Succession Planning: Buy/Sell Practice

Any ideas on the variables of pricing a book? Seems to be all over the place. Just looking for something fair to both parties.

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Commission revenue has been trending down the last few years. It used to be consistent around 1x, but last year the average multiple from deals was 0.88x. Recurring revenue you are right on - selling between 2-3.5x depending the revenue source (third-party managed assets and fees being valued the highest), age of the clients, expenses that need to be assumed, and strength of the client relationship. Those are just a few indicators, but most of the big ones. The other big contributor to discounts and premiums on the purchase price are related to how the deal is structured and financed. The more contingencies that are built into the deal, that can adjust the price post closing, the higher the value due to shifting risk away from the buyer to the seller

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Many factors go into it, but I’d say 1-1.5x on commission accts and 2.5-3x on fee if you are going to be competitive

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I agree. Have done a couple deals and those seem to be the mark.

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FP transitions has a great book on succession planning that includes examples and rationales for valuing a practice. You can buy it directly from their website.

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Those strategies FP talks about were great 10 to 15 years ago before anyone really knew much about buying and selling, but succession strategies and how to value a book have moved way beyond what those books talk about. Still probably appropriate for smaller books of business (sub $500k GDC). Best to google the subject at this point and you’ll find a lot of more contemporary and reliable resources and data.

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