A preliminary field read of CPA firms on the ten-part TRUE FirmWorth framework finds niche ownership ranking last of ten, in a market where a defensible niche earns the higher multiple. The firms averaged 56 out of 100.
The last three years of PE and M&A commentary in accounting have one clear point of agreement. A firm that owns a defensible niche gets paid a higher multiple than a generalist doing similar numbers. The field data now points to an awkward twist. Of the firms that completed the scorecard, niche ownership ranked dead last of ten, below every other trait a diligence team checks before it names a price.
Preliminary field data: CPA firms scored on the Accountaneur TRUE FirmWorth framework.
Higher is stronger; dashed line marks the group average.
The PE money shows up in the EBITDA multiple. TRUE FirmWorth™ framework estimates firms scoring in the seventies can be valued at 7.5 to 9 times EBITDA. The rest would be at 4.5 to 6. Similar firm sizes with similar numbers can be a full band of multiples apart. That mirrors how buyers price the whole market. A firm that runs as a transferable business gets paid up, and one that leans on its owner or sells commodity compliance gets marked down.
“The market figured out years ago that niche is worth paying for,” said Hitendra R. Patil, founder of Accountaneur and author of PE Deal Ready. “A buyer reads a firm that owns a lane as a business with pricing power. A generalist firm reads as a job someone bought. Such generalist firms chase growth because they can feel it. Niche gets ignored because it costs nothing to ignore, until a buyer puts a price on the firm.”
The firms that completed the scorecard self-scored across the same ten dimensions, spanning under $2M to $115M in revenue. As it is a preliminary field look, it is early and deliberately small, and not a census of the profession. Updated numbers and findings to follow as responses come in.
Any firm can take the TRUE FirmWorth scorecard for free in a few minutes and see its score across all ten dimensions, plus the firm-specific weakness that can cost it the most in a PE diligence room, at https://www.accountaneur.com/pe-in-accounting/pe-readiness-scorecard. The full methodology and the eighteen-month moves that can lift a firm’s score, and hence value, before a sale are in the PE Deal Ready book, available at https://www.accountaneur.com/pe-deal-ready-book.
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About Accountaneur. Accountaneur Advisory, founded by Hitendra R. Patil, advises CPA firm owners on CAS/advisory growth and private-equity readiness.
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