A practice loses value gradually through a handful of problems, and most of that value can be recovered if you start 12 to 18 months before a sale.
Two practices with identical fees can be worth very different amounts. The gap comes from a handful of problems that build up gradually over years, and most of them can be fixed. For each one, a buyer has a specific reason to reduce the price, and there is a specific fix you can make before you sell.
| What reduces value | Why a buyer discounts it | The fix |
|---|---|---|
| Owner-dependency | Relationships and knowledge leave with you — value could go on completion day | Delegate; add second contacts; document processes |
| Client concentration | Losing one client materially hurts income | Broaden the base; strengthen and document key relationships |
| Under-priced fees | Lower income now, plus a re-pricing job (and churn risk) later | Stage sensible increases at renewal |
| Low recurring % | Income is less predictable and repeatable | Convert ad-hoc work into repeating engagements |
| Messy WIP & billing | Suggests hidden problems, under-billing or scope creep | Tighten lockup; clear aged debtors |
| Undocumented processes | Risky, harder transition, higher retention risk | Simple checklists, client notes, a documented journey |
| Drifting or declining fees | Looks to a buyer like a firm in decline | Stabilise retention and re-price before you sell |
Owner-dependency costs the most. A firm where the owner holds every relationship, sets every price and remembers every process could, to a buyer, lose much of its value the day the owner leaves. Client loyalty that is to you personally may not transfer to a new owner. Work that runs through people and systems is worth materially more than work that runs through one person. This single factor can move you a whole quality band, in either direction. Our owner dependency check scores it across ten dimensions in about two minutes, converts the result into pounds on your own fee base, and tells you which parts to fix first.
Loyal clients who've never had a fee review can feel comfortable to keep. To a buyer, under-pricing combined with flat fees looks like a firm slowly going backwards. It costs you in two ways: you earn less now, and the buyer faces a re-pricing exercise (with the associated churn risk) that they'll price into their offer. Even modest, staged increases change the trajectory a buyer sees, and show a commercially healthy firm.
Buyers look for two related risks: a small number of clients making up a large share of fees, and a small number of people (often just the owner) holding all the important relationships and knowledge. Both are forms of concentration risk, and both lead to a discount. You can't always fix them quickly, but you can manage them with multiple contacts on key clients, delegated relationships and a documented service history, so the buyer can see each risk has been addressed.
Each of these problems has a matching fix. The practical, prioritised steps are in seven ways to increase value. Because a buyer will confirm all of this in due diligence, fixing it early lifts the multiple and also makes the sale smoother. Start from a realistic valuation so you know which problems are costing you the most.
Owner-dependency — a firm where all the key relationships, pricing and knowledge sit with the owner — because a buyer is pricing the risk that value leaves with the owner on completion day. Client concentration and under-pricing are close behind.
Client loyalty is good. It becomes a problem for the sale if that loyalty is entirely to you personally, because it may not transfer to a new owner. Introduce second contacts and delegate relationships so a buyer sees a firm that runs through its team.
Yes. Given 12–18 months' runway, most of it can be recovered. Reducing owner-dependency, re-pricing under-charged clients, lifting recurring income and documenting processes reverse the main causes of lost value — and make the firm nicer to run in the meantime.
Because it means lower income now (a smaller fee base to apply the multiple to) and a re-pricing job with churn risk for the buyer later — which they discount in their offer.
Book a confidential call with the buyer. We will give you an indicative range and tell you which of these factors is costing you most.
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Andy Jackson, co-founder