image-axd

Valuing Accountancy Practices and Professions

In valuing professions and white collar service businesses I observe an emerging trend to place less reliance on traditional rules of thumb and an increasing reliance on establishing value based on a multiple of Future Maintainable Earnings.

Accountancy Practices have traditionally been valued based on a “cents in the dollar” of fee revenue. High quality fees may have been priced “a dollar in the dollar” or “ninety cents in the dollar” of annual fees with lesser quality fees priced as low as “sixty to seventy cents in the dollar”.

However eastern states sales and valuations have for several years also been based on a cross- check of this calculation by adopting an EBIT multiple of the practice in an “under management “model, where the partners’ commercial salary packages have been factored into the adjusted profit. An EBIT multiple has then been applied to arrive at market value.

Our GMO valuation team also uses this cross -check and it often confirms the gross revenue method, but occasionally throws up a pricing differential!

We also observe the EBT multiple cross- check gaining credibility in valuations of Financial Planning Practices, Insurance Broking and Mortgage Broking businesses and Real Estate practices with valuable rent rolls. We also consider the EBIT multiple as a second method when valuing Veterinary Practices and other medical professionals.

Recent GMO transactions facilitated in both Accountancy and Rent Rolls indicates Banking Institutions appreciate the presentation of the practice in both an FME by EBIT multiple as well as in a Cents in the Dollar Revenue Multiplier configuration.

If you would like to discuss your practice and how we can assist you in accurately assessing its market value, contact Mehra Kazemi at GMO business valuations. Your privacy is paramount and we assure you of our complete discretion.

 

Written by Mehra Kazemi
Business Marketing & Valuation

MORE NEWS STORIES

DIGITAL MARKETING new startup project Interactive channels Business innovation technology work

The Death Of Advertising

The below article is written by a professional associate of ours, Dr John Carlson. Con Mast found this article both insightful and interesting. It highlights many important points, including the distinction between advertising and marketing Read more
anthony2

Get To Know Anthony Princi

Our team are a diverse group of experienced Business Brokers and/or Business Valuers. So much so, that we thought we better introduce them to you so you can get to know them better.   How long have Read more
child and adult holding money jar, donation, saving concept

What Is The Cost Of Selling A Business?

What Is The Cost Of Selling A Business? Here at GMO, there is no concrete cost for selling your business. It depends on a selection of variables including the type of business and the work involved. However, Read more