What buyers areactually paying for.

In an earlier edition of The Advice Firm Blueprint I wrote about Farmers and Hunters, the sales capability gap sitting inside most IFA firms, and why a business built entirely on relationship maintenance has a growth ceiling buyers can see from a mile off.

Here I want to go a level deeper. Because "buyers pay for growth" is true, but it's not specific enough to be useful. If you're a founder three to five years from an exit, you need to know exactly what's being priced, how it's being priced, and which levers actually move the number.

So let's talk about what's really happening when a buyer puts a multiple on your firm.

The headline number has moved and it's moving in two directions at once

For years, the simple shorthand in this market was a multiple of recurring income. Three to four times was the rule of thumb. That's no longer the full picture.

Recurring income multiples for smaller, owner-managed firms have generally sat in the 3.5x to 6x range over the past year or so, depending on quality and demand. For larger, multi-adviser businesses, the market has shifted decisively toward EBITDA, and Citywire's New Model Adviser reporting has cited around £2.5m of earnings as a rough tipping point at which buyers start applying genuinely different and stronger pricing logic. Above that line, EBITDA multiples for well-run, scalable firms have been reported in the 6x to 10x range, with the very largest platforms commanding more.

We should be very clear here: these are ranges reported by industry sources including Gunner & Co, Johnston Carmichael and Citywire, not a guarantee of what any individual firm will achieve. Every deal is priced on its own facts. But the direction of travel is consistent across all of them: the market is bifurcating. Scale and quality are being rewarded. Everything else is being discounted.

Three things buyers are actually pricing

Strip away the jargon and a buyer's model is answering three questions. Get clear on these and you'll understand exactly where your own number is coming from.

“A buyer isn't paying for what you built. They're paying for what they can keep without you.”

1. Earnings quality, not earnings size. A buyer wants to know how much of your profit survives the transition. Revenue concentrated in a handful of relationships, fee structures that depend on legacy trail commission, or margins propped up by an owner who's about to leave, all of that gets stripped out before a multiple is applied. Clean, recurring, advice-fee-based income with broad client distribution is what actually earns the higher end of the range.
2. Growth that doesn't depend on the founder. This is where the Farmers and Hunters piece connects directly. A firm with no demonstrable new business engine is a firm a buyer has to build growth into themselves and they'll discount the price accordingly, because they're taking on that risk. A firm that can show a repeatable, team-delivered pipeline is pricing in its own future, not just its past.
3. Key person risk. If the business stops functioning the day you stop showing up, that's not goodwill, that's a liability with a discount attached. Buyers look hard at leadership depth: can advisers other than the founder run client relationships end to end? Is there a second layer of management? Could the firm survive losing its founder for six months without a material drop in revenue?

Why this matters now, not at the point of sale

Every one of these factors is structural. None of them can be fixed in the weeks before a deal. Earnings quality, growth infrastructure and leadership depth are built or not, over years, which is exactly why founders in the three-to-five-year window are the right audience for this conversation, not founders who've already decided to sell.

If you're reading this and recognising your own firm in the discount column rather than the premium one, that's not a verdict. It's a starting point. The firms that move from one column to the other are the ones that treat valuation as an output of how the business is run, not a number a broker produces at the end.

If you want a candid view on where your own firm sits against these three measures, that's exactly the conversation to have before any sale process begins. Get in touch.