What your business is worth when you sell
How buyers value a mortgage business, why recurring income raises that value, and how a partnership with Equity & General builds recurring income into your firm.
How buyers value a mortgage business, why recurring income raises that value, and how a partnership with Equity & General builds recurring income into your firm.
A mortgage business with steady enquiries, repeat clients and a good name can still sell for less than its owner expects. The reason is the way mortgage income is earned, and it applies however well the firm is run.
A buyer pays for enterprise value. Transactional broking builds little of it, and a partnership can add to it.
A buyer is purchasing future income, and mortgage income is difficult to promise. It arrives at completion and then stops. The next year starts from nothing, rebuilt out of new enquiries. Much of it depends on the founder’s own relationships and reputation, which are hard to transfer to anyone else. It also rises and falls with things no firm controls: interest rates, lender appetite, and the spread of product transfers that pay little. A buyer sees income that has to be won again every year.
Buyers pay for income they can predict. They ask whether the income will still be there next year, whether it will continue after the current owner leaves, and whether it can be relied on without constant effort to replace it. Income that recurs, is contracted and stays attached to the client after the founder steps back is worth more, pound for pound, than income that has to be won again each year.
At exit, transactional income has one weakness: each year starts from zero. A record year leaves no income in place for the following year, and the flow of enquiries has to be refilled. A firm can therefore be busy, respected and profitable and still be worth little when the owner wants to step back, because its activity has not built an asset.
Recurring income works differently. When a client is advised on their pensions or investments and stays under ongoing advice, the fees on those assets under management recur year after year, and they tend to grow as the assets grow. A buyer can look at that income and model it, because it does not depend on next year’s enquiries. It carries on when the founder steps back, because it is attached to the client and the service. It does not depend on one person’s reputation, and it grows as more clients are added and existing portfolios build.
The clients you already have include people who need pension and investment advice. The borrower completing on a home, the landlord building a portfolio, the business owner releasing capital: each already has a relationship with you, and each may have pensions and savings that nobody is advising on. The introduction turns a client who once produced a one-off completion fee into a client who also produces recurring value.
A partnership lets you build that recurring value without becoming a wealth-management firm. You introduce; E&G provides the advisers, the systems, the compliance and the administration; and you share in the value of the assets under management that result. You keep your existing permissions, your team and the way you place mortgages. The result is recurring income attached to your firm, which is what a buyer looks for.
The change is gradual. In the early months you are making introductions, and the recurring value is small. As clients are advised and their assets build, and as more of your completions turn into introductions, the recurring income accumulates and begins to compound. The character of the firm shifts over years, from one that earns entirely at the point of each transaction toward one that also carries a growing base of recurring income. This describes what a partnership is designed to build and does not forecast any figure.
Two firms are offered for sale. One writes mortgages well and earns at each completion, with income that starts again from nothing every January. The other does the same, and also carries a base of recurring advice income attached to its clients through a partnership, with a second professional relationship helping to keep those clients in place. A buyer can see continuity in the second firm, income that survives the handover, and clients with a reason to stay. A buyer values the second firm more highly because of the type of income it carries.
You hold nothing outside your existing permissions. The regulated advice is E&G’s, the assets under management sit with E&G, and the permissions are E&G’s under FCA authorisation (No. 474163). Your share of the recurring value is contractual, set out in your partnership terms, and does not depend on you advising on a single pension or investment. You build capital value in your firm within your own permissions.
It can. A buyer values future income they can rely on, and transactional mortgage income is hard to promise because it restarts each year and leans on the founder’s own relationships. The firm still has value, but much of it is tied up in you, and a buyer finds that hard to pay for.
A completion fee is earned once and then gone, so a buyer cannot count on it recurring. Recurring advice income on assets under management arrives year after year, tends to grow with the assets, and stays attached to the client when the owner steps back. A buyer can model income like that with some confidence, which is why it supports a higher value per pound earned.
No. You carry on placing mortgage business as you do now, whether through E&G on comparable terms or through your existing network. The recurring value is added alongside your mortgage work, from the same clients.
You keep your relationship with the client, and E&G holds the regulated advice relationship and the assets under management under its own permissions. Your share in the recurring value is set by your partnership terms. That separation lets you build capital value without taking on FCA authorisation or the compliance that comes with it.
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