A leading advisor matchmaking firm recently cracked open its pricing model to let the world know what makes a practice more or less valuable in the eyes of would-be buyers.
David Grau Sr and David Grau Jr of FP Transitions shared their valuation criteria at the recent Focus Financial Network conference.
Some of their points fly in the face of conventional wisdom, but make sense when you drill down.
For example, the Graus say that if your clients skew older, your business is probably going to be worth less when it comes time to sell.
Granted, older clients tend to be more affluent, but that's only in the accumulation phase.
Once the typical client starts spending down the nest egg in retirement, he or she becomes less valuable every passing year -- and is closer to dying and dropping off the client list entirely.
Doing business under your own name is also a detractor, the Graus say. Sure, building your personal brand is fine for your personal brand, but anyone who buys the firm has to throw that marketing effort away and start fresh.
The points that enhance a firm's value include widespread use of CRM systems, as well as the usual suspects: more licensing within the firm, more recurring fee-based revenue, bigger accounts on average.