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Valuing and Pricing An Accounting Firm
The value of an accounting firm is subject to trends in the industry, more so than other types of businesses might be. The current trend affecting accounting firms the most is the development and adoption of modern software to aid in the firm’s day to day operations. Like many other industries, technology can be the root of major shifts in how a business is run, and accounting firms are no different.
An older owner of an accounting firm that’s looking to sell his business may run into trouble if he or she has not kept up with the trends in modern computer software. Assuming that everything still operates as it did decades ago, no matter how smoothly that may be, the firm will be essentially unsaleable. The best case scenario for this type of firm would be to sell of the client list for the best possible price, and then close the business. Computers and modern technology has caused these types of firms to die out quickly.
Younger firms, however, are much more likely to have their roots in modern software, and employ CPA and MBA graduates with a strong understanding of these new and powerful tools. The sale of this type of firm would be much easier, and more profitable.
It’s important to note that not every older accountant has fallen behind the times. Many have kept up with the changes in technology, and are just as capable as a newer firm. In fact, given access to the same tools, the older firm might be worth more due to it’s years of collective experience in the market.