One of the frequently asked questions we get from accountants, CPAs and EAs we talk to about selling their firm is: What do you think the $ VALUE could be for my firm when I go to sell it?
As I’ve mentioned before in other videos, LOCATION is one of the 24 or 2 dozen attributes or characteristics that Buyers look at when they go to evaluate, investigate and eventually acquire a firm.
And here’s a quick example of how just Location can affect the value or sale price of your firm.
Let’s say you live in Blackfoot, Idaho population 13,000. You have a $500,000 revenue firm and you’re one of only 17 accounting firms in Blackfoot.
Because of it’s ‘location’ and the number of potential buyers in the area, you might end up selling it for 0.8 X gross or $400k and it takes 2 years to do it, OR the other accountants in town see your listing and know they can just ‘wait it out’ (they don’t even have to know who you are) and for you to just close your firm and pick up your clients for free down the road.
Now let’s move your firm to the midwest to Kokomo, Indiana population 60,000 where the average household income is $54,000. Now you’re one of 80 or more accounting firms in the city and you might end up selling it for 1.0 X gross and it could take about a year to do it. By the way we’ll market to all those 80 firms and 8 might be interested in buying that firm, we could get 2 offers and pick the best one.
Now let’s move your firm to Brooklyn, New York, population 2.7 million in Kings County on Long Island. We know there are over 100,000 accountants in New York City and Brooklyn is a big chunk of what makes it up so let’s guess and say there’s around 25,000 accountants.
Now here’s a little secret so don’t tell anyone, BUT I already have about 1,000 of those accountants & CPAs inside our ‘registered buyer database’ that are actively looking to acquire an accounting firm. So just with my internal list along I can probably get 100 of them to raise their hand, become interested in your firm, sign NDAs and have a dozen offers in hand within 1 to 2 month’s time. AND your purchase price might be in the range of 1.3 to 1.5 times gross revenue. And all things being equal, we’ll likely close in 4 to 6 months.
I remember the very first firm I ever listed and sold ON Long Island was back in 2020 in the town of Huntington and it sold for 1.5 times gross, 100% cash at closing, and it was right in the middle of the Covid 19 pandemic.
Now to be fair to ‘Location’ just within Long Island, if you take that same firm you have in Brooklyn, and start moving it 20 miles east to Nassau County, or ever further east up the island towards the Hamptons in Suffolk County, it may be worth even more than 1.5 times gross. It could and might sell for between 1.5 to 2.0 times gross revenue.
Why? Because it’s the Hamptons, because the average household income in Suffolk county is $128,000, which is more than TWICE the HH income of the people in Kokomo Indiana. These are affluent clients, lots of income, you can get away with charging more for the same tax return in NY & the Hamptons vs what you can charge here in the Midwest and so on.
So in summary, even though Location is just one of 2 dozen factors in determining Value or a Purchase Price, it is one of the larger influences on value. There are 23 other factors that can affect value.
For more information on the other 23 factors that affect value, you can watch a short video of a webinar I recently hosted titled: Finding the ‘Right Buyer’ for Your Accounting, CPA, or EA Practice in 2025 or 2026 & Beyond
You can click on this link to watch the video:
https://acctsales.com/finding-the-right-buyer-for-your-accounting-cpa-or-ea-practice-in-2025-or-2026-beyond/
Or if you’re interested in selling your firm this year, we’ve written an article you can read on our website titled: For The Right Price Would You Sell Your Firm?
You can click on this link to read the article:
https://acctsales.com/for-the-right-price-would-you-sell-your-firm/
If you’ve worked your last tax season or have a question on the process of selling your firm, leave me a comment or send me an email at: jeff@acctsales.com and I’ll answer it for you. Jeff Bell – Managing Director