Factors That Affect The Value of Your CPA or Tax Firm

Deciding to sell your CPA or tax practice can be a complex and difficult decision. A seller will need to consider multiple factors that can impact the final sale price of their firm.

If you are considering selling your CPA or tax practice, you may be wondering what factors can impact the value of your firm. Here, we go over and break down some of the more important factors that may impact the valuation of your CPA or tax firm.

Know Your Average Fees

Are your return fees within industry averages? You may be able to find data on average practice fees by form or schedule through various groups or societies. These fees may vary depending on your practice’s geographical location as well. Additionally, it is important to know how long it takes to process each client’s tax return.

If you have been providing discounted fees to clients and know that you can increase your fees, now is the time to do so. If you increase your fees by just 15% on a $100,000/year practice, you may be able to net another $18,000-$20,000 when you sell your practice.

Consider Your Service Line

Do you provide full-service tax preparation including both individual and entity returns? Do you have clients who refer you to other clients? Do you handle representation work, accounting, etc.? Do any of your current clients represent more than 5% of your revenue? If so, a buyer may ask for an additional guarantee.

Determine Your Client’s Average Age

Have you not accepted a new client in years? Are most of your clients retired? If so, you may need to begin marketing your services to younger professionals. Buyers are looking for a practice that has promising growth potential.

Clear Out Bad Clients

Do you have clients that are behind or pay late? Buyers do not want the hassle of dealing with problem clients. Ideally, you want to begin enforcing compliance with your billing and collection policies as soon as possible. If you have overdue accounts, offer a discount if the client can pay by a certain time period. After you give a client a discount to secure the payment, ensure they know and understand that it is a one time discount.

Another method to clear out problem clients is by increasing your fees. Let all of the “late filers” know about the upcoming increase in fees and encourage them to come in before prices increase. Bad collection policies will only reduce the sale price, regardless of how stable the revenue of your practice is.

Gather Client Data

What is the average AGI? How many schedules C, E, and F are you preparing? What is the average age of your clientele? Most buyers will want to know how many clients come into the office for a formal interview process and how long each interview is.

Your software may have much of this information already, but if not, start to compile this information as soon as possible. The buyer will want to know the difficulty level and price range you are charging for all your returns. You can even pull one of your most complicated returns and see if the buyer fully comprehends the process involved.

Office Location

Is your CPA or tax practice in a Class-A building or in a small upstairs office with no parking? Security, lighting, parking, and access for people with disabilities are important factors for buyers. Lots of lighting and good views will always add up to a higher sale price. If your office is dirty and dimly lit, consider making some changes before you sell. If your current lease exceeds 8%-10% of your total revenue, it may be an issue to a buyer.

Know Your Profit Margins

A buyer wants to know the potential profit they can expect and are typically looking for a minimum baseline EBITDA of 50%. Therefore, should your profit be more than 50%, you can expect a higher asking price. The reverse is also true.

What is your hourly rate? Do you charge $150 per return but do 900 of them by yourself because each one only takes 15 minutes? Or, can you only finish 200 of them yourself because they are more complex, which implies that your fees are below average?

If that’s the case, you will need additional preparers to handle the other 700 returns, which also means an increase in overhead. On the flip side, another practice may produce 200 returns at an average fee of $500 each with a 35% overhead. This type of practice justifies an increased multiple to calculate the value of a practice.

Do not “pad” expenses on your own internal books. A lender will consider those expenses as part of the operating expenses when they determine the profitability and the overall loan viability. Keep and prepare a budget and get your margins in healthy shape.

Know Your Profit Margins By Service Line

Know how much it costs you to provide each of your services, whether it’s bookkeeping, payroll, or tax services. Providing a service with a slim or no profit margin is not worth much to a buyer. A buyer will expect to recover their investment in 3-5 years.

Have you prepared cash flow statements or projections looking forward 2-5 years? Are you projecting annual increases or any technological upgrades? You should consider preparing a cash basis P & L on a monthly basis for the past 3 years. Buyers will want to know the historical cash flows of a practice.

Organize Your Office

Does your practice currently utilize the latest technology and software with the highest levels of privacy and security? Do you need to worry about disclosures? If you are able to resolve these issues and any other liabilities before a sale, you will be able to obtain a higher sales price.

Ensure that your client’s source documents are scanned into a secure client file. Buyers do not want to deal with storage boxes full of client source documents. Use only a secure portal to transfer information to & from clients.


Most buyers will want to keep the status quo when it comes to staff. If you have an issue with an employee, rectify it before your practice is put up for sale. Try to ensure that the employees are able to assist the buyer and have the basic knowledge their roles require of them. It is best to avoid hiring new staff when you intend on selling the practice in the future. In some circumstances, the buyer may have staff that they intend on bringing with them.

Final Note

All in all, there are multiple factors that may impact the value of your CPA or tax practice when it comes time to sell. Getting your practice organized and handling any liabilities before you place your practice on the market may help ensure you secure a higher sale price.

If you are looking to buy or sell a CPA or Tax practice, the team at Accounting & Tax Brokerage can help. Our practice brokers have over 50 years of experience and only provide services to the accounting & tax industry. As seasoned tax professionals ourselves, we understand the importance of relationships. Our firm offers assistance to both buyers and sellers, ensuring that buyers find the right CPA or tax practice that meets their needs, and that sellers find a successor who will care for their firm as much as they do.

To learn more, or to get a free consultation, contact Accounting & Tax Brokerage here or call us at (855) 428-2225.