6. Why Chasing the Biggest Multiple Is a Dangerous Game

That headline multiple felt like proof. Proof that the years of building, the relationships, the sacrifice, all of it was worth something. But what happens when the number that stops you cold slowly stops meaning what you thought it meant?

In this episode, Darrell breaks down why the biggest risk in an advisor succession isn't selling. It's getting so fixated on the headline price that you stop asking the questions that actually matter. You'll learn why aggressive multiples rarely reflect true deal economics once earnouts, timing shifts, and performance contingencies are stacked on top of each other, how buyers quietly protect themselves through contract language that makes perfect sense in isolation and changes everything in aggregate, and why fit, client experience, and post-closing control are the factors that determine whether you look back with confidence or regret.

This is the last transaction you'll make with your practice. Make sure you're negotiating for the right things, not just the biggest number on the table.

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https://advisorhuntglobal.com/contact-us/

Transcript

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So, what's that saying? If it sounds too good to be true, we are hearing some crazy headline numbers, headline multiples. And so the question is, just how real are these? And what should I look for? Because sometimes that deal that at first glance sounds perfect, it is not perfect at all. In today's episode, we're talking about what to look for and what to avoid, and why advisors should focus on the right fit, the right experience for their clients, and themselves. And then chase that deal. You want to protect yourself from regret in your succession. And by the way, it's not just your succession, it's your client's succession too. Hi, I'm Daryl with Advisor Hunt. An advisor we were working with recently received an offer that stopped him cold. The multiple was high, higher than anything else on the table. That number dominated the conversation. Why? Because it felt like validation for a lifetime of work. But as due diligence progressed, the headline number stayed the same, but the deal quietly shifted, one straw at a time. Timing changed, earnouts got more defined, assumptions tightened. Each adjustment seemed reasonable on its own, especially when compared to that big headline number. But what didn't get attention in the drunkenness of that multiple was is this the right partner? Is this the right fit for my clients? For my life after closing? Is it the right fit to give me the amount of control I need in my succession and in my day-to-day? And a big one? What's the probability I get all of those earnouts? What's the probability that I ever get to see that headline number? After the deal closed, the regret wasn't selling. It was what he had deprioritized. Hadn't really looked at after being blinded by that big number. And remember something, this is the last transaction you will make with your practice. Start with is this the right partner? Is this the right fit? Then negotiate price. Because once those papers are signed, that headline number that takes a back seat. But the reality, day-to-day, getting paid out, those remain. Today we'll break this down into three points. Why headline price is not deal value, how overpaying buyers protect themselves, and why terms move silently, but regret does not. So one, headline price is not deal value. Deals can start with an aggressive multiple, it's eye-catching, it is exciting, and it's easy to fixate on, but it's definitely not the full story. These big headline valuations rarely reflect the true economics once due diligence, timing, and all of these contingencies are accounted for. Advisors who chase only that number risk discovering the gap after it's way too late. Overpaying buyers protect themselves quietly and contractually. Buyers anticipate adjustments. Contracts are written to protect them through earnouts, deferred payments, performance contingencies. Each clause makes sense in isolation, but when they are stacked together, they can materially reduce what the advisor, you, receive. Deals are renegotiated quietly, not publicly, and the initial excitement that fades fast. Point three Terms move silently, regret does not. The biggest risk isn't the sale itself, it's losing sight of what matters most. Advisors often deprioritize fit, client experience, cultural alignment, personal control, and lifestyle after closing. When those factors are misaligned, no headline number, it doesn't matter how great it is, can make up for a transition that leaves you or your clients unsatisfied. You're unhappy, your payout doesn't show up as expected, and guess what? Now you're stuck. There's only so many cents in a dollar, and everybody has to make money. This is not the right time to gamble. If you are looking at offers, here's some questions to ask yourself. Am I focused on fit, client experience, and my experience first? Have I really thought through the earnouts, the timing shifts, contingencies, the probability of actually hitting that headline number, of having it paid out? Here's a big one. Would I be happy with this deal, with this succession? It's the only one you get, even if that headline number never materialized. Those big headline numbers, they feel validating, but deals are about reality, not optics. Start with, is this right for me? Is this right for my clients? You want to protect client experience. You want to ensure your life after closing is what you want it to be. If you want real numbers and a deal protects with both you and your clients, click the link below to connect with us. And if this episode was helpful, subscribe and hit that notification bell, and you'll know when the next episode drops.