Updated Monday, December 22, 2014 as of 8:32 PM ET

What Advisors Get Wrong About Firm Profits

From a valuation perspective, which of these two advisory firms do you think could command the higher number in the sale of the business?

  • Advisory Firm A: $50 million in AUM, annual gross revenue of $500,000 (with a 1% fee), annual profit of $100,000 (20% profit margin)
  • Advisory Firm B: $100 million in AUM, annual gross revenue of $700,000 (with a 70-basis-point fee), annual profit of $70,000 (10% profit margin)

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Comments (1)
Wouldn't the picture be more accurate if you lumped the owner's compensation and profits together? Owners have considerable discretion in how they pay themselves.
Posted by HELEN H | Friday, March 28 2014 at 1:35PM ET
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