Increasing the bottom line of Accounting practices through prioritising Key Value Drivers

When it comes to assessing the value of accounting practices, the valuation process can often become a labyrinth of confusion, particularly when distinguishing between valuations of a business, an entity, and a book of clients. Ironically, Accounts will often just use Industry Rule of Thumb (IRT) as a valuation shortcut.

IRT valuations typically involve using relevant multiples of turnover.

For instance, small to mid-sized accounting firms often value their book of clients (as distinct from their business or company) based on a multiple of their revenue (typically ranging from 0.7 to 1.5 times the revenue).

In the case of accounting practices, the IRT valuation method is not really valuing the enterprise of the accounting firm but assessing the value of a bundle of fees generated by a group of clients. Different practices possess distinct costs and risk profiles.

The most appropriate approach to valuing an accounting practice should involve a methodology that captures future earnings less operating expenses.

Navigating the intricate landscape of accounting practice valuation demands a delicate balance of expertise, insight, and a deep understanding of the industry. By harnessing the power of accurate valuation methods, businesses owners can comprehensively understand their value and make informed decisions for long-term success.

Future earnings can be enhanced by using Key Value Drivers.

For example, this might include the incorporation of new software to deliver advisory services, such as our business valuation software (bvoPro), culling non profitable clients and reducing fixed costs.

Another Key Driver that can increase the bottom line is reduction in wages through offshore outsourcing. Outsourcing can decrease future wages as you grow; increasing the bottom line by as much as 20%-30% as additional offshore staff members.

So, whether you seek to value your accounting practice, navigate industry norms, or comprehend the true value of your client base, Business Valuations Online can help you unlock the true potential, and increase the value of your accounting practice through our valuation service.

Brett Goodyer

Business Valuations Online

businessvaluations.online

Founder and Managing Director of Business Valuations Online. We provide in-house business valuation software solution built by expert forensic accountants, BVOPro puts the knowledge and experience of business valuation experts in the hands of accountants, business brokers, and business consultants.