Book of business
A book of business is the complete set of client relationships, accounts, and recurring engagements a company or individual professional has built up over time. In service industries — insurance brokerages, financial advisory, accounting, and similar fields — the book of business is often the single most valuable asset changing hands in a sale.
In many service businesses, there’s very little physical equipment or inventory to value. What’s actually being sold is a set of relationships: the clients who trust the business, keep renewing, and keep referring others. That collection of relationships is the book of business.
How it’s typically valued
Books of business are commonly valued as a multiple of the revenue or recurring commissions they generate, adjusted for how concentrated the book is and how likely clients are to stay through a change of ownership. A book spread across many small accounts is generally seen as sturdier than one dependent on a handful of large relationships.
The retention risk
Clients follow relationships, not paperwork — if the departing owner was the main point of contact, some clients may leave once ownership changes, no matter how good the new owner is. Buyers typically build a transition period into the deal, and sometimes structure part of the price around actual client retention after closing.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Treadstone LawLegal commentaryGetting a Business Valuation Before You List
- 02Treadstone LawLegal commentaryCustomer Concentration Risk: Why It Can Sink an Ontario Business Sale
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