Advisors who are thinking about adding a partner to their practices have several questions to consider before making an offer, according to the authors of “How to Value, Buy or Sell a Financial Advisory Practice,” Mark C. Tibergien and Owen Dahl:
- What is the desired average income per owner?
- How much revenue does the firm need to generate to achieve that average?
- How much revenue does the firm need to generate to maintain a reasonable level of profitability after fair compensation is paid to the owners?
The authors recommend firms looking to expand should aim to earn between $400,000 and $750,000 of revenue per partner to avoid diluting income.