Professional practice valuations are a specialist area of business valuation because they are often valued under a different appraisal method or business valuation method to most business categories.
Accountancy practice valuations are most commonly conducted on a multiple of gross fees per annum, whereas other businesses are valued on a multiple of profitability.
For example, a valuation of an accountancy practice in metropolitan Melbourne may attract a multiple of 95-105 cents in the dollar of annual fees, provided those fees are in an attractive client demographic. If the client demographic is too low (with lots of low price compliance tax returns) then the multiple may drop below 75 cents in the dollar, whereas higher paying clients are generally valued more highly.
In contrast, an accountancy practice in a country town may only attract a multiple of 50-75 cents in the dollar for its fees, particularly if the town is small or is in a low growth situation.
There are similar quirks and variations in the valuation of other professional practices such as legal practice valuations, architectural practice valuations, engineering practice valuations, medical practice valuations, veterinary practice valuations, and surveying practice valuations.
The fee multiple is slowly being replaced by profit multiple valuation methods such as EBIT multiples and business valuers generally tend to do both valuation methods on a professional practice valuation as a cross-check.
Rent roll valuations are one of the most common valuations done by Business Valuer Network members. We value many real estate practices each year and have a broad database of