Author
Ryan Grau, CVA, CBA
Director of Valuations
“Is my practice worth 15x?”
If you have spent any time around other advisors lately, you have probably heard some version of this. Someone sold for 15 times EBITDA. Maybe it came up at a conference, maybe a peer mentioned it over dinner, maybe it showed up in a headline about a big platform acquisition. Here is the part worth sitting with: that number is probably real. Somebody likely did sell for that. What tends to get lost is what the number was actually describing.
Try asking it a different way. Is your practice worth 15x to your partner in a buy-in, or to the next advisor who might take it over one day? Almost certainly not, and that has nothing to do with how good the practice is. The cash flow simply will not support a price like that. No lender is going to underwrite it at that level, and no successor could service that kind of debt without the deal collapsing under its own weight. Now, ask it again about a well-capitalized acquirer who can fold your firm into a much larger platform, layer in synergies you could never generate alone, and pay a meaningful part of the price in equity rather than cash. Suddenly 15x is not just possible. It might be exactly right. Same practice, two very different buyers, two very different numbers, and neither one of them is wrong.
That is really the question underneath the question. Before anyone can tell you what your practice is worth, you both need to agree on who is asking and why. A number built for an internal succession plan and a number built for a strategic sale were never meant to be the same number, and holding one up next to the other is a bit like comparing what a house would rent for against what it would sell for. Both are real. They are just not the same measurement.
This is where a closer look at the data helps, not because it hands you a single magic multiple, but because it shows you the range and what actually lives inside it. SRG’s 2026 Advisor M&A Review looked at 171 peer-to-peer transactions completed in 2025, representing roughly $14 billion in transferred AUM. Here is how EBITDA multiples broke down across that data:
Statistic | EBITDA Multiple |
Maximum | 13.75x |
Third quartile | 12.71x |
Median | 11.65x |
Average | 9.98x |
First quartile | 6.41x |
Minimum | 5.90x |
Standard deviation | 3.03x |
The high end of that range topped out at 13.75x, with an average of 9.98x, up from 9.2x the year before. Recurring revenue multiples averaged 3.27x, up from 3.08x. Worth flagging: this data set is built entirely from peer-to-peer transactions, and we intentionally leave private equity and aggregator deals out of it. Those transactions are measuring something different, what a specific, well-capitalized buyer is willing to pay given its own synergies and growth plans, rather than what a typical buyer would pay in the open market. If you have heard about a deal north of 13x or 14x, there is a good chance that is exactly where it came from.
None of that means the number you heard was wrong. It probably was not. It just was not answering the question you are actually asking, which is usually some version of, what is my practice worth to me, right now, for the purpose I have in mind. That is the question this article is built to help you answer, drawing on what SRG’s valuation team sees across thousands of engagements, working almost exclusively with financial advisory practices.
The multiple is an output, not an input
So, to get to your number, and to understand why it might not resemble your neighbor’s at all, it helps to clear up something almost nobody explains plainly: the multiple everyone talks about is not where a valuation begins. It is where one ends.
A gross revenue multiple, an EBITDA multiple, and an EBOC multiple are not, on their own, a finished valuation. The market approach genuinely does start with a multiple, that is the whole premise behind it, but a raw multiple pulled from someone else’s transaction reflects that transaction’s risk profile, not yours. Before it means anything for your practice, it has to be risk-adjusted to reflect the specific characteristics of the practice being valued. The income approach works differently. Rather than starting from a multiple, it discounts a practice’s projected cash flow directly, using a discount rate built around that practice’s own risk, to arrive at value. Either way, the number you hear at a conference is rarely the number that would actually apply to your practice, because it has not been adjusted for the risk that is unique to it.
There are three generally accepted valuation approaches, asset, income, and market, and pricing multiples live only inside the market approach, derived from private transaction data on comparable practices. Taking a hearsay multiple and applying it to your own revenue is not the market approach. It is arithmetic built on someone else’s assumptions, for someone else’s transaction.
Here is a real example of how far that gap can stretch. In a recent engagement, a single market-based value indication implied an EBITDA multiple of 22.56x against the firm’s own reported earnings. That figure looked alarming until we adjusted the earnings side. A buyer acquiring full control would not carry several of the seller’s current costs: one of the older owner’s compensation would not be replaced along with several other roles that would simply be absorbed into the buyer’s existing infrastructure. Adding those costs back roughly tripled the earnings figure, and the very same value, measured against that buyer-adjusted number, implied 8.38x instead. Same practice, same dollar value, same date. Only the earnings side of the ratio changed.
Observation:
A multiple only means something once it has been risk-adjusted to your practice.
SRG Pro Tip:
When you hear a multiple, ask three questions before you react. Multiple of what? Under whose expense structure? How much was cash at close?
The question behind the question: who is the buyer?
We touched on this earlier with the partner buy-in example, but it deserves a closer look, because almost every disagreement about value traces back to this exact point. It is rarely a disagreement about methodology or market conditions. It is a disagreement about who the assumed buyer is. Different buyers bring different cash flow, different levels of control, and a different ability to make a price actually work, so naturally, they do not land on the same number.
Internal transactions.
An internal successor buys the firm largely as it operates today, so the forecast stays anchored to demonstrated performance, current staffing, current compensation, and the existing service model. There are no integration synergies here and no platform participation to lean on. That is part of why internal succession typically produces the lowest of the three values, not because the business is worth less, but because this particular buyer cannot extract the same value from it that someone else could.
Peer transactions
An independent firm buying another underwrites both the seller’s standalone cash flow and the incremental cash flow created by combining two businesses. Redundant costs come out, fixed infrastructure spreads across a larger revenue base, and certain owner functions get replaced with lower-cost salaried roles. Because those savings are identifiable before closing and largely within the buyer’s control, peer transactions generally support higher pricing than internal transitions do.
Private equity and aggregator transactions
These buyers underwrite peer-style efficiencies plus incremental revenue capacity tied to scale, brand, capital access, and expanded service breadth, and they usually assume the founder stays on, employed and compensated, after closing.
This third category is usually where those eye-catching multiples come from, and it is also where the sticker price and the underlying economics tend to look the most different from each other. These transactions commonly pay less than 50% of total consideration in cash at closing. The rest arrives through retention payments, earnouts tied to growth thresholds, and rolled equity whose ultimate worth depends on how the platform performs down the road.
Which means a meaningful portion of a reported multiple can represent exposure to future execution risk rather than cash in hand. For a sense of what the broader market actually pays: in 2025, all-cash deals were 32.9% of transactions, the average down payment was 68% of price, seller notes averaged 6.1 years at 4.38% interest, and 48.9% of deals carried a retention clause.
Each of these outcomes is perfectly rational within its own framework. The trouble starts when you compare them without accounting for the cash flow assumptions, control rights, and deal structure behind each one, and that is exactly why a headline multiple makes such a shaky foundation for a plan. A succession plan built on someone else’s multiple ends up being a plan built on someone else’s business.
Four questions that come before methodology
Once you know who the buyer is, there are a few more questions worth nailing down before methodology even enters the conversation. Skip these, and it will not matter how sophisticated the model behind your number looks. A court, a lender, or the IRS will test these four things first, before they ever look at the math.
Purpose. Why does this valuation exist? Exit planning, internal succession, partner buy-in, institutional lending, estate and gift tax, a shareholder dispute, or divorce. Purpose constrains everything downstream.
Standard of value. Fair market value is the price at which property would change hands between a hypothetical willing buyer and a hypothetical willing seller, neither under compulsion, both reasonably informed, per Revenue Ruling 59-60 and Treasury Reg. 20.2031-1(b). Fair value is a different standard. Investment value, the value to one specific identified buyer, is another. These distinctions are important, they are not synonyms, and they do not produce the same number.
Level of value. A 100% controlling, marketable interest is not the same asset as a 20% non-controlling, non-marketable interest. The second is not the first divided by five. The 20% interest holder has to place A LOT of trust in the 80% ownership, because they control the economics, governance, and operations of the practice.
Premise of value. Going concern or liquidation. For a profitable advisory practice the answer is always a going concern, which is also why the asset approach rarely applies. The value of an RIA sits in intangibles that never appear on a balance sheet.
Get these four wrong and the number is wrong, no matter how good the math is. Most disputes labeled as disagreements about value are actually disagreements about purpose, standard, or level. Before you engage anyone, write down what the valuation is for and who will rely on it. If the valuation provider does not discuss this with you, that is your answer about the provider.
The three approaches, and when each applies
Asset approach
Restates assets and liabilities from historical cost to fair market value. For an operating advisory firm it functions as a floor, because it excludes goodwill and other unrecorded intangibles, and it is generally not applicable to a profitable practice valued as a going concern.
Market approach
Determines value by reference to what comparable practices have actually sold for. This is where the M&A method lives and where gross revenue and EBITDA multiples get applied, drawn from private transaction data on practices of comparable type, size, and characteristics. Publicly traded company data is not useful here; the size difference makes it unreliable.
When it applies: external sales, and practices generally under $3 million to $4 million in gross revenue. It is also the right approach when expenses are shared, commingled, or structured so that true operating earnings cannot be reliably isolated. If you cannot trust the earnings, you cannot capitalize the earnings, and revenue becomes the more reliable measure. The same holds when the asset acquired is a revenue stream rather than an operating business, which describes most book-of-business purchases.
What it assumes: a peer-to-peer sale producing a 100% change of control, with the acquired revenue operated inside the buyer’s cost structure rather than yours.
Income approach
Forecasts future cash flow and discounts it to present value at a rate reflecting the specific risk of the subject firm, most often through a discounted cash flow method. The discount rate is built up from a risk-free rate, equity risk premium, size premium, industry risk premium, and company-specific risk premium, then converted to a capitalization rate for terminal value.
When it applies: internal transactions, partner buy-ins and buyouts, larger firms, and any matter requiring documented, defensible methodology, including litigation, estate and gift tax, and institutional lending.
Why it matters for internal deals: an internal successor cannot access the synergies an outside buyer can. Applying external-buyer multiples to an internal buyout tends to overprice the transaction, which can leave a successor stretched thin on debt service down the road. It is one of the costlier mistakes we see in financial advisor business valuation, and it is almost always made in good faith by people working from the only number they had.
Why we do not reconcile the market and income approaches
Conventional practice says a thorough valuation triangulates across approaches and assigns weights. SRG generally does not, and the reasoning matters.
Transaction comparables can embed synergies and control premiums that cannot be reliably isolated or adjusted. Blend a synergy-influenced market indication with a standalone income indication and you produce a number that describes no actual buyer. It overstates value to the internal successor and understates it to the strategic acquirer. Weighting two approaches that measure different things does not average out the error. It hides it.
We select the approach that matches the purpose and the assumed buyer, and determine value under it. Where a client wants to see the other indication, we present it as a clearly labeled supplemental exhibit, with no weight assigned and no reconciliation performed.
The practical consequence is that our number will sometimes be lower than a multiple you read about. That is not conservatism. The other number was measuring a different transaction.
What actually drives your number
The variables that move a practice from the bottom of that range to the top are specific and measurable. SRG scores them across four indexes in every valuation, benchmarked against comparable practices of similar type and gross revenue.
This is where a financial advisor practice valuation departs from a generic business valuation. An RIA business valuation requires a comparable set of advisory practices to benchmark against and a framework for the risks specific to transferring client relationships. A wealth management firm valuation performed without either one is a template applied to the wrong industry.
Attrition Index
The most valuable asset in an advisory practice is the client relationship and the seller’s ability to transfer it. So the first analysis is not financial. It is retention. This index carries the heaviest weight in the outcome and has two components.
Practice Risk covers the infrastructure that holds clients independent of any one person: personal branding, years in industry, CRM adoption, number of owners, total employees, whether a niche exists, and employment agreements and restrictive covenants for licensed and unlicensed staff.
Restrictive covenants are the cheapest valuation lift available to most firms. In one recent engagement, non-solicit and non-serve agreements across all staff represented roughly a 2% lift in value for a few thousand dollars. Across comparable practices, only 41.67% of licensed personnel and 20.95% of unlicensed personnel are covered. If your staff can walk out with your clients, a buyer prices that risk, and so do we.
Client Relationship Risk covers the client base: net households gained and lost, average client age, percentage of clients over 71, client tenure, whether multi-generational planning is in place, how often you meet clients outside your office, and contact frequency by client quartile.
Demographics produce the most surprises in a first valuation. Among comparable practices, average client age benchmarks near 59 years, and clients 71 and older represent roughly 26% of the book. A book skewed older carries decumulation risk, because those clients draw down assets rather than accumulate them. The answer is not to fire older clients. It is to build next-generation relationships and implement multi-generational planning, which measurably offsets concentration risk in our scoring.
Financial Quality Index
Once retention is understood, the quality of the revenue being transferred comes into focus. This index scores revenue mix, average revenue growth, client growth, net flow of assets, return on assets, total overhead, revenue per household, and assets per household. Among comparable practices, recurring revenue mix benchmarks near 85%, average revenue growth near 12%, net flow of assets near 6.3%, return on assets near 0.80%, total overhead near 36.75% of gross revenue, and revenue per household near $4,858.
Two of these deserve emphasis.
Net flow of assets separates your performance from the market’s. It captures new client assets, additions from existing clients, departures, and withdrawals, and excludes market movement. If your AUM grew 20% in a year the market returned 18%, net flow tells a very different story than your AUM chart. Buyers underwrite net flow. Nobody pays a premium for beta.
Return on assets is a pricing decision most firms have not revisited in years. Moving from 60 basis points toward the 70 to 80 basis point range changes revenue, earnings, and value at once, without adding a client.
Client Quality Index
This index examines composition: total households, households per advisor, average client age, the distribution of client age against assets, clients under $100,000, clients over $1 million, and a detailed look at the five largest households, including their share of revenue and AUM, their average age, and whether multi-generational planning exists for them. Among comparable practices, the top five households represent roughly 13.3% of revenue and 19.4% of AUM at an average age near 66.8.
Concentration matters, and so does the age and structure of the concentrated relationships. Five large households averaging 55 years old with multi-generational planning in place is a different risk than five averaging 78 with no next-generation relationship.
Practice Demand Index
The final step is buyer demand, which sets the premium or discount based on where the practice is domiciled, proximity to major metropolitan locations, practice type, whether a defensible competitive advantage exists, whether the practice serves a niche, and client meeting patterns.
Regional multiples in our data do vary. In 2025, recurring revenue multiples averaged 3.48x in the Midwest, 3.30x in the Northeast, 3.28x in the West, and 3.17x in the South, and out-of-state buyers paid an average premium of 13% over same-state buyers across the last five years. Use your region as a benchmark, not a ceiling.
What happens during an RIA valuation
Discovery and data collection. The team requests five years of profit and loss statements and year-end balance sheets, trailing twelve-month financials, and a detailed questionnaire covering ownership, compensation, personnel, licensing, client demographics, top-household detail, revenue composition, technology, and client communication. Licenses, registration, outside business activities, and disclosure events are verified independently through FINRA BrokerCheck and the SEC’s Investment Adviser Public Disclosure system.
Normalization. Reported financials are adjusted to reflect the economics of the business rather than the tax return. Owner compensation is normalized to market rate, one-time and personal expenses come out, capital expenditures are recategorized, and excess cash and working capital are identified for the enterprise-to-equity reconciliation. This is where experience shows, because knowing which adjustments are defensible matters more than knowing which are favorable.
Comparative analysis and modeling. The practice is scored across the four indexes against comparable transaction data, the appropriate approach is applied, and value is concluded.
Report and debrief. You receive a formal report documenting purpose, standard of value, premise, scope, methodology, assumptions, limiting conditions, value, and a signed appraisal report from a the person that actually performed your appraisal. Then comes the live debrief, which is where the report becomes useful. We spend that call on the index scores: which metrics landed below benchmark, what each is costing you, and what to do about it over the next twelve months.
Typical turnaround is 30 business days from receipt of complete data. Incomplete information at the start is the usual cause of delay.
Divorce, litigation, and court-ready valuations
This one comes with a warning.
Jurisdictions have their own definitions of value, and those definitions frequently differ from what a practice would actually sell for. Many states distinguish enterprise goodwill, which is transferable and generally part of the marital estate, from personal goodwill, which attaches to the individual and in a number of jurisdictions is not divisible. Some states exclude personal goodwill entirely, others do not recognize the distinction, and states differ on the double dip, where the same earnings stream is counted both as a divisible asset and as income for support.
A valuation built on transaction multiples, however accurate as a description of the market, can therefore be the wrong number for the proceeding. Pricing multiples reflect what a buyer would pay. They say nothing about what a particular state’s case law treats as divisible marital property.
Litigation work requires a different scope, a different level of documentation, and an analyst prepared to stand behind the file under cross-examination. The fees run higher than a standard RIA valuation, but they are modest next to the cost of a number that does not hold up, whether that is a challenge from the other side’s expert or a court adopting a figure your business cannot actually support. It is worth scoping the work for the jurisdiction from the outset, since that is not something that can be added after the fact.
Know your number, then track it
Most advisors get a valuation because something forced them to. A partner wants in, a lender wants a report, a buyer made an offer, or a life event took the choice away.
Firms that consistently score in the top quartile value annually and watch the trendline, which is the only way to know whether last year’s decisions built value or consumed it. Revenue can grow while value stagnates when the underlying drivers move the wrong way. A single valuation is a number. A series is a management tool, and it means your number is current the day a buyer calls rather than three years stale.
What to do this quarter
Each item maps to a metric in the four indexes, and each is inside your control.
Get restrictive covenants in place. Non-solicit and non-serve agreements for all licensed and unlicensed staff. Highest return per dollar on this list.
Separate net flow from market performance. Calculate net flow of assets for the last twelve months: new client assets, plus additions from existing clients, less departures and withdrawals, excluding market movement. That is your growth story. If it is thin, you have a business development problem the market has been hiding.
Pull your top five households. Share of revenue, share of AUM, average age, and whether a next-generation relationship exists for each. Then decide which gaps you close this year.
Review your return on assets. Compare your realized yield to the 70 to 80 basis point range. If you are meaningfully below it, know why, and decide whether it is intentional.
Audit your revenue mix. Categorize trailing twelve-month revenue as recurring or non-recurring. Non-recurring revenue is valued at a fraction of recurring, and in some transactions excluded entirely.
Confirm your entity structure matches the firm you are now. An outdated structure creates compliance exposure and signals that the firm has not been managed with transferability in mind.
The bottom line
Your practice is not worth 15x because someone told you a story about 15x. It is worth what a defined buyer will pay for a defined interest, under a defined standard of value, on a defined date. The multiple is what falls out at the end.
Almost everything separating the first quartile from the third is a metric you can measure and a decision you can make. Client demographics, net flow, revenue mix, staff agreements, pricing, concentration, and entity structure. None of it requires a market cycle to cooperate.
When you want a defensible RIA valuation, our team will tell you both what your number is and what is holding it back.
When you are ready to take that number to market, the difference between representing yourself and having an advocate showed up in the 2025 data as 0.21x on the recurring revenue multiple and 14 percentage points of additional cash at closing.
