How to value an accounting firm: proven methods and key value drivers

Valuation is one of those things every firm owner eventually runs into, whether you’re planning for retirement or just curious about what your firm might fetch on the market.

While putting a number on your firm might seem simple, it rarely is. Accounting firms involve people, processes, and client relationships, which makes valuation more than a formula — it’s also about how your business runs and how transferable it is.

In this guide, we’ll cover how to value an accounting firm, what drives firm value, and the steps you can take now to strengthen your position down the line.

Proven methods to value a CPA firm

There’s no one-size-fits-all approach to value an accounting practice. The right approach really depends on how big your firm is, how well it runs, and what a buyer is looking for. 

Here are the most common methods — and when they tend to come into play.

Gross annual revenue multiple

One of the most common ways to value a CPA firm is by taking your gross annual revenue and multiplying it by a typical valuation multiple, depending on things like niche, client base, and location.

It’s simple, but that also means it misses some nuance. It doesn’t factor in how profitable you are, how efficient your team runs, or whether your clients are sticking around year over year.

Revenue multiple example: if your accounting practice generates $800,000 in annual revenue and gets a 1x multiple, that puts your estimated valuation right at $800,000.

SDE multiple (seller’s discretionary earnings)

This valuation method multiplies your SDE (seller’s discretionary earnings) — including profit, owner salary, perks, and non-recurring expenses — by a market-based multiple.

It’s useful because it captures the full earning power available to a buyer, especially in firms where the owner’s role is heavily embedded.

SDE multiple example: let’s say your firm’s SDE comes to $200,000. If a buyer offers a 2.5x multiple, your estimated firm value would be $500,000.

EBITDA multiple

If a buyer wants to know how profitable your firm really is — not just what it brings in — they’ll look at EBITDA (earnings before interest, taxes, depreciation, and amortization). 

This method tends to come up more with firms that are organized, stable, and show growth potential.

EBITDA multiple example: if your firm nets $250K in EBITDA and you’re given a 3.5x multiple, that puts your valuation at $875K. 

Market approach

This valuation approach looks at what similar firms have sold for recently, taking into account things like location, service mix, client base, and revenue model.

When you can find relevant sales data, this approach gives one of the clearest pictures of what the market is actually paying. 

The one downside is that those comparables aren’t always easy to track down unless you’re working with a broker. Still, it’s possible to connect with state CPA societies or M&A consultants to get a better sense of what firms like yours are fetching.

Asset-based approach 

In some cases, a valuation can come down to what your firm owns — desks, equipment, accounts receivable — minus any liabilities. It’s simple, but it’s also not that common.

That said, if your practice holds real estate, proprietary tech, or other valuable assets beyond client work, this approach can play a bigger role influencing your valuation. 

Just keep in mind that intangible assets, like brand equity or client contracts, are harder to price and often require a specialist assessment.

Cost approach 

Rare, but worth covering — occasionally the value of an accounting firm is based on what it would cost to build a similar firm: systems, staff, infrastructure, and everything in between. 

This method shows up most in distressed sales or situations where the business isn’t operating profitably anymore, providing a fallback approach when a firm’s value is tied more to replacement cost than ongoing performance.

Typical accounting firm valuation multiples

Valuation multiples give you a fast way to ballpark firm worth. They’re not a final number, but they’re a useful benchmark. And where you land depends on what kind of firm you’re running.

Gross revenue multiples for smaller firms tend to range from 0.7x to 1.1x, depending on niche, location, and how your revenue is structured. Larger, more systematized firms can sometimes reach 1.5x or more.

SDE (seller’s discretionary earnings) multiples typically fall between 1.8x and 3.25x. These are most common for small to mid-sized firms where owner compensation and benefits are part of the picture.

EBITDA multiples tend to apply more to mid-sized and growing firms with clean books, optimized systems, and recurring revenue. These generally fall between 3.0x and 4.5x, depending on profitability and transferability.

How to get a higher multiple

The above are average multiples, but what pushes a firm toward the higher end? A few things:

• Healthy year-over-year growth
• Strong client retention
• Minimal owner dependency
• Cloud-based accounting workflows
• Based in a growing market or desirable niche

To put this into context: if your firm brings in $190K in SDE and you’re at a 2.6x multiple, that’s a $494K valuation. Improve your margins, tighten operations, or shift to a more scalable model, and you might land closer to 3.2x — a $608K valuation.

The takeaway? Knowing the multiple is a great starting point. Influencing it, however, is where you build real equity.

Key drivers that influence firm worth

Various factors drive up the value of an accounting firm, because buyers aren’t just looking at your top-line numbers; they’re asking, How predictable is this business? And how easily can it grow without breaking? 

Firm size and annual revenue

Larger firms usually get more attention, and better multiples, but size alone doesn’t guarantee value. 

What also matters is the stability of your revenue and the structure behind it. For example, a $2M practice that revolves around a single partner is riskier than a $1.2M firm with a leadership team, documented processes, and shared client relationships.

Recurring clients and strong relationships 

An accounting practice with loyal, recurring clients will almost always command a higher value than one chasing project-based work. 

Things like retainers, bundled services, niche services, and a tech-driven client experience — such as a secure, mobile-first client portal — tell buyers that your firm is predictable and stable in terms of client retention and satisfaction. 

Buyers also look for diversity when assessing the value of an accounting firm. If a few clients make up a large chunk of your revenue, that can be seen as a risk. 

Growth rate and market potential

If your firm is steadily growing — say, 20–30% annually — it’s going to turn heads. But even if not, clear goals can push up your valuation. Think: new service lines, pricing strategies, or expansion into underserved markets.

What buyers don’t want to see is flat or declining revenue with no story behind it, as this can signal operational bottlenecks or client churn.

Location and competitive positioning

Firms in big metros used to have an advantage. These days, location matters less as long as your operation is efficient. Remote and hybrid firms running on cloud-based systems are now highly attractive.

That said, location can still play a role in state-specific licensing, referral networks, or markets with higher-than-average billing rates. But overall, efficient systems and reach tend to matter more than zip code.

Strong team expertise 

If your firm relies heavily on one person to manage everything — especially client relationships — that’s a potential red flag for buyers. 

To make your firm more stable and increase firm worth, start building a strong team with clear roles, cross-training opportunities, well-documented SOPs, and closer relationships with all your clients. 

Use of technology and operational efficiency

This is one of the big valuation drivers — and one of the easiest to implement. 

Buyers want firms that are organized, automated, and easy to transition. 

So if your firm uses modern technology — such as a practice management platform that simplifies your operations and helps you grow — you’re sending a strong signal that your business is efficient and scalable.

Brand reputation and marketing strategy

You don’t need to be a household name, but you do need a reputation that feels trustworthy. Buyers essentially want to know that if they invest in your firm, clients will keep coming. 

This can be helped with a professional website, a good marketing or lead generation strategy, positive online reviews, or just a strong referral engine. 

Deal structure and its impact on the value of an accounting firm

A firm’s financials might look great on paper, but if the deal isn’t structured well, that value can quickly erode. Here’s what to consider and how different terms can increase your valuation or add more risk.

Upfront payments vs. earn-outs

Most sales involve some mix of upfront payment and future earn-out tied to performance. The more stable and transferable your is, the better shot you have at securing a larger upfront payout.

Earn-outs, where the rest of the payment hinges on hitting certain targets (like revenue or client retention), are used to bridge valuation gaps. They can increase total value, but only if things go well post-sale.

Client retention clauses

Buyers want assurance that clients will stick around. That’s where retention clauses come in: they tie a portion of the sale price to client continuity.

These clauses protect the buyer, but they’re also not so bad for the seller. If your clients are loyal and your transition plan is airtight, they can actually help you secure a higher total payout.

Payout timeline and terms

Longer payout periods make deals more affordable for buyers and can bump up your final valuation. But they also stretch out risk, especially if you’re not going to be involved after.

Some firm owners negotiate better terms by offering post-sale support, even in a limited advisory role, as this can ease transition concerns and build trust.

Synergies between buyer and seller

Let’s say the buyer focuses on CFO services and you handle bookkeeping — that cross-sell potential can help push up your multiple.

The same goes for operational synergy. If your tech or processes can help them slash costs or expand into a new market, that can also add measurable value.

How to prepare your firm for a higher valuation

What’s great to know is that many of the same things that make your firm easier to run also make it more valuable.

So even if you’re not thinking about selling right now, making strategic improvements today gives you more options down the line — whether that’s a future exit, merger opportunity, or just stronger profitability.

Improving profitability and stabilizing revenue

Start by drilling down on what’s actually profitable. Which of your service lines deliver margin? Which ones drain your time without much payoff? Answering those will help you move away from low-value work. 

You can also start packaging services into fixed-fee bundles that are much easier to deliver at scale, or raising prices — especially if you’re still undercharging legacy clients. 

Reducing dependency on key individuals

If your team can’t function without you, buyers will see it as a risk. So if that’s the case at your firm, start gradually removing yourself from client-facing roles to build up your team’s independence.

You can do this by documenting internal processes clearly, introducing clients to more of your team, and training managers or senior staff to own relationships so your clients aren’t tied to a single person. 

Strengthening client contracts and relationships

Think about shifting your clients to monthly retainers, fixed-fee engagements, or annual contracts. You can also encourage retention by improving your client experience. Client portal software, for example, will make it quick and simple for clients to complete tasks and communicate with your team — strengthening loyalty. 

In short, strong client ties to your firm will make the transition smoother and give buyers more confidence that the revenue will stick post-sale.

Upgrading systems and leveraging technology

Tech-forward firms are more attractive to buyers, as a modern infrastructure signals efficiency, scalability, and an easier transition.

Using a trusted practice management platform, such as TaxDome, will help you tighten up your operations, build long-term client trust, and ensure consistent revenue growth.

With powerful accounting automation, centralized document storage, robust security, a top-rated client portal, and more, you can save time, cut costs, improve client satisfaction, and ultimately reduce risk. 

And less risk, in the eyes of a buyer, means a higher valuation.

Final takeaways

There’s more than one way to value an accounting firm, from multiples to market-based approaches — and the right valuation approach ultimately depends on your firm.

But no matter whether you’re looking to sell or merge, these factors matter most: clean financials, strong client relationships, low owner dependency, loyal clients, and modern tech.

And strengthening these now will put you in a better position down the line.

TaxDome is here to help. Our number one end-to-end platform can help you run a smarter operation, build client loyalty, and keep your revenue growing — exactly the kind of firm buyers want to invest in.