Why client concentration costs you at exit
Ten clients, forty per cent of the income, and a discount you will not see coming.
Concentration is the risk that a small number of conversations move a large amount of value. If your ten largest clients are forty per cent of recurring income, a buyer is underwriting the possibility that four of them leave in the first year.
It is priced, and it is priced quietly — not as a line item, but as a lower multiple or a larger deferred element. Owners often read that as the buyer being difficult, when it is arithmetic.
What reduces it is unglamorous and slow: broaden the book, introduce a second adviser to the biggest relationships, and make sure the largest clients have a reason to stay that is not personal loyalty to you.
Firms talk about recruitment. The harder number is how many principals have no plan for the day they stop.
The rules were written for the whole market. The cost of complying with them does not scale down.
Most of the argument in an advice-firm deal is about the part you get paid later.
Thinking about your own timeline?
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