The Problem with Hearsay Valuation

When valuing a professional practice, many owners default to familiar rules of thumb. Multiples of recurring revenue. Growth rates. Loose assumptions based on similar businesses in their network.

The flaw in this approach is twofold.

First, these reference points are rarely rooted in real data. The sample size of visible, comparable transactions is small, and each practice carries its own unique blend of clients, staff, services, and risks. A single multiple from a conversation at a conference tells you almost nothing about how buyers will perceive your business.

Second, the dynamics of the market are fluid. Buyer priorities shift, regulatory landscapes evolve, and what mattered most yesterday may be secondary tomorrow. Static assumptions don’t keep pace with a moving market.

As a result, owners who rely on gut feel or anecdote often either underestimate or overestimate their practice’s value — and make strategic decisions based on flawed assumptions.

Moving Beyond Guesswork: What the Data Tells Us

Recognising this, we spent years developing a different approach: collecting live, buyer-weighted data at the point of transaction. Not opinions. Not assumptions. Actual insights from the people making real-world decisions about what to buy, and at what price.

What emerged was a data set that cuts through the noise. Rather than relying on informal multiples, we identified nine core value drivers, each shaped by multiple underlying factors that influence buyer perception:

• Services
  
• Staff
  
• Clients
  
• Compliance
  
• Financials
  
• Growth
  
• Systems and technology
  
• Location and portability
  
• Owner reliance
  
  

However, it’s not simply a matter of knowing how buyers view each driver in isolation. It’s the weight they place on the underlying factors — and the way those factors interact within each driver — that reveals a far richer and more complex picture. And it’s here that the real surprises begin to emerge.

When Intuition Misleads

A few examples stand out.

Many owners assume that investing heavily in internal systems will increase their valuation. It feels like the right thing to do — after all, a clean, modern system must be a selling point. Yet our data reveals that, more often than not, buyers intend to replace inherited systems with their own. System quality, while helpful, rarely moves the needle.

Or take pricing. Gut instinct suggests that undercharging clients creates an opportunity for uplift. Some buyers agree — but others see underpriced services as a warning sign of future churn risk. It’s a more complicated picture than common sense suggests.

Perhaps most revealing is the assumption that historical growth is a strong selling point. While it helps, buyers are primarily focused on what the practice looks like today and what they believe they can build tomorrow. Past growth is no guarantee of future appeal.

The lesson is clear: instinct and second-hand stories are a poor substitute for data-backed insight.

Optimising for Real-World Outcomes

One of the most valuable insights from our research is the concept of the Overscore — the point at which further improvements in a particular area deliver diminishing returns on value. For practice owners, this understanding is crucial. It allows for strategic allocation of effort and investment, focusing only on areas that genuinely impact buyer perception.

Rather than pouring time and resources into improvements that won’t shift the dial, owners can prioritise actions that directly align with active buyer preferences.

This is the advantage of data over hearsay. While barbecue wisdom may offer a comforting narrative, real-world outcomes depend on understanding the specifics of what today’s buyers value — and what they don’t.

Closing Thoughts

As the French military learned too late, trusting old assumptions over emerging realities is a dangerous strategy. In the world of practice sales, owners who rely on gut feel or casual anecdotes risk building their own Maginot Lines — impressive, but ultimately useless defenses against the realities of the market.

The difference between assumption and insight can be the difference between an acceptable deal and an exceptional one.

Because here’s the truth:
What you overhear at a barbecue — or what someone once “got for their practice” — won’t sell your business. Real buyers, in real markets, rely on real data. And so should you.

The tools are available. The data is live. And for those willing to look past the noise, the answers are clearer than ever.

As the market keeps evolving, the data keeps speaking. And it’s revealing far more than surface assumptions will ever show.