Article December 2, 2020

Factors that can influence the financial value of your business

 Carine Monge, LL.L, LL.B, MBA, Director of Operations, Corporation de services du Barreau du Québec

Now that we’ve discussed issues related to strategy, process, compliance and customer segmentation, it’s time to turn our attention to the topic of valuation in succession planning.

I’m sure you’ve already heard of some of the models used to value a book of business based on its size and recurring revenue, so I won’t dwell on those points here. In reality, every situation is unique and putting a percentage or dollar amount on the value of a book of business is no simple task, especially for financial advisors who aren’t specialized in business valuation.

Additionally, leaders who have dedicated years of their life to their work and clientele often overestimate the true value of their business. Getting assistance from an advisor or independent appraiser can help them stay as objective as possible.

Their advisor can also help them increase the value of their book of business by drawing their attention to certain factors which they have a degree of control over. The table below groups these factors into three categories: operations, clients and transaction:



Increases value

Decreases value


Adherence to compliance rules

Successful audit, no follow-up required

Audit identifies multiple areas for improvement

Needs analysis

Up to date on most records

Not systematically carried out

Organization of procedures

Well organized

Poorly organized

Use of digital technology

Frequent (CRM, paperless records, electronic signature, virtual meetings, etc.)

Very minimal

Number of financial institutions used



Formation of the book of business

Primarily by the financial advisor selling the business

Combination of several books from multiple advisors

Business over the last 5 years

Stable and growing

Irregular and/or declining

Types of sales


Frequent replacements of existing contracts

Retention rate for contracts sold

Near 100%

Under 60%


Number of clients

Less than 500 families

Plus de 500 familles

Age of clients

Generally younger

Generally older

Frequency of contact with clients


Sporadic and unsystematic

Geographical concentration

Highly concentrated (e.g., Island of Montreal)

Very spread out

Segmentation of client groups

Few distinct groups

Spread across many different groups


Brand and value of service

Clear and communicated to the client

Non existante

Professional reputation of the buyer and seller


Poor or unknown

Seller’s attitude

Ready to step down

Forced to step down

Buyer’s attitude

Understanding and ready to buy

No interest in collaboration

Clients’ knowledge of the transfer

Informed in advance

Surprised by the decision

Future sales potential

Easy to identify

Very hard or impossible to evaluate

Type of transfer agreement

Clear and in writing (retention clause, value adjustment, etc.)

Vague verbal agreement


One thing is for sure: greater cooperation by advisors in the transition process generally leads to higher sale prices. The opposite is also true: the less the seller cooperates, the lower the price they’ll get. However, striking the right balance between involvement and distance from operations is hard to plan for in advance, and even harder to implement in practice.

It’s also important to recognize the need for more transparency around succession planning for advisors. For various reasons, it’s not always easy to get information within your own brokerage firm, and the fierce competition between players isn’t a great help in this regard. Thankfully, the topic of succession planning has been addressed in numerous books, conferences and research projects, so don’t hesitate to draw inspiration from other sectors. For example, have a look at the various documents prepared by the Business Development Bank of Canada. I also recommend the book (in French) L’après Inc., Vivre sa sortie entrepreneuriale positivement.

The final article in this series will be entitled “Is there such a thing as a perfect match?”.