Accounting firms typically sell at a multiple of annual gross revenue or EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). The exact multiple depends on factors like client retention, profitability, location, and firm size.
Revenue Multiples
- Small Firms (<$1M revenue) → 0.8x – 1.2x gross revenue
- Mid-Sized Firms ($1M–$5M revenue) → 1.0x – 1.5x gross revenue
EBITDA Multiples (More common for larger firms)
- Small Firms → 2x – 4x EBITDA
- Mid-Sized Firms → 4x – 6x EBITDA
Factors That Affect the Multiple
- Client Retention – Firms with high recurring revenue and long-term client relationships sell at higher multiples.
- Profit Margins – Higher margins (>20%) justify a higher multiple.
- Specialized Services – Firms offering advisory, wealth management, or niche tax consulting can command 1.3x+ revenue multiples.
- Geographic Location – Urban and high-demand areas see higher multiples than rural firms.
- Technology & Efficiency – Cloud-based, paperless firms tend to sell at a premium.
- Owner Dependence – If clients are heavily reliant on the seller, the multiple is lower due to transition risk.
Typical Deal Structures
Most deals include 50%-80% upfront payment, with the remaining tied to client retention (earn-outs) over 1-3 years.