What a Fair RIA Deal Actually Looks Like
Headline multiples make the press release. Structure decides whether the founder is happy in year three. Here's how to read a term sheet the way a buyer does.
Every founder hears the same number at a conference and comes home anchored to it. Multiples are real, but they're the least informative line in a term sheet. Two deals at the same multiple can leave a founder with wildly different money, risk, and daily life.
Read structure first. How much is cash at close, how much is rollover equity, and how much is an earnout you have to go earn. Cash is certain. Rollover is a bet on the buyer. An earnout is a job with a bonus plan you didn't write.
Then read the operating covenants. Who hires. Who prices. Whose name is on the door in year two. A great price with bad governance is a bad deal wearing good clothes.
A fair deal is legible. The founder can explain it to their spouse in five minutes: this much cash, this much ownership in the new thing, this is what I have to do, this is what happens if I stop. If the explanation takes an hour, the complexity is doing work, and rarely for the seller.