Accounting and legal practice valuation
Accounting and legal practices typically value at 2.5 to 4.0 times normalised EBITDA, cross-checked against the cents-in-the-dollar fee multiples the profession uses. The depth of fee earners below the principal decides where a practice lands.
Professional services value is a question of how much of the fee base belongs to the firm rather than to a named individual. A practice with three fee earners, documented files and retainer clients is worth substantially more than one of identical profit where the founder personally holds every relationship.
Quick answer
What is an accounting or legal practice worth?
Normalised EBITDA — after every principal is costed at a market salary for the work they do — multiplied by 2.5× to 4.0×. Australian accounting practices are also commonly quoted at roughly 80 cents to $1.20 in the dollar of recurring fees, and we run that as a cross-check. Retainer or compliance-based fee bases with strong retention reach the top; practices dependent on one principal do not.
What moves the number
What separates a saleable practice from a personal one
Every driver here answers the same question: what happens to the fee base when the principal stops working.
| Factor | Pushes toward the top | Pulls toward the bottom |
|---|---|---|
| Fee-earner depth | Two or more qualified fee earners below the principal, with their own client responsibility | A principal producing the majority of chargeable output |
| Fee base quality | Recurring compliance or retainer work with year-on-year retention above 90 per cent | Transactional and one-off matters won afresh each year |
| Client concentration | No client above 5 per cent of fees, spread across industries | A handful of clients carrying a large share of the fee base |
| Systems and files | Documented workflows, current practice software, complete client files | Knowledge held informally, incomplete files, paper-based processes |
| Transition arrangements | A principal willing to stay through a handover with a restraint in place | An immediate exit with no handover and no restraint |
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Fee-earner depth
↑ Two or more qualified fee earners below the principal, with their own client responsibility
↓ A principal producing the majority of chargeable output
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Fee base quality
↑ Recurring compliance or retainer work with year-on-year retention above 90 per cent
↓ Transactional and one-off matters won afresh each year
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Client concentration
↑ No client above 5 per cent of fees, spread across industries
↓ A handful of clients carrying a large share of the fee base
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Systems and files
↑ Documented workflows, current practice software, complete client files
↓ Knowledge held informally, incomplete files, paper-based processes
-
Transition arrangements
↑ A principal willing to stay through a handover with a restraint in place
↓ An immediate exit with no handover and no restraint
Normalising the earnings
Normalising a practice P&L
Principals in professional firms rarely pay themselves a market salary, and unbilled WIP moves earnings between years. Both are restated first.
How the earnings method works →- Principal remuneration Every principal costed at a market salary for their actual role, not their drawings
- Work in progress and lock-up Unbilled time and debtor days normalised so earnings sit in the right period
- Related-party rent and service fees Payments to entities the principals control, brought to market
- Family wages Administration and bookkeeping roles brought to a market rate
- Professional development and travel The personal component separated from genuine practice cost
- One-off matters An exceptional litigation or advisory fee isolated from maintainable earnings
Worked example
Worked example: a suburban accounting practice
Fees are $1.9m, of which $1.55m is recurring compliance work with 93 per cent retention. Reported profit is $690,000 across two principals drawing $180,000 combined; market salaries for their roles total $320,000, so $140,000 comes off. A one-off software migration of $70,000 is added back.
Normalised EBITDA is $545,000. Four fee earners sit below the principals, no client exceeds 4 per cent of fees, and both principals will stay twelve months with restraints — supporting 3.6×.
$1.96m enterprise value, cross-checking at roughly $1.05 in the dollar of recurring fees
Illustrative only. Every engagement is scoped to the specific business, its records and the purpose of the valuation.
What a buyer, a bank or an opposing expert will test first
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01
Whose clients they are
Client files, engagement letters and who signs the advice. Relationships held personally by a departing principal are not fully transferable.
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02
Lock-up
WIP plus debtor days. High lock-up ties up working capital and is priced into what a buyer will pay.
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03
Restraints and handover
The length and enforceability of the principal’s restraint materially changes what the fee base is worth.
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04
Professional indemnity history
Claims history and run-off cover. Prior claims are a disclosed risk, not a footnote.
Questions
Professional practice valuations, answered
Broader questions are on the full FAQ page.
Ask a valuerBoth, and the two should reconcile. The primary method is normalised EBITDA multiplied by a derived multiple; the cents-in-the-dollar fee benchmark is a cross-check the profession understands. Where they diverge materially, the report explains why — usually a cost base that is unusually high or unusually lean for the fee level.
Australian accounting practices with good-quality recurring compliance fees commonly transact around 80 cents to $1.20 in the dollar, with the top of that range requiring high retention, fee-earner depth and a genuine handover. Blocks of fees sold without a practice attached sit lower. It is a benchmark, not a valuation.
Legal practices carry more transactional and matter-based revenue, so fee-base durability is examined harder, and areas of practice matter — a conveyancing or family law practice with steady matter flow values differently from a litigation practice dependent on a named partner. Trust accounting and run-off insurance are also examined.
Usually yes, prepared on a consistent basis so the merger ratio is defensible to both sides. A single valuer valuing both practices on identical assumptions is far more useful than two reports built on different bases.
Read the partnership or shareholder agreement first — it commonly prescribes the valuation basis and frequently excludes discounts for internal transfers. Where the deed is silent, whether a minority discount applies depends on the size of the interest, the governance rights attaching to it and the purpose of the valuation.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
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