The Foundational Valuation Formula
The starting point for any valuation is a simple, powerful equation. It establishes the baseline value from which all adjustments are made.
A Rising Tide: The Growth of Valuation Multiples
The market for trail books is hotter than ever. Sustained demand has driven a significant and consistent increase in valuation multiples over the past decade, signaling a strong seller's market for high-quality assets.
The Quantitative Drivers: What the Numbers Say
Run-Off Rate
The annual rate at which your loan book's balance decreases. A lower rate is the strongest signal of a stable, loyal client base and commands a premium.
Net Book Growth
The year-on-year growth after accounting for run-off. Positive growth proves your business has momentum and is highly attractive to buyers.
Loan Book Risk Profile
Metrics like arrears, clawbacks, and loan seasoning are scrutinised to assess risk. A clean, mature book is inherently more valuable.
The Qualitative Edge: Beyond the Numbers
Sophisticated buyers look past the spreadsheets to assess the underlying health and structural integrity of your book. These factors are the root cause of premium quantitative results.
Client Portfolio Quality
- ●Demographics: A high concentration of clients under 50 in stable, high-income professions is ideal.
- ●Location: Clients in major metro areas are often preferred by buyers.
- ●Equity: A client base with significant property equity signals lower risk and future opportunity.
Structural & Operational Integrity
- ●Lender Spread: High diversification is critical. No single lender should represent more than 25-40% of the book.
- ●Data Quality: Clean, complete, and accessible CRM data is non-negotiable. Poor data leads to a major valuation discount.
- ●Systems & Brand: Documented processes and a professional brand reduce owner dependence and add value.