Every owner knows the list of things that make a firm more valuable. Fewer sit down and work through the list of things that make it less valuable, partly because it is an uncomfortable exercise and partly because some of the items on it feel like ancient history. Buyers do not treat them as history. They treat them as price adjustments, and in some cases as reasons to walk away.
This article is the mirror of the things that raise your multiple. It works through the discounts: what causes them, how buyers apply them, and, most usefully, which ones you can do something about in the run-up to a sale and which ones are structural. The distinction matters because time spent trying to fix a structural problem is time not spent fixing a genuinely fixable one.
How a discount actually lands
A buyer rarely says "we are deducting 0.4x for your DB transfer history". What happens instead is quieter. The headline multiple in the indicative offer is a little lower than you hoped. The earn-out conditions are a little tighter. The warranties run a little longer, the deferred consideration is a little larger as a proportion of the total, and the retention held back against future claims is a little heavier. Each of those is a discount wearing different clothes.
That is worth holding in mind throughout. Risk in an advice firm does not usually reduce the number on the front page of the offer alone; it changes the shape of the whole deal. A firm with a clean past gets more of its money sooner, with fewer conditions. A firm with open questions gets a deal built to make those questions the seller's problem rather than the buyer's. On how the recurring income multiple itself is built, the discounts below are the reason two firms with identical FUM and identical recurring income can receive offers a full turn apart.
Defined benefit transfer history
The single heaviest item on the list. If your firm advised on DB transfers, especially in the years around the British Steel period, every serious buyer will examine that book line by line before committing to anything. The concern is not whether the advice was good; it is that DB transfer advice carries a long redress tail, and the buyer of your company inherits it.
The FCA has been explicit that firms cannot sell client banks and leave redress liabilities behind: its published expectations of firms selling client banks state that it will act where that happens, and that firms must hold adequate financial resources for potential redress. A buyer reads the same page you do and prices accordingly.
Is it fixable? Partially, and only in the sense that certainty is worth money. A DB book that has been independently file-reviewed, with any redress already calculated and paid, is a known quantity; a DB book nobody has looked at since the advice was given is an unknown one, and unknowns attract the largest discounts. What you cannot do is make the history disappear. It will shape the deal structure, the run-off cover requirement and the warranties whatever you do, and if the exposure is serious enough it will push buyers towards an asset purchase that leaves the company, and its liabilities, with you. That trade-off is its own subject: asset sale or share sale.
Legacy commission and non-recurring income
Buyers pay for income that repeats. Trail commission on pre-RDR business repeats, for now, but it is income the client is often barely aware of, attached to products nobody is actively servicing, and vulnerable to provider changes and to the simple attrition of old policies. A revenue line that looks healthy in aggregate can conceal a meaningful slice of this, and buyers will strip it out or discount it heavily when they calculate the recurring income figure they are actually willing to pay a multiple on.
Fixable? Substantially, given time. The work is to convert legacy commission clients into advised, fee-paying clients on modern terms, which is slow, client-by-client work, and is precisely why preparation windows of a year or two exist. Where conversion is not realistic, honest categorisation still helps: a seller who presents their income already split into durable recurring fees and declining legacy commission is trusted more than one whose single revenue figure falls apart in due diligence.
An elderly client bank
This is the discount owners find hardest to accept, because an older client bank is usually the product of doing the job well for thirty years. But a buyer is purchasing future income, and a client bank concentrated in the late seventies and eighties is a client bank in drawdown, in decumulation and, bluntly, in run-off. The recurring income attached to it has a shorter expected life than the same income attached to clients in their fifties.
Fixable? Structurally, no. You cannot make your clients younger, and a late scramble to recruit younger clients rarely moves the average enough to matter. What is fixable is the record: documented relationships with the adult children of your largest clients, evidence of intergenerational planning conversations, and assets that have already survived one generational transfer all soften the discount because they change the expected life of the income. The full argument is in why client age is the number most owners overlook.
Key-person dependency
If every material client relationship runs through you, then the asset being sold walks out of the door at completion. Buyers solve this with structure: a longer earn-out, a heavier deferred element, a required handover period, and consideration contingent on client retention after you leave. None of that is malicious; it is the only rational way to buy a firm whose value is a single person's relationships.
Fixable? Yes, and it is one of the highest-value pieces of pre-sale work available, but it needs the most lead time. Introducing a second adviser to your key relationships eighteen months before a sale changes what the buyer is buying. Doing it three months before a sale changes nothing, because no buyer believes a relationship transfers in a quarter. If you are the only adviser and always will be, expect the deal to carry more contingent consideration and a longer tie-in, and negotiate on those terms knowingly rather than resentfully.
Poor data
Client records spread across a back-office system nobody reconciles, a spreadsheet, and the inside of your head. Fee schedules that do not match what providers actually pay. Files missing suitability letters. None of this means the firm is badly run in the ways that matter to clients, but all of it means the buyer cannot verify what they are buying, and what cannot be verified gets discounted or excluded.
Fixable? Completely, and this is the cheapest discount on the list to remove. It is administration, not strategy: reconciling the client list, chasing missing documents, making the recorded income agree with the bank statements. Firms that arrive at market with clean, consistent data also sell faster, because due diligence stops generating new questions. The case for treating this as the first job in any preparation plan is made in why your data quality determines your price.
High-risk products on the book
UCIS, unregulated collective structures, minibonds, aggressive tax schemes, heavy concentrations in illiquid or esoteric holdings: any of these on historic files raises the same question as DB transfers, which is what redress tail might follow the advice. Even a small number of files can be expensive, because the buyer cannot easily bound the exposure without reviewing everything.
Fixable? The same half-answer as DB history. The advice was given and cannot be ungiven, but a reviewed, quantified, documented exposure is priced; an unreviewed one is either heavily discounted or structured around, typically by excluding the liability from what the buyer takes on and leaving it with your company and your run-off cover.
Unresolved complaints
An open complaint, an active Financial Ombudsman Service case, or a past-business review still in progress is an unquantified liability sitting on the table in the middle of the negotiation. Buyers respond in one of three ways: they wait, they carve the liability out, or they hold back enough consideration to cover the worst case. All three cost you, in time or in money.
Fixable? Usually, and worth prioritising. Resolving open complaints before going to market converts an unknown into a known, and a settled complaint with a documented outcome is a far smaller mark against the firm than a live one. If a complaint genuinely cannot be resolved before sale, full disclosure early beats discovery late; a buyer who finds an undisclosed complaint in due diligence discounts not just the complaint but your credibility, and shaken credibility is a common ingredient in deals that collapse.
What the market context adds
Two market facts sharpen all of this. First, average recurring-income multiples reached their highest point since 2018 in H1 2025, at 4.2x according to Gunner & Co, with competition for well-prepared firms named as a driver. The premium is going to prepared firms specifically, which means the gap between a clean firm and a discounted one is wider than it was when everything traded at roughly 3.5x.
Second, buyers themselves are under scrutiny. The FCA's multi-firm review of consolidation, published on Fri 31st Oct 2025, pressed acquirers on governance, debt-funded acquisition structures and the risks of poorly managed integration. A consolidator that has been told to strengthen its risk management does not respond by becoming more relaxed about what it buys. Diligence on seller-side risk has become more thorough, not less, and the discounts described above are applied with more rigour than they were a few years ago.
Sorting the list
Put the seven factors in two columns and the preparation plan writes itself. Genuinely fixable, given twelve to twenty-four months: legacy commission conversion, data quality, unresolved complaints, and key-person dependency if you start early enough. Structural, to be priced and structured around rather than fixed: DB transfer history, high-risk products already on historic files, and the age profile of your client bank, though the record around each can still be improved.
The honest conclusion is that the fixable column is mostly administration and succession work, unglamorous and entirely within your control, while the structural column is mostly history, which is not. Sellers who accept that split early spend their preparation time where it pays and walk into negotiations knowing which discounts they should push back on and which they should trade against deal structure instead. The rest of the what your practice is worth pillar covers the other side of the ledger.
None of this makes a firm unsellable. Firms with DB books, elderly clients and founder-held relationships sell every month; they just sell on different terms, with more of the price contingent and more of the risk retained. Knowing your own discount list before a buyer reads it to you is the difference between negotiating and being told.
If you want a number of your own to react to before you start that exercise, the free IFA valuation calculator gives you a range and explains the factors affecting it.