How Much is My Accounting Practice Worth?

When I work with an accountant who is thinking about selling their business, the first question they’ll ask is “How much is my practice worth?” They’re numbers people, after all. And the answer I’m giving most often these days is “More than it was a couple of years ago. In fact, maybe twice as much”

There are a couple of reasons for that. One is that savvy business owners have been able to implement technology to make their practice much more efficient and profitable. In fact, I have a formula for valuing accounting practices based on their level of technology. Firms that have modernized by implementing remote staff, reducing or eliminating their office space footprint, using off-shore support, installing client portals, using workflow automation, and offering high-value advisory services are receiving offers up to 2 gross annual revenues. 

Those who are still managing a physical office and using paper to track mostly yearly tax filings are lucky to get 1 – 1.25X their gross revenues. Technology upgrades increase profitability, making those companies much more attractive both to strategic buyers and private equity firms. 

That’s why there’s been an enormous surge in demand for accounting businesses recently. It’s a seller’s market right now, and I see many more buyers looking for attractive acquisitions than owners ready to sell. Because accountants, by nature, are risk-averse, many owners are waiting until the outcome of the national election before making a decision to sell the business. 

And it’s true that the party in charge after November 5 can influence some important factors in the sale. Income tax rates, for example – most sales come through as straight earnings for the seller. Another critical financial factor is the capital gains rate – something every accountant is acutely aware of. 

But after the election comes tax season – and no one can afford the time to focus on a sale during the busiest time of year. So I predict a flood of businesses for sale come next summer – which means your business’s value may be slightly less in 2025.

When I provide an opinion of value for an accountant, I also let them know about some of the quick wins they can implement to increase their practice’s value over the next couple of years. Investing in a virtual client portal to automate communication and documentation is one improvement that will pay off almost immediately. 

It surprises me that many practices don’t have written standard operating procedures. The owner knows exactly how every transaction should be handled, but accountants or support staff may each be doing things slightly differently. Not only do SOPs make it easier to onboard and train staff, but they also make it easier to use remote and even offshore staff – no more micromanagement required. 

If you are curious about your business's worth, we offer a complimentary and confidential valuation opinion. Regardless of where you are in your business cycle, it is important to always know how your business contributes to your net worth.