Advisors Off Script

Considering an Exit? Max Your Value First with Scott DiGiammarino

• Shelby Nicholl • Season 3 • Episode 7

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Considering an exit isn’t about timing retirement—it’s about maximizing the value of what you’ve built before the window shifts.

In this episode of Advisors Off Script, Shelby Nicholl talks with Scott DiGiammarino of JPTD Partners about what’s driving advisor valuations today, how private equity and PE-backed buyers evaluate firms, and what advisors can do now to command premium multiples. Scott explains why many sellers are exiting earlier than you might expect, how “sell-and-stay” deals work, and why growth—not age—is often the real trigger for an exit conversation.

In this episode, we cover:

  • What actually drives advisor valuations today
  • How buyers evaluate growth, EBITDA, and recurring revenue
  • Why clean governance, compliance, and financials matter more than ever
  • How platform choice (RIA vs BD) affects deal structure
  • The hidden risks that can derail or kill a deal entirely
  • Why waiting can cost you millions

This isn’t just about selling. It’s about leverage, optionality, and protecting the value of your firm before making your next move.

Learn more at MurielConsulting.com 

Hosted by Shelby Nicholl. Produced and edited by Aaron Sherman. Operations and Guest Coordination by Shelly Hadel.

Advisors, I really wanna know, what is your number? No, really. If you had to sell your practice, what would it be worth? If you're like most advisors, you've built something meaningful. But the number, your valuation, it might surprise you. Today's episode is for every advisor who has spent years in the trenches and wants to make sure that they don't leave money on the table when it's time to exit.. My guest today is the guy that advisors call when they're ready to sell and ready to win. Scott DiGiammarino, or everyone calls him DiG, or DG, is the founder of JPTD Partners. a boutique consulting firm that has helped countless RIAs, hybrids, and insurance agents maximize their valuation and find the right fit. Buyer, think private equity m and a, the kind of deal flow that most advisors. Sort of know about but don't really know about. He's Let's get into it. Shelby, first all, thank you for having me. I'm excited to be here. I get almost 40 years of financial services experience. So I was an advisor for a number of years. I got into leadership at the Old American Express Financial Advisors. I basically ran the Mid-Atlantic, for American Express, which is now, like I said, Ameriprise. I was in charge of about 200 offices in 2,600 financial advisors back in the day. Left to start some entrepreneurial ventures a couple years ago, but did a bunch of board work in the industry. And then about five years ago, six years ago, uh, a really good friend of mine named Ted Jenkin, who I hired out of Boston College, when he was 22 years old, called me and he was a $2 million RAA in Atlanta. And he is like, dude, I just sold my business for 15 million bucks and I got to stay for as long as I want. I'm like, you gotta be kidding me. and so, um, he sold to Warburg Pincus and I called Warburg and I said, is this true? And they said it was, and it was the first time private equity or private equity backed firms are getting involved in buying financial advisor practices. And they asked me if, if I'd be interested in helping them grow and expand. So that was kind of the genesis of our entire organization. It's such an amazing story, one that he, he. Did that personally, right. And had that experience and then that you're able now to turn it into an entire consulting and, business that you all run. Um, how many advisors have you all helped over the course of these Oh gosh, great question. So we've been, we've been in business for like five, six years. By the way. JPTD stands for John Peter, Ted, and like you said, they call me DG or Dej. Uh, we're not that creative in terms of branding Shelby, but we, we, we collectively used to run a chunk of the United States for Ameriprise, for, for decades. And so, and we've been friends for 40 years each. so over the last. I'd say five years since we've been doing this, we've probably done over 150 deals. I would say 60% of our clients are RIA 60, 65% of RIAs. the other 20, 25% are probably hybrids and a small, small percentage are employee base folks. Last year, I think we did, uh, 49 deals closed. Mm-hmm. Interesting stat. We just, 'cause we just got our yearend numbers, 87% of the clients that sign with us actually end up doing, uh, a transition. They close. That's an incredible stat, and I think that's even up from a few years ago and it was like 80% back then, but 87%. That means that they found a, a, a figure that they wanted, they found a partner that they wanted, they saw the value in it and, and moved Correct, correct. And the thing about us is like, is the way, the best way to think about us is we are Jerry McGuire. So if you like movies, uh, we represent. The financial advisor to this world. And for the mo for most advisors, this is new. Yeah. you know, a lot of advisors think back, at least I was brought up in the world of two and a half to three x recurring revenue, where if you wanted to sell and you had to be out of there in 12 to 18 months. Now the world is completely different. So it's very much of a journey for most advisors.'cause what they think the world is in, in a lot of cases is very, very different than reality. Talk about that gap. What do you see as reality today? Then if there's a gap from what advisors think it is. let me give you some numbers. I think the numbers will help as, as kind of a headline into today. So on a consistent basis, we, first of all, we see 20 deals a day. Okay, so we have, we have right now, close to 200 new clients. These are advisors. Our average revenues say four to 7 million of, of, of revenue, but our smallest advisor is probably a million of revenue, and our biggest is over a hundred million. Um, now we do have a tucking division, which is sub million dollars of revenue. And for those folks, I can guarantee you a fourex. which we have prearranged deals with 108 buyers right now, that we work with. So what's funny about our, about our advisors is a couple things. One is when we first started this, we thought our average age client would be 70 years old. Okay. We thought 70, take a bunch of money, hit the beach someplace, but our average age client is actually 48. Um, right. Which means they get a 5, 10, 15 year run on them. So they are sell and stay. They're sell and stay. So we thought originally that most of our clients would come on would be sell and leave. I think we've had maybe out of our, you know, 150 some odd deals, two, maybe three clients wanted to leave in in two or three years. That being said, we have buyers lined up. For folks that just want to get out in a couple years. But again, most of our clients are young. Um, part two is our advisors are in growth mode. So they either have a history of growth or really want to grow, but sometimes they've hit that ceiling of complexity and they really don't know what to do next in order to double or triple their business without spending a ton of money into the business. and the third thing is, is, Every one of our clients are not tire kickers, so they're not doing this for their ego. and they all pass the likability test. And it's interesting is likability is a big, big deal because, because if someone's gonna spend 30, 40, $50 million on you, they bet like you so. right. So you gotta put them aside. So, so that's part one, part two, as I mentioned, we have 108 buyers right now in growing. So buyers are calling us every day, Mm-hmm. buyers are all looking for something different. So they structure their deals differently. they're negotiating differently. they have different multiples. But what's interesting about our buyer list is, um, we have such deep relationships with them. We know what they're looking for. Now we see we don't wanna waste their time. and on the buyer side, on a consistent basis is we are seeing four to seven x top line revenue, or eight to 16 x ebitda. And we could, we should probably talk about the definition of EBITDA in a sec. But, but, and by the way, on the four to seven. Top line, we've, we even have seen a couple of eights recently. and why size does matter in terms of getting these higher numbers. You know, how big you are is what you get. there's a zillion other small things that make up what a valuation is. I definitely wanna talk about how can we increase that valuation. But what you basically just said is that there are gonna be some size metrics where you're gonna get another click in that valuation. Is that fair? the industry term is a turn. So going from four to five, that's a turn. Going from five to five and a half. That's a half a turn. Yes. Okay. I always have said clicks, so now I gotta update my language to turn. So right. We're gonna get another turn on there. So beyond size, what are the key characteristics that influences that number? Okay, lemme take a deep breath on this one, Shelby.'cause this is a it's a lot. It's a lot. again, size clearly matters. So first of all, the way my world works is top line is pre. Payout rate, it is pre, It's true. fee. Yeah. I call it true top line, right? And a lot of advisors do not know their true top line. They know how much they're getting from the firm, right? Like let's say they're an LPL advisor or Ray J advisor or Ameriprise advisor. They know what they're. Are getting kind of top line, but they're, they need to calculate their true top line. What are their clients paying at the So I, I I call it gross, gross, gross. Yes. so, so if you think about it, one of those firms that you just mentioned, I'm not gonna mention the name. actually we had a client that was realized they was, they were, it was costing them$2.1 million in association fees, platform fees. Yes, They had no idea what their top is. So your gross, gross, gross is that four to seven x is what I'm talking about on your overall. So, so let's go through it a little bit. So the number one thing that buyers are looking for is growth. So you have a history of growth. You wanna grow. They don't want a company that has a lifestyle type of business. They want you to have a desire and a fire in your ability to wanna continue to grow. And I'll tell you why that's important in a sec. do you do financial planning? Do you have 85 to 90% of your revenue being recurring? do you run it like a business? Versus running like a financial advisor. And there's a difference, right? So running like a business means you have structure and support and systems in place, people in place. So if you wanted to be in Tahiti for six weeks, the place still makes money, the clients is still serviced. geography sometimes matters.'cause what we wanna do is when we send you out to market, we don't send you to 108 people, we send you to five that we think is a good fit. Right.'cause in a way we're like matchmakers, and we want to get a bidding war. I wanna get three, four offers for you where people are fighting and clamoring over you. that being said, 60% of our clients actually take less money 'cause it's a better fit. and by the way, the fit's not just for the advisor, it's for the staff, it's for the G twos, it's for the clients, it's gonna feel, right. Right. So we kinda help them through that process. But, but one of the small little variables in geo, in, in, um, in the fit is actually geography. We had a, we had a, uh, firm in North Dakota. that was a $2 million top line revenue firm. I had six, companies, um, vying for them because they wanted a presence in North Dakota. here's a to close that geography hole, I guess that they had. Super interesting to think about geography in that way. I was thinking about geography in, in terms of like, how does that influence your ebitda and can your EBITDA be somehow higher?'cause you don't have high rank costs, but No, no, no. It's, it's just we're pulling the gap. Here's a little one for you. It's a big deal. So one of the questions we get asked all the time is, what percent of your clients are over 70 years old? and then the second question behind that is always, okay, what percent of them do you have their kids as, or grandkids as clients? And the reason being is because the buyers, these private equity firms or private equity backed firms. Are spending stupid money on you, right? Double or triple the mar that most people expect double or triple the market. and the only way in the world they're gonna make money is if you grow. And here's the why, because, Three years from now, seven years from now, most of these firms, most of these buyers will have their own event. Okay? So one of the PE firms will get bought by another bigger PE firm, right? And they're gonna get, and they're gonna sell for double, triple, quadruple what they're paying you. So, but the only way in the world they're gonna do it is if you are growing. So, so it's harder for you as an advisor to grow if you have outflows. So if you have a bunch of clients over 70, I don't have the kids and they're taking RMDs or, or the client passes away and the kids take their money and they go to another broker dealer or another RIA. It's harder to grow when you, when you hear the sucking sound of money leaving. so that's a big deal. So anyway, Um, small intangible things that people never think about, like some of the gotchas, but that those are some of the bigger ones. One of the ones. I've been wondering about too is around platform and is that maybe just a function of EBITDA or something else? So, one of the things we've historically have heard is that will receive a higher multiple than a business that's affiliated with a broker dealer. What's your view on that today? Is that actually still true or not? Yeah, so the, our 108 buyers, if they had a magic wand, they would just do deals with our aas. It's, it's easier, Yeah. you know, it's goes from Schwab to Schwab, fidelity to Fidelity. You don't have to worry about the broker dealer. of paper to the clients, so that part of the transition is simpler. Super easy, right? they, that's one of the first questions they always ask us is are they an RIA, are they a hybrid? Are they a true pd? but I'll tell you that no one's gonna touch an advisor unless you have 85 to 90% recurring revenue. So whether you're RIA and or hybrid, or at least you won't be getting the higher multiples in that particular case. the flight to RIA over the last what decade or so, has been massive. And it's going to, it's gonna continue to be that way, um, especially when they, when they see this world of what the multiples are. It was interesting. I was doing some data analysis over the weekend about the Commonwealth to LPL deal. Right. And what happened to the advisors there. but it's around a third or just over a third. Maybe it's about 40% I think actually went RIA centric, they are, they might have a friendly bd, many of them do, but they have gone RIA centric as part of that, that exit. exactly. exactly. It just, it just, it's just so much easier and, and ease of transition, ease of evaluation. it's an easier way of doing it for the, both the buyer and the seller, Well, let's do talk about EBITDA and also these little kind of micro things that can impact evaluation, running it like a real business. Talk to me a little bit more. Let's talk about some math here. I'm gonna try and make things simple. so here's how you get to ebitda. you take your gross, gross, gross, like we discussed, right? then what you wanna do is you wanna subtract out your true operating expenses, your true fixed expenses. So this is. Staff in real estate and marketing and technology and insurance and blah blah, blah, right? but we want your true opex. this is all before you as the advisor makes a dime, Yeah. Don't, don't put yourself on salary or anything like that. When you take your opex from your gross, gross, gross, that's called ebook, earnings before owner's compensation, EBOC, to get to ebitda, which is at eight to 16 x multiple I told you about, gonna need to pay someone to run the business. Let's say it's you, you're gonna probably take 30%. Of your gross, gross, gross to pay someone to run the business. So if you're a million dollar producer, take$300,000 off of Eeb A and that will get you to ebitda. So it's, so I would say 85% of our buyers buy you based off of e. Um, the other 20 do it off top line, which is so much easier because I don't have to argue about how much money you spend, you know, taking people out for dinner. Um, and then to give you some ratios, a good ratios, you're looking at your business. an EBOC number should be 30 to 35%. Of your gross, gross, gross, right? In terms of expenses, an EBITDA number should be also be 30, 35% of your top, top line. So if you're doing a million dollars a year of, of gross, gross, gross, and your, and your EBITDA is like three 50, you're doing great. Now, some people say, I run it lean. They do I I spend nothing. I work outta my house and you know, I, I just have my computer and my telephone.$2 billion business, and in my cost to run it are 400 K. The rest is going to, to me, So Shelby, that's a good thing and a bad thing. So it's a first of all, it's a good thing if you're running it lean and you're growing double digits a year on top line revenue, you're a rockstar. On the flip side, if you're running it lean and you're doing single digit growth or flat, or God forbid, going backwards, they look at it as you're running a lifestyle business and when they don't wanna buy lifestyle businesses. So we so just take a look at what your operating expenses, your EBITDA is off of. Top line on, by the way, on the flip side, some people run it fat. We had a $6 million top line revenue producer that had a 58% operating expenses. That ain't gonna work. Yeah. Yeah. You know, it's just not profitable. Yeah, yeah. I had a client recently that had just too much staff, fundamentally, right? Like business was originally larger, not as much came over. Staff was a little bit high. We knew we were gonna have to grow out of that, Right. can. You can make that trade off for a certain amount of time, but you can't live like that for the long term, both for yourself, but especially for your exit Well, and what's interesting about that is Going back to the buyers, the buyers are gonna say something to the effect of, Hey Shelby, if I could free you up a day, day and a half a week, what would you do with your time? Right. And, and the reason being is 'cause they, they have infrastructure. Most of 'em have infrastructure 'cause they want to help you grow. So, for example, they'll take compliance off your plate. Imagine having no compliance to worry about, right? Uh, they'll manage the money for you if you want to, they will do hr, they'll do bill pay, they'll do sophisticated digital based marketing. they have CPA services, trust services, some of them. So the buyers have such infrastructure that you may not need all that overhead, okay? When you really, when you start looking at it. What about some of the small things? You know, one of the things I've heard from, you know, even like a Matthew Jarvis and, and some of his podcasts, I think with Ted is like even small things like having your books in order can make a difference on your, on your, on your multiples. Well, here's a great example. We just, we just went through this, so we had a client just close. it took three months longer because, eight years ago, they had a partner as part of an operating agreement who's no longer there. They never closed out the operating agreement. And so this, this other advisor found out about the sale, held the whole thing up. All right, so we gotta clean up our paperwork. We gotta clean up. our, our numbers, right? We gotta know our numbers, which is something so many advisors don't actually know. We have to know our numbers and we gotta, we gotta do the work to clean our crap up. Well, here's another one. If you're in a partnership, right? This, um, this goes back to the operating agreement. If you're in a partnership, let's say you and I were partners and I wanted to sell, and you didn't. How do you make a decision? Right, right. Yeah. Yeah. I always think that that governance is so important. And is the governance based on total votes? Is it based on size of the businesses? How are you gonna extract it? Like we have to kind of plan some of that as we go to stand up. I work with a lot of folks who are standing up and so we talk about like, what's your prenup, essentially?'cause that's kind of what, what they needed. Exactly. Exactly. So, so also, let's say you have a G two in place, or you're about to bring a G two in place. Mm-hmm. A lot of people don't have the, um, expertise on how to onboard somebody and what to give up, what not to give up, and how to train them up. so that one little piece is a big deal for these buyers because they're looking at it saying, Hey, you got this expense, but they're not maximizing their talents. They're not, they're not doing things to take things off your plate. And so getting some guidance on that upfront is a big, big deal. Well, and that brings up just G two in general. Right. And we know there's such a G two problem often, but I can think about some clients that I have and, and contacts in the industry that I have where they don't have a G two. They're, you know, into their seventies. They don't have a G two one. Obviously that's gonna hurt their multiple in their exit. But are the buyers prepared with G twos to fill some of these gaps? What does Sometimes. Yeah, sometimes yes, sometimes no. So as we talked about earlier, with the 4,000 different mini things that make up valuation, having a G two is one of them. Um, you have a G two in place that's trained, that knows your systems, that's, that knows your clients, that is an immense proposition. But if you don't have a G two, some of our buyers will actually try to help you. as you know, one of the biggest issues in the industry right now is getting younger people into the industry. It's a, it's a big, big challenge. but a lot of the buyers out there are proactive, looking to find. Junior people that could ultimately help take, take, take over matter. Some of them will out, they'll actually go out there, buy the juniors practice, recruit them in here and give you the economics. Interesting. Wow. Yeah. So, buy the practice that'll give that person a cash outlay. Then they'll be able to come in and serve correct, larger practice. correct. And then. then as they take it on, they're probably getting some level of salary and they're sort of staying the sell and stay, so to speak. They're the G two is taking over the business and staying and getting more revenue That's right. And so it's, right. So they'll crush it cash flow wise. Right. so, and by the way, on the, on the, you mentioned salary. Sometimes it's a salary, most times it's still a payout rate. True. we'll, we'll give you a payout rate ongoing to, to service the business. Mm-hmm. Yeah. What does that kind of sell and stay look like these days? Right? Because there are, you know, a lot of folks, you said the average age of your seller is, is in their forties, late forties. what does it look like when they decide to sell and stay? They're gonna get the big multiple. And then what does payout rate look like? Is it look like a wirehouse? Great question. So let's, let's talk about, deal structure. Oh, yeah. Okay. That'll tie right into what you're talking about. So. You could do one of four, you could sell your business one of four ways. One is you could do a full, a full sale, sell the whole thing and decide if you wanna stay or decide if you want to go. Another is you could sell a majority, you could sell 51% plus, or you could sell a minority, which is 49%. Or you could do a fractional sale. In other words, I can, I'm gonna sell 20, 25% now and live to fight another day. but in all cases, the multiples for any of those four. Are really the same, to be honest with you. if you do a full sale, it's usually a W2 deal. and I'll walk you through an example of what a deal would look like, but a W2 deal says Here's how I'm getting paid versus how I'm being treated. So most people think of Shark Tank, right? When this. And they're gonna, they're saying, oh my God, they're gonna micromanage me. They're gonna, it's like when I'm a roo, I was a rookie advisor. Again, dials talked to his appointment set, appointment scene. That's not the case at all. The buyers don't have the time, the capacity, or quite frankly, the capability of micromanaging you. They're gonna say, Shelby, here's a whole bunch of money here, has a bunch of support. Go get 'em, tiger. They're gonna leave you alone and that's what you want.'cause they're buying you, they're buying your, what you've built. They don't wanna change it. They want to enhance it. anything less than, a full sale, it's usually a 10 99 deal. So if I sold 30%, the buyer will claw back 30% of the revenue. and you'll sometimes they'll pick up 30% of the expense. Sometimes they won't. Sometimes they'll say You're still responsible for a hundred percent. But let's walk through an example. I, we just closed the deal the other day. It was, $4 million team. we end up getting $31 million, so let's, let's call it 30 million to make my life easy. Okay. By the way, when I quote that, that does not include compensation and that does not include, um, a potential retirement plan, which I'll walk you through. So, $30 million, they're gonna say, Shelby, congratulations. You you are now part of our organization. We're gonna give you 70% of that upfront, so we're gonna give you $21 million upon signing. I'm gonna go on vacation. gonna have a like, like yours, Right. By the way, and I'm not a CPA, but ask your CPA, but the vast majority of this 90% plus is long-term cap gains. And the reason, and the reason being is 'cause you're selling goodwill. How long that lasts, who knows? But, but for right now, right now, time's good, with. right? Um, so I give you $21 million up upfront. You say, you say, I wanna take 5% in the buyer's stock. I want take 40% in the buyer's stock, or something in between. And we negotiate that for you. The rest of the $9 million is made up based on this thing called an earnout. An earnout is based on two factors, usually, one is revenue retention. So if you are at 4 million today, and let's say two years from now, you're still at 4 million, they're gonna give you another 4.5 million bucks. And then the last part is based on growth. It's annual growth. It's called cagr compound annual growth rate. The usual target is 10%. So if you're growing 10% a year on top line revenue, we need you the last 4.5 million. And these earnouts could be as short as a year, they could be as high as four or five years. Just kinda depends on who the buyer is. What we try to negotiate for you is a pro rata deal. So for example, if uh, you grow 9% instead of 10%, you're gonna get 90% of the bonus, um, versus an all or nothing. Um, and then part two is, uh, we try to negotiate a mulligan year for you. Markets go bad, you lose a big client, you can make up the differential in the last year of the deal. It's kinda what we do. So everything we just talked about is called consideration. So this is what I'm buying your practice for. The upfront cash in stock plus the earnouts. The second part is the comp, to your point earlier. So if it's a W2 model, we've seen comp between 25% payout rate and 40% payout rate with no expenses. Okay. Not a salary payout rate. So it just kind of depends who we talk to. Matter of fact, we've, we've got a couple of firms right now that are actually giving bonuses where you could potentially get a 50% payout rate with no expenses. I not bad, right? Um. and you've gotten the big check on the upfront, right? You've gotten the big check for selling your business, And now you're still getting a nice payout along the way for running it, And Shelby, we advise, we don't want you tapping into the 30 million that's yours. You don't have to live off of that. Okay? But again, these folks are helping you grow by freeing you up. you know, a lot of advisor thought they wanted to retire in five years. Like, I'm having fun now. I may wanna do this for 10 or 15 years because I don't have the operational headaches anymore. I'm not having to push all the buttons anymore. Correct. I did it for a while, built my value, got my big check, did my sale, and now I don't have to do it, and I can just do the parts I want to do. I wanna see clients, I wanna service clients and take a vacation. and then the last piece of this is some of the firms out there will give you what they call a A successor plan. And what that basically means is when you actually decide to retire for a period of up to five years, depending on the buyer, um, you could do a junior senior comp split with your G two, up to say 50 50. So if you're making a million dollars a year. When you retire, um, you could make $500,000 a year, 50 50 split with your G two for up to five years. Now that's ordinary income'cause it's a comp split versus long-term cap gains. Mm-hmm. It's extra money while you're on the beach. And then that amount is not included in that four to seven, four to eight x piece I was telling you about. Incredible. It is an awesome, awesome time to be a financial advisor. It is. we tell people you just need to educate yourself. and, and that's where we can help. Yeah. So you've got 87% of people who start the process with you are seeing it through and going to a transaction. But we also know there's a lot of, you know, looky-loos and who, people who want to understand this, but they're not ready yet. How are you educating those folks? we spend a tremendous amount of time upfront trying to understand you. it's kinda like Shelby, if you were a financial advisor, my wife and I came to you, you'd be asking me what are my goals? What are my objectives? What are my history? What's my risk tolerance? Things like that, you know, all those, all the right questions. What we found is most people have never done that. With an advisor, you know, what are your goals, what are your objectives? So that's what we do. part of that is understanding your financials. So we go through the last three year p and ls, and we can, we just have a lot of experience and we can look at it in two seconds and tell you whether or not you have anything to sell. And, and I can also tell you what your multiples are gonna be. I, I can give you your goalpost, your range, and then, If you are interested in it, then we do a wishlist. So this is a series of questions that we ask, which is, must have deal killers, nice to have, or you don't care, for example. Um, how important is it to keep your brand? Nice to have, must have. I don't care. how important is it for you to continue to manage money if you're playing pm do you need help with marketing? Must have nice to have. Do you need a G two? Nice to have. Must to have. So we ask these 30, 40 questions and what this helps us do is narrow our buyer list from the 108 down to five to seven based what you're doing. Interesting enough, I brought up a couple times I wanna make sure I get across before I forget. A lot of advisors love to play portfolio manager, you know, they got 15 screens in front of 'em. And my, my, the advice I give my clients is best in class. Nobody can touch it, da da, da, da. Um, and that's great. I'm sure you do a great job in comparison to the markets and the indexes, but do you know that most buyers will hold that against you? Hmm. Because what they're gonna say to you is, Shelby, how much time a week are you spending doing that? And you're like, oh, I'm spend outta my 60 hours. I'm spending 20 hours a week looking at head and shoulder charts or whatever, or going to chat GPT. Um, and they're saying, if you took that time, let us take over the money management and if, and if you took that time to go spend with your. Getting deeper share, Walt with your existing clients or getting new clients or working on developing your staff, for example, how much more could you grow? Because again, it goes back to our original thing saying growth is everything. Now, there are advisors that love, love, love, love, love to play, pm and we have buyers that will take that, but the vast majority of them would rather have you let them manage it and you go do your thing. Yeah, they want you out there relationship building and prospecting and meeting with clients. The other reason I would wonder is, is there's a little bit more compliance risk in that too, and there can be other economics that they can, they can fulfill also. let's talk about some, oh my gosh, I never even thought about that. That that will kill deals. That's happened to us a couple times. You mentioned compliance. So we had a client, it was a $64 million deal. It was gonna close. Um, I think in less than a month, guy walks in on a Monday morning, sees an email. It's from compliance. Client complained justified or unjustified'cause it was too early. The buyer pulled the deal. One, one compliance issue could crush you. Yeah. Especially one coming up at the wrong time. This goes back to why, well, people say, well, I could wait five years. Well, you know, one compliance issue that next five years could make you untouchable. Mm-hmm. Another one is health. We had a, we had a client that, that it was a big deal, like, like, like a hundred million dollar plus deal. Worked on it for three years with them. Um, to get this deal done. Clients get granted to close, goes into see as annual physical stage four prostate cancer. Entire deal gets pulled. Yeah. Heartbreaking, right? Um, and so it's, it's things like that you don't think about, you know, it's a market gonna keep doing what it's doing. Is the tax gonna stay the same? We don't know. What the buyers will do when we have a recession, because most of them have never been through it, right? Last was what? 2008? 2009. And so do they take the money and say, okay, the multiples of our back are gonna drop and we're gonna go to veterinarian clinics. We just don't know. Right. It's such a good point. I, and, and I'm really appreciative that you brought up health. I've had, I wanna say three clients in the last two years alone that. Going down the path. Going down the path about to make a move, do something in their business that was gonna dramatically change their business. And either they, as the advisor got sick or somebody in their very close set of family could be a parent, it might have been a child, right? Gets sick and it halts Everything. Everything. And while you can think about like, that's just, well, I'm just gonna put it on hold. You know, we don't know. To your point, we don't know what the buyer is gonna do. We don't know what the deals are gonna be. know, if you are making a move from a captive broker dealer to an independent broker dealer and owning your business today, those checks that they're giving have never been higher than they are Right. now. If you're selling your business. Those checks have never been higher than they are right now by some of the buyers that you have in your database. Right? So we just don't know. Right. Well, the, and then the other thing that's happening is we're seeing consolidation in the industry from the buyers, so that my list of 108 a year from now could be 50 because they keep buying each other. And when that happens, there's less. There's less chance of us, getting that bidding war we talked about, which is, is gonna depress the valuations. So I gotta tell you, when I, when we started doing this five, six years ago, I thought this thing had a three year run. I really did. Now, now we're six years in, and depending on who you talked to, I saw an article the other day said that we're in the third inning of this. Um, but then again, you hear people saying, this thing could be done by the end of the year. You just don't know. So what we, consult with people and we, what we tell 'em is pretend. your business was your client, right? And they had, and for the most part, the vast majority of people's net net worths are built in their business. Right. So what would you tell 'em to do? Take some chips off the table, diversify, you know, take advantage of the markets while the markets are high. What would you tell 'em to do? Think about it in the, the pre Enron scenario, right? You've got a client with all their, all their stock is sitting in, in company stock and they're an Enron executive. You would tell 'em to take some chips off the table and that would've been the ideal advice at that moment. And, and that's what we're, that's what we're seeing in the market right now. super, super important. So let's, let's say though we have a little bit more time. I mean, obviously we believe that advisors, advisors need to take agency over their careers and over their businesses. You need to do it when you're healthy. You need to do it before there's a compliance change, et cetera. But let's say we're planning, we're planners and we say we're gonna exit. We're gonna sell our business in two years. We're you know, an older advisor. we're gonna try to get out and say five or 10, but we're gonna sell in a couple. What are some of the actions that I should take today so that I get the highest multiple? Assuming all else in the industry, sort of stays the same as it is today. I, I would say have a mindset of growth. Um, whether it's having an organic marketing program, so you do, you do webinars and you do podcasts, and you do social, but you need to be able to show growth on the top line revenue and, and or show growth in ebitda. Growth will get people's attention. The second of all is, if I were to ask you a question, are you running like a business or running like a financial advisor? So running like a business will get you more attention in my world. Versus running like a financial advisor. So the world of selling A shares and B shares and things like that, and just annuities and insurance doesn't play. it has to be recurring revenue. and then the third thing is make sure your point earlier, Shelby, get your house in order. Look at those old operating agreements. Make sure they're tight. Look at your partnership agreement. If you have a partnership, make sure they're tight. and essentially always, of course, do the right thing from a compliance standpoint.'cause that way it's gonna keep you healthy. we've got a lot of, uh, a lot of advisors out there who, senior advisor, mom or dad have a child or a cousin or a niece inside of the business? They also need to exit. They've got other children that they need to think about estate planning, et cetera with. And so probably the right a action is gonna be selling, maybe it's gonna be a minority stake of some sort to diversify the ownership base and create some, some dollars that they can then hand over to other children at the time and, and sort of equalize out their estate plan. How do you all see that playing? Because that's a common scenario. So the number one, one of the top things we hear from situations like you're talking about is the son or daughter. The G two says, dad, dad, mom, mom, don't sell it. Thought you were gonna give it to me. Right? This is mine. And. other daughters and the other sons are like, Hey, wait a minute, I'm not in the business. Exactly. And so it's hard to do that. Number one plus number two is who's gonna give the G two a $50 million loan? Right. and then they say, oh, let's structure it. I'll pay you out. I'll do a revenue share with you over the next 10, 15, 20 years. Well, time value of money, velocity of money. You, you, would you rather have a $30 million right now or would you rather have $30 million over the next 15, 20 years? So for the, for the entrepreneur, for the founder, it's not a great business decision. but more importantly though is you need to incent the G two. whether it's the son or the daughter, that says if you sell, I get nothing except for maybe cashflow. So there's a lot of creative things out there, specifically with stock swaps that we negotiate that will really incent the G two to grow this thing. And if you do the math on it, that when the, every single time we've had the G-tube look at this thing, let's say they were in their early, early to mid thirties, they look at it and they say, oh my gosh. I could totally do this. And they, they were into it. We, we developed this, um, Excel spreadsheet, um, we call it The Clash. Um, I dunno if you ever, if you're a music person, but the Clash is, um, this had one song, one of the, one of their favorite songs was, should I stay or Should I Go? Yeah. And so what we do is we plug in. The deal and then we plug in you sticking around doing nothing and selling to the G two. Um, and, and 90% of the time it makes so much more economic sense for you to sell. Now get the big check now. Long-term cap gain status because, so you can, you can tax arbitrage, have the earn outs and still get paid to, to do it as long as you want. Mm-hmm. Yeah. Super interesting. How do you think the G two feels about that? well, when the, when the G two emotionally starts looking at it, it's, it's every single time they're like, I, I don't want you to do this. Yeah. Yeah. It's the what about me syndrome? Yeah. But then you look at the founder, the, the advisor, the G one, and when they start looking at the numbers, they said, this is so stupid. I, I, there is no reason in the world why I shouldn't do this. Yeah, there's no way I can't do this. And hey G two, how are we gonna make this. work with you? And that's where you get into those kind of swaps, as you were mentioning, and the long-term opportunity for the G two. Yeah. And then the other thing you mentioned is about the other spouses that are not in the financial services business, how you split, how you splitting all that. The other thing too is a lot of times the G two doesn't have the same skillset as the G one. Uh, as mom and dad, they, maybe they can't market, they can't bring in clients. They need help. So a lot of these other firms, these buyers out there when they say, Hey, be part of the Schwab of or Fidelity custodial referral program, or We have AI based marketing now that can drive leads to you getting new clients is really super hard. Or here's the latest technology that we have. All these things are put in place to. The entire organization, G one, G two, G three staff grow. And when you're growing, you're doing great. If you're not growing, you're, you're, you're, you're basically not gonna ever, ever, ever meet expectations for yourself. Yeah, and you can grow that cashflow even if, even if the business, to your point earlier, has been sold by the senior I. or at least a good portion of it has you as a G two. I think you have to decide, is my ego in owning the practice fully or do I. really just care about where I'm gonna make more money? Right. And so this is, this is why we close 87% because we have this discussion upfront. Yeah. You know, we don't wanna waste your time. Um, I said, look, we, and we, and you know, if, if I can get you between 30 and.$45 million dollars where you could stay and get an X, Y, Z payout. And the G two's ecstatic because he's gonna get, he or she's gonna get, some stock swap and some upside. assuming you fell in love with the firm, would you do the deal? And if the answer is nah, maybe I'll think about it. We're not working with you. Yeah. Such a good, such a good reminder. You, you are valuing them, they're valuing you and your expertise and you're putting a value on, Hey, my time is worth something here too. And I'm, I'm gonna vet you. as a client also. Love that. It's definitely something we do in our business too, and, and it's hard to say no, but sometimes we have to. Exactly. Well, that was, again, a lot of. financial advisors that are trying to find a successor Yeah. struggle mightily, you know, is it, is it the right fit? Do I have time to train them? What do I train them on? Systems, processes, et cetera. It is, it's, it's really, really difficult if you've never done it before. Yeah, and, and what we're seeing is we're seeing a lot of G twos on the street because they were, they, they thought they were getting into a good situation and it wasn't a good situation. So again, you need some expertise around that. Um, and some guidance, some, some advice. That's where you should spend your money if I was an advisor, is finding someone to help you do that. Yeah, super interesting. We can definitely help with the hiring and sort of the onboarding of a G two, but you're right, there's a whole bunch of skillset that we gotta tackle with that G two and you've gotta create them in a way that not only are they able to service your existing business, but they're able to go out and grow the business for you too. And that's a another skillset. this was so great. Thank you so much for the conversation. Um, absolutely incredible work that you guys are doing. To our listeners, if you've been sort of heads down and building and you've never paused to kind of think about what your firm is worth. It sounds like now might be a really good time to do that. JPTD would be happy to help. And it's not just about retirement, it's about growth, it's about optionality, it's about leverage. It's about building something that lasts for you and for your clients. So hopefully today's episode brought you some clarity. Remember, it's not just a podcast, it's a playbook. Hit subscribe. Look forward to talking with you next time. Thanks so much.

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