What Is an Accounting Firm Worth?

The industry convention is roughly 1x annual recurring revenue, though earnings-based valuation at 1.8x to 3.3x SDE is the better cross-check. When the two diverge sharply, the reason is usually an unusually high or low expense ratio.

It ties part of your price to how many clients remain after a set period, commonly one year. It is close to standard in this category. Negotiate the measurement carefully: what counts as retained, who controls client communication during the period, and whether you are paid on revenue or client count.

Most do, if the transition is handled well. Retention is materially higher where staff already hold relationships, where the seller stays through one full tax cycle, and where clients are told in person rather than by letter.

There is no single average, because price tracks earnings rather than revenue. At the midpoint multiple of 2.5x SDE, accounting firms at $500,000 of SDE sell around $1,275,000, and at $1,000,000 of SDE around $2,550,000. Typical SDE margin in this category runs near 20% of revenue, so an accounting firm doing $1,000,000 in revenue would often carry about $200,000 of SDE and land near $510,000.

Take your Seller's Discretionary Earnings and multiply by 1.8x to 3.3x. Where you land inside that band is decided by owner dependence, customer concentration, recurring revenue and the quality of your books. An accounting firm at the top of the range looks materially different from one at the bottom, and most of those differences can be improved in the twelve months before a sale.

SDE multiples of 1.8x to 3.3x apply to owner-operated accounting firms. Once earnings pass roughly $1M to $2M of EBITDA the buyer pool shifts to private equity and strategic acquirers, and pricing restates onto an EBITDA multiple of 4x to 6.5x. The two are not comparable: SDE includes the owner's compensation and EBITDA does not, so the same business shows a higher SDE multiple than EBITDA multiple.

Typically 6 to 12 months from going to market to closing, assuming financials are ready. Accounting practices usually sell with a retention clause: part of the price depends on how many clients are still there a year later. Negotiate that clause carefully, because it is where most of your risk sits.

There is no formula unique to accounting firms. The method is the same one used across small business sales: recast earnings into Seller's Discretionary Earnings, then multiply by the industry band, which for accounting firms is 1.8x to 3.3x. Three valuation methods exist in principle. The income approach, applying a multiple to earnings, is what nearly every real transaction uses. The market approach compares against recorded sales of similar businesses and works as a cross-check. The asset approach values equipment and inventory and generally sets a floor rather than a price.

Yes. The calculator on this page applies the same 1.8x to 3.3x band used throughout this guide, adjusted for owner dependence, margin quality and business age. It takes five inputs and returns a market range rather than a single figure, because real transaction prices move with deal structure and buyer type.

A market valuation estimates what a buyer would likely pay and is what you need to decide whether to sell. A formal appraisal is a certified document prepared to a defined standard, and is normally required only for litigation, divorce, estate and tax matters, or an SBA loan on the buyer's side. For planning an exit, a market valuation is the right instrument and is far cheaper.