How do you sell a book of business?
Looongtime lurker here but this is my first post. I am an indy at a small firm and am negotiating with my partner to take over my book of business. An ill parent has left me a family business to run starting next year. What is the going rate for the sale of a book of business. I have a mix of commission and advisory clients. I want top dollar and my partner is willing to pay it because of minimal risk of losing clients. But what is the going rate? A percentage of AUM, revenue? Any advice would be appreciated.
have you looked at FPTransitions.com? They do this all the time and could structure the deal for you.
For basic business, as a rule fo thumb figure 1-1.5X T-12 for Commissions, and 2-3X for fee business. Break it down like that and it’s a basic estimate. But as CALI said, you should talk to experts about structuring the deal. I think you wanting “top dollar” due to ease of transition should be offset by the simpicity of the deal. You are in an enviable position of having a partner willing to buy the book. And I would come down further if the purchase is with all upfront money.How big a book is it?
36M give or take a few sandwiches. a rough estimate is what I was looking for and that is about inline. I also heard a % of AUM that is about inline with % of t12 too. That’s the ballpark The plan is for all upfront, so I will come down like you said B24. Gonna miss this business…
I checked out FP transitions recently ( stopped by their office). For a small commission ( paid half by buyer and half by seller) they will quantify the book and lend a lot of experience. I would use them if I was buying or selling, unless I could find someone better.
I was also told there are plenty of buyers, and lots of cash for buying. Allow a minimum of six months to stay with the transition, meaning, you have to stay licensed and available for about six months, to be a credible seller. That also allows the buyer enough time to look back, and see about retention, which is a part of the price formula. I bet if you just called one of their sales reps, you could get a ton on info, whether you ended up using them or not. They have proforma contracts, and so on, you still need to run things by your own attorney. I wouldn’t mind doing something different, myself, but where are you going to make such an efficient living?