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Is Your Firm Profitable, or Are You Just Well Paid?

Split what you take home into pay for doing the job and profit from owning the firm. See your true margin, and what the business would earn if you hired someone to do your job.

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Last Year’s Numbers

From your P&L or tax return. Round numbers are fine.

The Business
$
$
$
You
$
$
True Profit Margin
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Your Take: Pay vs. Profit
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Your True Profit Report

Your P&L restated as if you were an employee of your own firm, where every revenue dollar goes, and what it means for value.

Your P&L, Restated

Revenue
Operating expenses
Add back personal costsThey're really part of what you take out
Market-rate pay for your jobWhat it would cost to hire your replacement
True profit

Where Every Revenue Dollar Goes

Where You Land

BandWhat it meansTrue margin

What It Means for Value

Profit as most owners first calculate itRevenue minus expenses, counting your whole take as profit
True profit
Illustrative value at your multipleTrue profit × the multiple you entered

Illustrative. Bands are this tool's own, and the multiple is your assumption, not a valuation. A buyer, lender or valuation professional may normalize the numbers differently.

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See your P&L restated as if you were an employee of your own firm, where every dollar goes, and what it means for value.

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Reading Your True Profit

In an owner-run advisory firm, the owner's take mixes two different things: pay for doing a job inside the firm and profit from owning it. When they are counted together, a firm can look highly profitable while depending entirely on its owner's work. Separating them shows what the business itself earns.

Market-Rate Pay Is the Key Number

The question is what it would cost to hire someone to do the work you do, at a fair market wage. That figure is treated as an operating cost. What remains after it is the firm's true profit. If you are unsure, consider what you would offer an experienced advisor to take over your client work.

Add-Backs Belong in the Owner's Column

Personal costs that run through the business, such as a car or family members on payroll who do not work in the firm, are part of what the owner takes out rather than true operating expenses. Adding them back gives a cleaner view of what the business really costs to run.

True Profit Is What Can Be Grown or Sold

A buyer, partner or lender looks at what the business earns after paying someone to do the work. True profit is the figure that funds hiring, reinvestment and a future transition. Improving it is a different project from increasing the owner's take, and both are worth measuring.

Common questions

How do you calculate the true profit of a financial advisory firm?

Start with revenue, subtract operating expenses excluding anything paid to the owner, add back personal costs run through the business, then subtract a market-rate salary for the work the owner does. The result is the profit the business earns as a business, separate from the owner's pay for doing a job.

What is owner normalization in an advisory practice?

Normalization adjusts a firm's financial statements so they reflect the business as if it were run by hired staff. It typically replaces the owner's actual compensation with a market-rate salary and removes personal or one-time expenses, giving a clearer picture of ongoing profit.

Why does true profit matter when selling an advisory firm?

Buyers generally value a firm based on the cash flow it will produce after paying someone to serve its clients. If the firm only appears profitable because the owner is paid below market or because personal costs are mixed in, the profit a buyer can expect may differ from the profit the owner sees.