Valuation of an accounting firm will focus on five major variables and 15 key contributors to those major variables. The five major variables focus on making your firm attractive with regard to the framework of the deal itself. No one will acquire your firm to lose money but that doesn’t mean you should give it away either. The five major variables in determining the value of a practice are:

How these five variables interact is how you will ultimately determine the value.

Consider the following equation: the less money down, the longer the retention and payout periods, the more profitable the deal is for the buyer, the higher the multiple. Of course, the opposite is true as well!

The 15 key contributors to the five major variables help establish a potential value baseline and focus on the following:

For a deeper dive on valuing an accounting firm: