Premier South Texas CPA Firm, 20-Year Practice

$1.3M

Revenue

$620K

SDE

2.9x

Multiple

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Full Editorial Writeup

This is a 20-year-old CPA firm in South Texas doing roughly $1.3M in annual revenue with about $620K in seller's discretionary earnings, a 48% margin that tells you this is a real, well-run practice and not a solo shop dressed up as one. The firm runs on seven experienced employees plus the owner, with established systems and processes, a leased office, and a base of stable, recurring client relationships built over two decades. It serves the standard mix you would expect from a regional CPA: tax preparation, compliance, and accounting work for individuals and local businesses.

What makes this notable is the combination of recurring, non-discretionary revenue and a team already in place. Tax and accounting work is compliance-driven, meaning clients cannot simply stop filing, and switching accountants carries real friction, which is why retention in this category is famously sticky. The seller is retiring and offering a transition period, which matters enormously here because client relationships in a CPA firm often live with the principal.

The asking price of $1,795,000 puts this at roughly 2.9x cash flow, a fair-to-slightly-full multiple for an accounting practice of this size. The margin, tenure, and staffed team justify a premium over a bare book of business, but the buyer is paying for goodwill and relationships, which is exactly where the diligence and structuring work needs to focus.

Why we like it

Earnings quality is strong: $620K SDE on $1.3M revenue is a 48% margin, which for a CPA firm signals disciplined pricing, an efficient team, and recurring compliance work rather than one-off project revenue. Accounting practices convert to owner cash cleanly because they carry low capex and minimal inventory.
The moat is switching cost and habit. Clients who have used the same firm for tax and compliance work for years rarely leave, because the accountant holds their history, their books, and their trust, and changing providers means re-explaining everything at the worst possible time (tax season). Twenty years of operation has compounded that stickiness.
The demand is recession-resistant by nature. Tax returns must be filed, businesses must stay compliant, and IRS deadlines do not pause for a downturn, so this revenue base holds up when discretionary spending gets cut. That is the kind of boring, durable cash flow that compounds quietly.
The operator advantage is real: seven experienced employees already run the work, so this is not a solo practitioner whose departure vaporizes the business. A buyer with existing CPA infrastructure could fold this in and expand margins, and an individual CPA gets a staffed, turnkey firm rather than starting from zero.

How to improve it

Lock down client retention immediately with a structured transition. Have the seller personally introduce the top 20% of clients by revenue within the first 90 days, and secure engagement letter renewals or written commitments before the deal fully closes to protect the goodwill you are paying for.
Raise prices on legacy clients who have not seen an increase in years. Long-tenured practices almost always underprice their oldest relationships, and a modest 5 to 10% fee adjustment on sticky compliance clients drops nearly straight to the bottom line with minimal churn risk.
Push clients from one-time seasonal tax work into recurring monthly advisory and bookkeeping engagements. This smooths the notoriously seasonal cash flow of a tax-heavy practice and increases annual revenue per client, which raises the value of the firm on any future exit.
Systematize the workflow with modern tax and practice-management software if not already in place. Reducing hours per return through automation and standardized processes lets the existing seven-person team handle more volume without proportional headcount growth.
Build a referral and reactivation engine. A 20-year firm has a large base of former and dormant clients plus a community reputation; a simple outreach campaign and a formal referral incentive for existing clients is a low-cost path to organic growth.
Reduce key-person risk on the staff side by identifying who among the seven employees holds the deepest client relationships and locking them in with retention agreements. In a services firm, your people are the asset, and losing a lead accountant post-close can cost you clients.

Diligence notes

Verify how much of the $620K SDE depends on the owner personally serving clients versus the team. If the retiring owner handles the largest or most complex accounts himself, revenue could walk out the door with him, so map client relationships by who actually does the work.
Analyze client concentration and revenue mix. Pull the top 10 and top 20 clients by fees and confirm no single client or handful of clients represents a dangerous share of revenue, and separate recurring compliance revenue from one-time or non-recurring engagements.
Scrutinize the SDE add-backs and confirm the margin. A 48% margin is excellent but worth stress-testing: confirm what owner compensation is baked in, whether the seven employees are fully costed, and whether any expenses were understated to inflate cash flow.
Review the office lease terms and transferability. The business runs from a leased location, so confirm remaining term, renewal options, rent escalations, and whether the lease assigns cleanly to a new owner without a rent reset.
Confirm licensing and regulatory requirements. Depending on state rules, the buyer or a principal in the firm may need to be a licensed CPA to own the practice, so verify the ownership structure required and plan for it before close.

Source

Originally listed on BusinessBroker.net. View original listing →