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WarPig View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote WarPig Quote  Post ReplyReply Direct Link To This Post Posted: Jul/18/2021 at 12:23pm
Originally posted by helado helado wrote:

Originally posted by WarPig WarPig wrote:

Originally posted by helado helado wrote:

Originally posted by WarPig WarPig wrote:

My position has evolved a bit over the last year. I'm with B24, once you get to a certain income letter it's basically wtf else am I going to do with the money? Yes, it's cool, but why?

The biggest reason to grow after you reach your ideal income is enterprise value. Our practices are worth some serious coin. Every million of new assets represents 30-45k of business networth. That is something to keep grinding for.

$40k per million?  Are valuations really going up?!

Lots of variables: fee, age, practice makeup but if you were at 1% fee and got 4x .. crazy right?

My fee is .9% at 1mm so it would be less for me.  Maybe more for a guy like Mo that charges a premium.

So the going rate for recurring revenue is 400%?

Cuz that would be "bye Felicia" for me!

That's what I'm hearing. Know three people that sold their practices in the last year. 3-4.5x

Two of them were based on EBITA but it still landed in that range.

Others might be seeing different things.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Iamlegend Quote  Post ReplyReply Direct Link To This Post Posted: Jul/18/2021 at 12:30pm
Originally posted by WarPig WarPig wrote:

Originally posted by helado helado wrote:

Originally posted by WarPig WarPig wrote:

Originally posted by helado helado wrote:

Originally posted by WarPig WarPig wrote:

My position has evolved a bit over the last year. I'm with B24, once you get to a certain income letter it's basically wtf else am I going to do with the money? Yes, it's cool, but why?

The biggest reason to grow after you reach your ideal income is enterprise value. Our practices are worth some serious coin. Every million of new assets represents 30-45k of business networth. That is something to keep grinding for.

$40k per million?  Are valuations really going up?!

Lots of variables: fee, age, practice makeup but if you were at 1% fee and got 4x .. crazy right?

My fee is .9% at 1mm so it would be less for me.  Maybe more for a guy like Mo that charges a premium.

So the going rate for recurring revenue is 400%?

Cuz that would be "bye Felicia" for me!

That's what I'm hearing. Know three people that sold their practices in the last year. 3-4.5x

Two of them were based on EBITA but it still landed in that range.

Others might be seeing different things.

Crazy 😜 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote jwrober Quote  Post ReplyReply Direct Link To This Post Posted: Jul/22/2021 at 6:15pm
It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 8:28am
Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote B24 Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 8:39am
Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:00am
Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote WarPig Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:11am
Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.

I don't think smaller practices get the same valuation but would love to hear otherwise.  It's easier to run high margins with a smaller book (be it assets or clients)  but does a buyer on the other end with BIG money want to buy smaller firms?  Doubtful. but maybe?

* this isn't meant to be a slight for anyone, expect Peach, that has decided to not be growth focused.


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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:15am
Originally posted by WarPig WarPig wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.

I don't think smaller practices get the same valuation but would love to hear otherwise.  It's easier to run high margins with a smaller book (be it assets or clients)  but does a buyer on the other end with BIG money want to buy smaller firms?  Doubtful. but maybe?

* this isn't meant to be a slight for anyone, expect Peach, that has decided to not be growth focused.



Oh, I agree. That's why before I get excited I'd want to check.

My friend at Hightower had a smallish book relative to Hightower's size ($90MM) when they picked him up. The purpose wasn't to keep him on as an advisor though (although he did keep on the book until about two years ago). Maybe they'd buy my tiny ass practice and give me a job.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote B24 Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:18am
Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.

It could, but you have to impute an owners comp. In other words, you have to factor in paying yourself, say, 40 or 50%, or whatever the buyer would have to pay you or someone else to buy the book. Plus, if they have to hire an additional admin (which you don't have) to manage the book, then they have to factor that in.

So in reality, if you are running at 90% profit margin to YOU, it might only be more like 30-40% to a buyer (on an EBIDTA basis).


Edited by B24 - Jul/23/2021 at 9:19am
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Post Options Post Options   Thanks (0) Thanks(0)   Quote WarPig Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:22am
Curious... what's everyone's magical "Cash Out" number?  (If I was offered this, I would sell today)

8mm for me - BYE!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:23am
Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.

It could, but you have to impute an owners comp. In other words, you have to factor in paying yourself, say, 40 or 50%, or whatever the buyer would have to pay you or someone else to buy the book. Plus, if they have to hire an additional admin (which you don't have) to manage the book, then they have to factor that in.

So in reality, if you are running at 90% profit margin to YOU, it might only be more like 30-40% to a buyer (on an EBIDTA basis).

Thanks for business-spraining that to me you dick!

LOL

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:27am
Originally posted by WarPig WarPig wrote:

Curious... what's everyone's magical "Cash Out" number?  (If I was offered this, I would sell today)

8mm for me - BYE!

6MM is probably good enough for me to do something else. 


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Post Options Post Options   Thanks (0) Thanks(0)   Quote B24 Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 9:37am
Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.

It could, but you have to impute an owners comp. In other words, you have to factor in paying yourself, say, 40 or 50%, or whatever the buyer would have to pay you or someone else to buy the book. Plus, if they have to hire an additional admin (which you don't have) to manage the book, then they have to factor that in.

So in reality, if you are running at 90% profit margin to YOU, it might only be more like 30-40% to a buyer (on an EBIDTA basis).

Thanks for business-spraining that to me you dick!

LOL


Well, I figured since you've been channeling your inner CLAB, that you might not know much about business. LOL
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 10:00am
Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.

It could, but you have to impute an owners comp. In other words, you have to factor in paying yourself, say, 40 or 50%, or whatever the buyer would have to pay you or someone else to buy the book. Plus, if they have to hire an additional admin (which you don't have) to manage the book, then they have to factor that in.

So in reality, if you are running at 90% profit margin to YOU, it might only be more like 30-40% to a buyer (on an EBIDTA basis).

Thanks for business-spraining that to me you dick!

LOL


Well, I figured since you've been channeling your inner CLAB, that you might not know much about business. LOL

If I was channeling my inner CLAB, I'd be at 150% margins!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote missionshooter Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 10:08am
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Post Options Post Options   Thanks (0) Thanks(0)   Quote newbieRIA Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 1:23pm
So you guys are saying 1,000,000 net firm (assistant salary included) would sell for 4 Million with this valuation.

1,000,000 profit -500k to hire someone to run the book equals 500,000 net to the owner.  This 500k sells for 8 times so I would get 4,000,000?

This sounds like a great deal to me.  Are you sure you can get this much currently?

Gives me even more of an Incentive to bust my as for 15 years building an enterprise.


Edited by newbieRIA - Jul/23/2021 at 1:23pm
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Hacksaw Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 1:50pm
Originally posted by WarPig WarPig wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by B24 B24 wrote:

Originally posted by Moraen Moraen wrote:

Originally posted by jwrober jwrober wrote:

It's gotten pretty crazy over the last 18 months on some of the deals out there.  I've seen as high as a 13-15x for some, but a closer average to 8x mostly based on EBITA and other metrics that have to do with persistency and hard assets.  Those deals are based in a slightly different corner of the industry, but I can say that there will be some bleed over to the advisory market soon if it hasn't started already.

Shit unless you have a Circles practice 8x EBITDA is a lot of fucking money. 

I have a friend highly placed at Hightower. I'm going to have a chat with him.

Yes, except that a lot of these practices run at 20-25% margins. So a firm that does $50M in gross revenue and 12M in EBITDA might sell for $90-100M, which is around 2x revenue.

Right. That's why I would want to know if you are running at 90% margin (which is where I'll be this year), if an 8x valuation would hold.

I don't think smaller practices get the same valuation but would love to hear otherwise.  It's easier to run high margins with a smaller book (be it assets or clients)  but does a buyer on the other end with BIG money want to buy smaller firms?  Doubtful. but maybe?

* this isn't meant to be a slight for anyone, expect Peach, that has decided to not be growth focused.



Solos are typically at a lower valuation because much of the business is the advisor.  How much stays when you are gone?  Businesses that function or rely less on the owner are typically at the higher valuations.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote newbieRIA Quote  Post ReplyReply Direct Link To This Post Posted: Jul/23/2021 at 2:16pm
so can we still bank on 2.5 for a solo advisor with an assistant


so like 1,000,000 net practice could still sell for 2.5 million?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote jwrober Quote  Post ReplyReply Direct Link To This Post Posted: Jul/26/2021 at 10:28am
The 8X plus deals have all been for larger agencies that have been around quite a while.  For the smaller firms, those are easy to gobble up for a relative discount, but it doesn't increase your overall marketshare much so that's why you don't see much over 2X for solo shops or even a smaller group of FAs.  However, like I said, I can see those wild valuations starting to bleed over into the FA side of the market as there are fewer and fewer large shops left to buy.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gregsanberg Quote  Post ReplyReply Direct Link To This Post Posted: 5 hours 6 minutes ago at 5:53am
I've been listening to the 2021 Mid-Year update by FP Transitions. https://www.fptransitions.com/2021-mid-year-market-update I'm impressed that they are providing pretty good information on sales data from transactions that they've been involved with this year.

Highlights:
Under $1B AUM (most are selling 5x - 9x EBITDA)
Revenue multiples are 2x-3x with smaller selling for less
They list the average RIA as 2.77x revenue
They list the average hybrid/RR as 2.14x revenue

44% cash upfront with earnout on rest as typical terms
25-34 weeks as average time from list to sale
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