Part Two: How Accounting Firms are Valued for Sale

The Growing Influence of Private Equity

NCI has developed strong relationships with select PE buyers over the past five years, reflecting the expanding presence and influence of private equity buyers in the accounting space. This reality is changing some of the traditional valuation methods, making an alternative valuation framework increasingly common.

Rather than focusing primarily on gross revenue, private equity firms tend to value accounting practices based on a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) or SDE (Seller’s Discretionary Earnings). This approach places greater emphasis on profitability and operational efficiency rather than on top-line revenue alone.

Typical valuation ranges for these transactions often fall between 3.0x and 5.0x EBITDA, depending on many of the same factors outlined above—particularly recurring revenue, staff depth, client quality, and growth potential. If the firm’s EBITDA is above 6mm, extremely rare, the multiples can be as high as 8 to 10 times.

This shift reflects a more investment-oriented mindset. With it, buyers are focused on cash flow, scalability, and long-term return on investment. As private equity continues to play a larger role in the market, sellers may increasingly find that their firm’s profitability and operational structure factor into a valuation as much as its revenue base.

Beyond the Numbers

While revenue multiples are a common shorthand, buyers also evaluate profitability, growth trends, and transition risk. Ultimately, the value of a firm is determined by what a qualified buyer is willing to pay, based on financial performance, practice profile, and perceived future opportunity.

Final Thoughts

By focusing on building recurring revenue, strengthening client relationships, and developing a capable team, firm owners can position themselves to achieve a premium valuation when the time comes.

When the time does come to sell, NCI can help practice owners navigate the crucial process of correctly and fairly pricing their practices by carefully weighing each of the factors noted above. This is the first step to avoid listing a practice that lingers on the market. A lingering practice, along with subsequent downward price adjustments, sends a negative message to potential buyers about the seller or about the practice itself. Remember, practice buyers are smart. They have done their research and they generally know the right price for a practice. Being correct and fair about this from the start will generate strong buyer interest and condense the selling timeline.

Ready to list your practice for sale now or in the near future? Please email me, Chris Clark, at chrisclarkNCI@gmail.com or call me directly at 856-404-0949.