How are Prices for Atlanta Accounting Firms Determined?

How are Prices for Atlanta Accounting Firms Determined?

In general terms, prices for Atlanta accounting firms are based on what a buyer is qualified to pay for the business and what they believe it is worth. While this is a bottom line way to look at a firm's valuation, there are a few things a seller can do, like acquisition marketing and pre-acquisition preparation, to help clarify the value of the business and determine a selling point.

Location of the Business

A firm that is located in a more populated area could have a higher valuation than a firm in a smaller area. A bigger city offers more potential clients and the opportunity to capture a niche market. Local marketing potential is greater - with fewer dollars required for advertising.

In addition, more partnerships could be cultivated with referral partners, such as attorneys and insurance companies. A larger city could also offer more availability of qualified employees and professionals.

In smaller communities, the location of the firm in relationship to other businesses and higher traffic areas could also help to raise the value of a firm. A location that is in the main area of a town could be worth more than one that is on a secondary street or an area with less traffic.

Number of Clients

Typically, the more clients a firm has, the more revenue the company will bring in each year. This will depend on the fee schedule charged for each type of client. A business with a higher average fee income could be valued higher than a firm with fewer clients but higher prices.

Some potential buyers could analyze the firm and see room to increase fees. However, they may be reluctant to raise prices during an acquisition in fear of losing clientele.

Profit Margin of the Atlanta Accounting Firm

At Fusion CPA, an Atlanta accounting firm, we understand the value of utilizing a pre-acquisition preparation guide before listing your accounting firm for sale. One of the most important reasons to adhere to these guidelines is it could help reign in the profit margins of the business. Performing a financial overhaul of your monthly and annual budget could help to identify wasted spending or missed tax planning of your own firm. Making adjustments to these areas can help to increase the profitability of the business and make it more attractive to a potential buyer.

Terms of the Sale

Many companies look at a ratio of 1.1 to 1.3 times gross annual revenue as a method of firm valuation. The value tends to hold stronger when the terms of the sale are based on the current valuation verses actual revenue collected. During a sale, it is common for clients to be wary of new owners. This could be especially true for clients who have been with the firm for a long time and have developed a loyalty towards the current owners.

In cases where clients choose not to remain with the new owners, the annual payment required from the buyer could be adjusted to a percentage of actual annual revenue. This can then be collected with a low down payment and help to reassure potential buyers of their investment.

Method of Acquisition Marketing

Choosing to work with a professional acquisition marketing firm could help to increase the value of your company. Acquisition marketing experts tend to be better equipped at finding qualified buyers who are looking for your type of Atlanta accounting firm. They also work to point out the positive aspects of your firm and opportunities for future growth.

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