I have an opportunity to buy a “book of business” from someone. How do I know how much to offer?
One of the biggest factors in determining a fair price for a “book of business” is the estimated retention rate of clients.
“Done properly, with an earn-out in which the seller helps transition the book, client retention rates will be 90% or better,” according to Wealth Management, “Without that gradual and organized transition, retention rates will fall to 40% to 60%.”
Once you know roughly how many clients will continue through the transition, you can use prior revenue statements to determine the value of the client-base. Baystate Business Brokers has an excellent article diving a bit deeper on the subject.
Hope this helps!
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