerbating the impact of lost revenue. Trailblazer Finance advises clients on mitigating the risks associated with clawbacks, ensuring that contractual agreements adequately address these provisions.

5. Misunderstanding Client Relationships

Understanding the origins of client relationships is paramount in acquisitions, particularly when key staff members hold significant client portfolios. Failure to recognise and address potential client retention risks can lead to post-acquisition challenges and revenue loss. Trailblazer Finance provides strategic guidance to help clients navigate client relationship dynamics and mitigate potential risks associated with staff turnover.

While acquisitions present lucrative opportunities, they also entail inherent risks and complexities. By engaging with Trailblazer Finance, clients can benefit from our expertise and guidance throughout the acquisition process. From conducting thorough due diligence to negotiating robust legal agreements, we are committed to helping our clients avoid common pitfalls and achieve successful outcomes in their acquisitions.

Reach out to the experts to discuss your financial needs. Call us now 1300 139 003

Download our free eBook Acquisition Ready  covering 10 topics that have been specifically chosen because it covers an area that is absolutely essential for a successful acquisition but often overlooked or poorly understood.