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Practice Management > Building Your Business

Why “Small” Firms Are Plenty Valuable to Thousands of Advisors

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I received the following e-mail in response to my November column in Investment Advisor, and my subsequent blog on the same topic, from Jim Dorman in Maitland, FL, about Mark Hurley’s latest report on valuation of advisory firms.

It was so exactly what I was talking about that I thought I’d share it:                

“Your analysis of Mark Hurley's viewpoint of the valuation of practices caused me to laugh out loud. I have a 'small' practice, just short of $100 million AUM.  My staff salaries will reach about 35% of my revenue, which averages 70 bps (normal fee is 1%).  I'll make about 50%.I have 300 clients, 80 we actually do planning for; the rest are legacy accounts I will not fire. 

“I have purchased four practices along the way with a 98% retention rate, given the client base that’s not always good.Bottom line, I play golf on Fridays with clients and guests. I don't see clients on Mondays and have 6 to 10 client appointments a week.  I am in the office about 30 hrs. a week.  I'm 52 and when in acquisition mode work many more hours.  My staff and I know we can handle about five times our best client load and are on track to hit that number in five years without acquiring another practice. 

"We have over 300 written processes in our practice and the practice lives on without me in a sale or something worse. This is certainly a winning firm valuation perspective.Hurley's perspective, as you point out, is tainted by his association with 'larger' firms. I work as hard as I need to and delegate the rest.  Life couldn't be better as I build 'value'.”

In my experience, Jim embodies the dream of many independent advisors: A good income, great lifestyle, has his own business and can take care of his clients his way, without any outside pressures.

Even if a bank or rollup venture wouldn’t have much interest in his firm, it still has great value to him, and to thousands of advisors like him—as evidenced by the fact that Jim has built his firm, in part, through acquiring other independent firms.  In fairness, Jim is a former CPA , who did a lot of M&A when he was in the accounting world, so acquiring practices is well with in his comfort zone. In fact, he tells me that he’s in the market to find another firm to buy right now.

See an additional news item about Hurley’s newest report from