You’ve built a $1.2M practice. Your fee book is 70% compliance — tax returns, BAS, annual financials — and 30% advisory work you genuinely enjoy. A buyer approaches. They quote you 90 cents per dollar of recurring fees.
You’re insulted. You’ve been building this for fifteen years.
But here’s the uncomfortable truth: in Australian professional services, that 90 cents might be a fair — even generous — offer, depending on how much of the practice walks out the door with you.
The Fee Book Is the Asset
Unlike most businesses, professional services firms aren’t typically valued on EBITDA multiples alone. Accounting practices in particular are quoted in cents per dollar of recurring fees — a metric unique to this sector.
| Fee Book Quality | Typical Price (cents/$1 recurring) |
|---|---|
| High-retention compliance book, multiple partners | 90c – $1.20 |
| Single-principal practice, strong systems | 70c – 95c |
| Mixed compliance/advisory, owner-dependent | 50c – 80c |
| Predominantly advisory or project-based | 30c – 60c |
For larger firms or those valued on earnings, EBITDA multiples typically range from 4x–6x for accounting practices, 3x–6x for law firms, and 5x–8x for financial planning businesses with recurring SMSF or investment management fees.
The distinction that matters most: compliance revenue (tax returns, BAS, annual financials) is sticky — clients rarely move their compliance work. Advisory revenue (CFO services, strategic consulting, M&A advice) follows the person who delivers it. A dollar of compliance fees is worth significantly more than a dollar of advisory fees in a sale.
The Client-Follows-the-Partner Problem
This is the central tension in every professional services transaction. Your clients chose you. They trust you. When you leave, a meaningful percentage will leave too — regardless of what the sale agreement says.
Buyers know this. It’s why the standard deal structure in Australian professional services isn’t a clean upfront payment. It’s an earn-out over 12–24 months, where a portion of the purchase price is contingent on client retention.
A typical structure looks like this:
- 30–50% paid upfront on completion
- Remaining 50–70% paid over 12–24 months, adjusted for client attrition
- Clawback provisions if fees drop below an agreed threshold (commonly 80–85% retention)
- The seller stays on during the transition — sometimes as an employee, sometimes as a contractor
If you’re a sole practitioner who personally manages every client relationship, expect the earn-out portion to be higher and the retention threshold to be scrutinised more closely. If you have two or three senior managers who each own a portfolio of client relationships, you’re in a much stronger negotiating position.
WIP and Debtors: The Hidden Deal Killers
Professional services firms carry two balance sheet items that cause outsized problems in transactions: work-in-progress (WIP) and debtors.
WIP is the unbilled time sitting in your practice management system. In theory, it’s an asset. In practice, buyers treat it with suspicion — how much of that WIP is genuinely recoverable? Every accountant knows the difference between recorded WIP and what you’ll actually bill and collect.
Before going to market:
- Write off stale WIP. Anything over 90 days unbilled should be reviewed ruthlessly.
- Bill everything you can. Get your WIP converted to invoices before a buyer starts their due diligence.
- Clean up your debtor book. Aged debtors over 60 days signal poor billing discipline, and buyers will discount them heavily or exclude them from the transaction entirely.
What Actually Moves the Multiple
SMSF administration fees command the highest valuations in Australian accounting. The retention rates are exceptional (clients almost never move their SMSF), the fees are meaningful ($2,000–$5,000 per fund annually), and the regulatory complexity creates a natural moat. A practice with a large SMSF book will attract financial planning acquirers willing to pay a premium.
Client engagement letters with the firm — not with you personally. This sounds administrative, but it’s legally significant. If clients have engagement letters with “Smith & Co” rather than “John Smith,” the contractual relationship transfers with the business.
Team depth and qualifications. A CA or CPA who manages their own client portfolio is worth retaining. Consider what retention arrangements — stay bonuses, equity participation, or deferred compensation — you need to keep key people through a transition.
Technology stack. Practices running Xero Practice Manager, cloud-based document management, and automated workflows are worth more than those still running desktop MYOB with paper files. This isn’t about being trendy — it’s about the acquirer’s integration cost.
A surprising reality: many sole practitioners discover their practice is worth less than they expected because the business is them. The most valuable thing you can do in the 2–3 years before a sale is systematically transfer client relationships to senior staff — even though it feels counterintuitive to step back from clients you’ve served for years.
The 12-Month Countdown
If you’re serious about selling in the next one to two years:
- Audit your fee book. Categorise every client as compliance, advisory, or mixed. Know your recurring percentage cold.
- Introduce your number two. Start having senior staff lead client meetings, sign off on work, and handle queries directly.
- Formalise engagement letters. Every client should have a current letter of engagement with the firm entity.
- Bill and collect aggressively. Get WIP and debtors as clean as they’ve ever been.
- Lock in your lease. Buyers need premises certainty — ensure you have at least 3 years remaining.
Get a baseline estimate of your firm’s value or talk to us confidentially about positioning your practice for sale.