Are you a sole adviser/planner and curious about what your practice is worth? FP Transitions is a sales and consulting company that specializes in selling advisory practices. They publish an annual report (pdf file) which tells you how to do your own valuation:

In practice, the market multiples (about 2.1 for recurring income streams, and about 1.1 for non-recurring income streams) produce a quick, and highly accurate picture of value on the open market. We’ve seen the multiple applied by sellers on practices ranging from a high of $3 million in value… to a low of $500,000.

It continues:

Most buyers pay about 33% of the purchase price in a cash down payment… and the balance over a 3 to 5 year period if the acquisition performs as expected.

The report is amazingly detailed. They cover unplanned transitions, post-closing client retention rates, due diligence and numerous deal structures.

FYI, I found out about FP Transitions from Bob Clark’s most recent editorial. He says they decided to stop publishing the free report in 2006. Unfortunate, but the 2005 report should be relevant for a few years.