A 4-partner Boston consulting network with $3.8M revenue had no equity structure and two partners wanting to exit. We built the equity allocation, valuation method, and buy-sell agreement.
01The Situation
The four partners had built the consulting network through a handshake arrangement that had worked perfectly for nine years. But P2 wanted to exit in two years to retire. P1 wanted out in three years to start a new venture. With no equity structure, no buy-sell agreement, and no valuation methodology, there was no mechanism for either exit to happen cleanly.
Without a plan, the exits would either be informal, the exiting partners just walk away, taking their clients, or contentious.
02What We Did
We started with a revenue attribution analysis, which clients were each partner's relationships, and which were institutional. This determined client portability and drove the equity allocation, weighted by client revenue and portability, not equal shares.
The buy-sell agreement established a 2.2x EBITDA valuation methodology, right of first refusal process, and a 24-month financing structure, staying partners buy out exiting partners funded by their enhanced share of future revenue. P2 exits in month 14 of the plan. Process is proceeding without dispute.
03Client Impact
The partners had avoided the equity structure conversation for nine years because they assumed it would be contentious. It was not. The revenue attribution analysis gave them an objective basis for the allocation that all four accepted. Nine years of avoidance resolved in three months.
Breakdown
| Partner | Client Revenue | Portability | Equity % | Implied Value | Exit Timeline |
|---|---|---|---|---|---|
| P1, Founding | $1,520,000 | High | 38% | $1,596,000 | Year 3 |
| P2, Strategy | $980,000 | Medium | 24% | $1,008,000 | Year 2 |
| P3, Operations | $840,000 | Low | 21% | $882,000 | Staying |
| P4, BD Lead | $460,000 | High | 17% | $714,000 | Year 3 |
| TOTAL | $3,800,000 | — | 100% | $4,200,000 | — |
What changed
Equity Structure Built, Weighted by Revenue Contribution
Four partners assigned equity percentages based on client revenue and portability. All agreed.
$4.2M Agreed Valuation
2.2x EBITDA methodology established and signed. No disputes about valuation when exits occur.
Buy-Sell Agreement Signed
Right of first refusal, 24-month payout structure, and financing mechanism all documented.
P2 Exit Proceeding, No Disputes
Month 14: P2 exit on track per plan. P3 and P4 acquiring P2 equity exactly as modeled.
The partners had avoided the equity structure conversation for nine years because they assumed it would be contentious. It was not. The revenue attribution analysis gave them an objective basis for the allocation that all four accepted. Nine years of avoidance resolved in three months.
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