Accountant Business Valuation Issues
The Accountant sector is part of the larger Professional Services industry and has seen significant changes over the past decade. These include:
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Increasing uptake and use of cloud technology
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Upskilling and training of bookkeepers
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FOFA reform
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Some businesses undertaking their own reporting requirements
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Changes to key parts of the Tax Act such as Div7A, PAYG and SGC reporting.
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Ever increasing complexity of tax and accounting regulation.
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There has been some rationalisation of smaller practices, with mid-tier practices expanding into the both ends of the market (larger and smaller privately held companies), and increased regulatory requirements and training has seen some accountants leaving the industry.
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Key factors that influence the accountant business valuation include location and client base, integrated IT systems, key staff, procedures and recurring client base.
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We expect continued acquisition and merger opportunities as technology, training and other industry changes influence some accountancy partners to exit the industry.
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Key Drivers of Accountant Business Valuations
Key Industry Statistics
According to IBISWorld, the Accounting industry:
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Grew revenue by 1.3% pa over the past five years to $20bn.
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Average revenue per business is $590k
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Top 4 accounting firms (PwC, Deloitte, KPMG and EY) account for less thsan 40% of the industry revenue.
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Over 98% of accounting firms have less than employee fewer than 20 people.
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We have collated industry performance statistics based on ABS data and detailed them in a whitepaper, which can be downloaded from the link below.
An Accountant business valuation is driven by key factors below such as:
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Number of clients and level of recurring revenue
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Location and business population
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Low reliance on key partners
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Staff structure in place
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Effective management systems and integrated IT systems
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Provision of a range of services dependent on location.
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EBITDA Margins range from less than 20% to 45% (for some large practitioners), depending on the size of the business, localtion, range of services, technology and automation.
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Typical EBITDA Multiple ranges we have observed are:
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Revenue of $1m - $10m: 0.5x - 2.5x
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Revenue of $10m - $20m: 2.0x - 4.0x
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Revenue greater than $20m: 3.5x - 5.5x
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Our Business Valuation Experience
Our accountant business valuation experience has included including business valuations for:
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Several 1 or 2 person accounting practices for partner or staff buyout
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Larger 20 person accounting practice for the purposes of partner exit
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A number of multi-person bookkeeping practices​
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A 4 person accounting practice acquisition by a larger local practice
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