Every practice sale I’ve ever watched turns into the same argument. The seller has a number in his head. He read somewhere that firms go for a certain multiple, he did the math on a napkin, and now that figure is what his life’s work is worth, full stop. You come in lower, because you’ve read other things. And the two of you spend the next three meetings haggling over the multiple like it’s the thing that matters. It mostly isn’t.
Let me back up and say what a multiple even is, plainly, because the word gets thrown around like everyone was born knowing it. When people value a practice, they usually talk about it as some number times a thing. Times revenue, meaning what the firm brings in a year. Or times profit, what’s left after the bills, which the finance crowd calls EBITDA. So “two times revenue” just means you pay two years of what the firm collects. Small practices tend to trade somewhere around that two-times-revenue mark, give or take, according to the valuation people at Advisor Legacy. Bigger, cleaner firms fetch more. That’s the whole mystery.
Here’s the problem with treating that number as the answer. It describes the average firm sold to the average buyer. It does not describe this book, in your hands. And the gap between those two things is enormous.
The same book is worth two different prices
Picture two Advisors looking at the exact same practice. One of them serves the same kind of clients already, bills the same way, runs the same style of service. The other is a mismatch, different clientele, different model, different everything. They are not buying the same asset, even though it’s the same book on paper.
Because value in this business isn’t really in the book. It’s in how much of the book survives the handoff, and that depends entirely on who’s doing the buying. The Advisor it fits might keep nearly all of those clients, because almost nothing about their experience changes. The one it doesn’t fit could lose a quarter of them inside a year, as people feel the mismatch and drift. Same practice. Wildly different amount of revenue actually sticking around. So the thing is genuinely worth more to one of them than the other, and they should pay different prices for it, on purpose.
That’s the part the multiple hides. It’s a tidy average pretending to be a fact about your specific deal. The seller clings to it because it’s the biggest number he can defend. You should be quietly ignoring it, because it’s answering a question you don’t care about.
Value it from the clients down, not the multiple up
So flip the whole thing around. Don’t start from “what’s the going rate and how do I haggle it down.” Start from “how much of this book would stay with me, and what that’s worth.” Then back into a price from there. The multiple becomes something that falls out of the math at the end, not the thing you argue about at the start.
The numbers nobody explains straight are exactly what The Chairman’s Council is for. Paid members get the full playbook, and every one after it.
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