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.
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.
Key factors that influence the accountant business valuation include location and client base, integrated IT systems, key staff, procedures and recurring client base.
We expect continued acquisition and merger opportunities as technology, training and other industry changes influence some accountancy partners to exit the industry.
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.
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.
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.
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
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
