Advisor Practice Valuation & Deal Terms Calculator

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Succession Link’s Deal Terms Calculator was created so that users could see how the amount they receive for their practice changes with the structure of the transaction. Two core components make up the deal structure; the down payment, and the term years. Time is usually a major concern for financial advisors engaged in the buying or selling of a practice, and the length of the deal agreed upon by both parties is a key determinant of the down payment. It is for this reason that the down payment estimation computed by the Deal Terms Calculator is a function of term years, which explains why users can change only the years and not the down payment.

Financial Advisors involved in the exchange of a practice are faced with a tradeoff between time and price; sellers receive less money up front, but more in total as the amount of time to complete the full payment becomes longer; buyers pay less up front (a smaller down payment), but more in total as deal terms lengthen. While the tool is only meant to provide users with an idea of what to expect as terms vary, it’s important for financial advisors to jointly consider the implications of both the term years and the down payment to a greater extent than the total expected payment. The largest price tag the Deal Terms Calculator will compute will be found at 10 years, the maximum allowed. The total can distract users from the ancillary implications that work in conjunction with a large dollar-value, such as a smaller down payment, smaller annual payments, an extended period of incomplete ownership for both parties, as well as many others.

The methodology of the deal terms calculator, much like the calculator itself, is an expansion of the methodology used in the valuation process. The difference is the addition of the down payment and term years to the set of value driving-variables in our predictive model. In the valuation process, we hold the term years constant at 5 and the down payment constant at 28%. By holding all deal structures equal, all valuations are comparable (e.g. a practice valued a $500K can only be deemed “more valuable” than a practice valued at $450K if the deal terms are the same). The Deal Terms Calculator provides users with the opportunity to see how the price of their practice changes with different deal structures.

Our unique valuation methodology is derived from a hybrid of three commonly used methods to determine practice value; the market multiplier approach, the asset-based approach, and the comparable transactions approach. While all three approaches are related (and some would even argue they’re all a division of the market approach), each one plays a key role in our unique valuation process. Regression analysis, utilizing data from thousands of practice transactions and valuations, has allowed us to identify the most significant variables in the determination of practice value, and subsequently create a statistical model that measures how these variables interact with each other. This model provides us with a predictive estimation of practice value through the use of non-traditional multipliers created through variable interactions, the core of which are measured through the practice’s assets. This sequence summarizes the role of each method in our hybrid valuation process. Considering the limited amount of information it requires, our tool has shown remarkable accuracy when tested against valuations prepared by the industry’s leading firms.


Users need to be aware of what this tool provides them with, as well as what it does not. The intended use of our Deal Terms Calculator is to provide users with a range of expectations.

The suggested down payment is accompanied by a low and a high down payment. Although Succession Link research has identified a positive correlation between the price received and the money down, higher down payments are associated with shorter deal structures. This makes certain down payments unrealistic in different deals. Additionally, since down payments are largely a function of the time to complete the payment, the down payments are predetermined based on the amount of years selected by the user.

Although the methodology used by the Deal Terms Calculator is an expansion of our valuation methodology, this is not our valuation tool. There is a difference between the price tag of a practice and the value of a practice, perhaps best exemplified by the Deal Terms Calculator. Users should remember that the value of their practice does not change with different deal terms; once the term years deviate from our default term of 5, practice values are no longer comparable. It is the price tag of the practice that changes, not the value. The higher price tag represents the tradeoff between price and time, and is largely unassociated with value.

This material has been prepared by Succession Link (a wholly owned subsidiary of Succession Link, LLC) and in the belief that it is fair and not misleading. The information upon which this material is based on was obtained from sources believed to be reliable, but has not been independently verified; therefore, we do not guarantee the fore-mentioned practice. This is not an offer or solicitation of an offer to buy or sell any practice. Any opinion or estimates in value constitute our best judgment as of this data, and are subject to change without notice. Succession Link, has issued this material. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Succession Link.

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