Accountancy Business Valuation

Accountants are the most important service provider to small businesses in Australia. Their relationship with SME clients could be described as ‘sticky”. In other words, there is loyalty or stickiness in the relationship between client and accountant and that relationship is habitual. The client utilises the accountant’s services for tax and management and succession planning and exit strategy advice at least once each year and often on several occasions.

As a consequence of this habitual financial income stream, the value of accountancy practices is high in dollar terms when compared to other professions such as lawyers, engineers, and architects.

It is common for accountancy practice fees to be sold on a multiple of gross fee production per annum.

The multiple can be as high as one dollar ten in the dollar of gross fees or as low as thirty cents in the dollar of gross fees.

For example, an upmarket suburban accountant’s practice with five hundred thousand dollars in fees derived from quality SME clients may sell for four hundred and fifty thousand dollars. Whereas accountants fees in a wheatbelt town of the same amount of billings may only sell for three hundred and fifty thousand dollars.

Fees such as accountants’ audit fees may also attract a lower multiple because there are fewer buyers than management accounting fees.

It is also possible to value accountants by a profit multiple, which has some logic as one practice may have high occupancy costs compared to another accounting practice producing the same amount of billings or may be less efficient in its wage costs to revenues earned ratios, in which case it should sell for a lesser amount than the more efficient practice.

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