Why Your Growth Engine—Not Your AUM—Defines Your Valuation

The ECHELON Partners Deal Report Is Here. Let’s Break It Down.?

If you’re thinking about valuation, succession, or M&A, the headline is clear: AUM doesn’t dictate your firm’s worth—your ability to scale does.?

With 366 RIA transactions in 2024 (a record high), buyers—especially private equity—have no shortage of options. And they’re not just writing checks for AUM. They’re investing in firms with predictable, scalable growth engines that can compound value with or without the founder in the driver’s seat.?

To put it bluntly:?

A $700M firm with 17% organic growth is often worth more than a $1B firm with flat growth.?

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If your goal is still “hitting $1B AUM,” you’re focused on the wrong number. Here’s what matters now and what buyers are really looking for.?

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1. Prove Your Growth Engine—With Hard Numbers?

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Buyers don’t just want to hear you’re growing. They want to see how—and whether that growth is repeatable, scalable, and resilient beyond market performance.?

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Run your firm’s growth data over the last three years, but don’t stop at topline AUM.?

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Dissect it:?

• Organic growth: New clients, COI referrals, expansion within existing relationships?

• Inorganic growth: Acquisitions, tuck-ins, strategic partnerships?

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Now, identify your strongest growth driver. Maybe COI referrals are consistently generating 8% organic growth. What happens if you pour 30% more time, budget, or talent into it over the next six months??

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The firms that can prove how $1 in resources generates $3 in return get premium valuations. Buyers aren’t gambling on potential—they’re underwriting predictable growth.?

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2. Scale Is a Story—And Buyers Want a Playbook?

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PE firms and strategic buyers don’t buy potential—they buy firms that can execute on a clear, bankable growth plan.?

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Can you articulate your “scale story” in a single page??

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• Who is your ideal client? (“Founders three years from exit” is compelling. “Wealthy families” is not.)?

• What’s your primary growth lever? (SEO? CPA partnerships? Productized planning for equity-compensated execs?)?

• What’s your boldest move to 2x AUM in five years? (Scaling a specialized service model? Targeting 200 new ideal clients?)?

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You're losing valuation points if your answers aren’t clear—and provable. The market isn’t just rewarding size anymore. It’s rewarding specialized strategies with untapped potential.??

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3. Convert Soft Assets Into Hard Value?

With 366 deals on the table, buyers are scrutinizing the intangibles that drive real enterprise value—and separate premium firms from generic ones.?

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The key levers:?

• Client retention & experience: Revenue isn’t sticky unless clients are loyal. Can you prove it??

• Culture & leadership: Firms dependent on the founder always sell for less.?

• Team strength: Who’s positioned to lead in the next phase??

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If you’re still the firm’s MVP across growth, strategy, and client retention, that’s a valuation red flag. Buyers don’t want a firm built around you—they want a firm built to last.?

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4. Smaller Deals Are a Signal—And an Opportunity?

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One of the most interesting takeaways from this year’s report? Deal sizes are shrinking—but it’s not a sign of weakness. Instead, it points to capital shifting down-market, targeting firms with greater upside potential.???

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Translation:?

• If you’ve assumed, “We’re too small to attract serious buyers,” you may be wrong.?

• If you’ve assumed, “We’re big enough to command a premium,” you may be really wrong.?

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Size without scalability, clarity, and a strategic execution plan won’t cut it anymore. The question isn’t “Are we big enough to sell?”—it’s “Are we structured to maximize enterprise value?”?

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What’s Your Next Move??

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Take 30 minutes this week to pressure-test your firm’s scalability:?

• Are you tracking and optimizing your best organic growth channel??

• Can you articulate your scale story in a one-page roadmap??

• If a buyer called tomorrow, could you prove how your model grows—with or without you??

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Every RIA is a target in this market. The ones that command a premium are the firms that understand their growth engine—and prove they know how to scale it.?

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No limits,?