OUTLOOK & ANALYSIS

What a CPA Firm Is Worth

calculatorLook at the revenue stream. Goodwill is another story.

By Marc Rosenberg
Retirements & Buyouts

To illustrate a CPA firm’s value, let’s use an example of a plain-vanilla or average firm:

  • Annual revenues: $6 million.
  • Six partners with ages spread evenly between 45 and 62.
  • Average partner income: $350,000.
  • Ratio of professional staff to partner is 3.5.
  • Firm is located in a city with a population in excess of 1M.
  • Clients are all in common industries such as manufacturing, real estate, health care, etc. No niches or specialties.
  • Services are all traditional annuity types such as accounting and tax.
  • The firm’s accrual basis capital, primarily WIP and A/R, is $1.2M.

Now, let’s compute the value.