Chicago North Shore Tax & Accounting Practice

$950K

Revenue

$723K

SDE

2.0x

Multiple

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Full Editorial Writeup

This is a tax and accounting practice serving the affluent North Shore suburbs of Chicago. The firm generates roughly $950,000 in annual revenue and converts an exceptional 76% of that to seller's discretionary earnings, producing $723,000 in cash flow. That margin profile is well above the typical accounting practice, which usually lands in the 40% to 55% SDE range, and it signals either a lean cost structure, high-value client work, or both.

Accounting and tax practices are among the most durable small businesses you can buy. Clients need tax filings and compliance work every single year regardless of the economy, and the switching costs are high because the incumbent firm holds years of financial history and relationships. The North Shore location matters here: it is one of the wealthiest markets in Illinois, meaning the client base likely includes high-income individuals, business owners, and professionals who pay premium fees and are not price shopping.

At a 2.01x multiple on cash flow, the asking price of $1,450,000 sits at the reasonable end for a practice of this profitability. The open questions are around revenue concentration, the mix of recurring compliance work versus one-time advisory, and how much of the current earnings depend on the departing owner's personal client relationships and billable hours.

Why we like it

The earnings quality is the headline: $723,000 of SDE on $950,000 of revenue is a 76% margin, far above the 40% to 55% you normally see in accounting practices. That kind of conversion suggests either premium billing rates or a genuinely lean operation, both of which are attractive if they hold up under diligence.
Tax and accounting is about as recession-resistant as service businesses get. Compliance filings are non-discretionary, they recur annually, and clients rarely leave because the incumbent firm holds their entire financial history, which creates natural switching costs and predictable revenue.
The North Shore of Chicago is a wealthy, dense market with a deep pool of high-income individuals and business owners who pay premium fees. Serving affluent clients means less fee sensitivity and better realization rates than a practice in a commoditized market.
At 2.01x cash flow, the price is grounded for a practice this profitable. A buyer who finances a chunk of this and retains the client base can pay back a meaningful portion of equity within a few years given the earnings level.

How to improve it

Audit the fee schedule against comparable North Shore firms in the first 90 days. Affluent-market practices often underprice long-tenured clients, and even a modest across-the-board rate increase flows almost entirely to the bottom line given the existing cost base.
Map revenue between recurring compliance work (annual tax returns, monthly bookkeeping) and one-time projects. Shift the mix toward retainer and monthly advisory engagements to smooth cash flow and raise the multiple a future buyer will pay.
Systematize client relationships away from the departing owner by documenting every account, assigning staff owners, and introducing the buyer or a lead manager to top clients before close. This directly de-risks the transition and protects the earnings you are paying for.
Layer in advisory and tax-planning services for the high-income client base. Wealthy clients value proactive planning and will pay for it, and this converts low-margin compliance relationships into higher-value, stickier engagements.
Invest in modern workflow and tax software to increase throughput per staff member. Better tooling lets the firm handle more clients without proportional headcount growth, protecting the margin profile as it scales.
Build a light referral engine with local wealth managers, attorneys, and real estate professionals who serve the same affluent clientele. In a wealthy market, referral partnerships are the cheapest and most reliable source of premium new clients.

Diligence notes

Interrogate the 76% SDE margin, because it is unusually high for an accounting practice. Confirm whether the owner is working full billable hours that a buyer would need to replace, and whether any normal operating costs (staff, rent, software) have been understated or run through personally.
Pull client concentration data. If a handful of high-net-worth clients or a few business accounts drive most of the revenue, the loss of one or two during transition could materially dent the earnings you are underwriting.
Verify the split between recurring compliance revenue and one-time work, and check client retention and revenue trends over the last three years. A practice with high annual churn or declining engagements is worth far less than the multiple implies.
Assess how much of the practice depends on the owner's personal relationships and reputation versus the firm brand. Ask about the transition and training commitment, since the listing does not disclose one, and structure a retention holdback or earnout tied to client retention.
Confirm the years in business, staff count, and lease terms, all of which are missing from the listing. Understand who does the actual work, whether key staff will stay, and whether the office space and location are secure post-close.

Source

Originally listed on DealStream. View original listing →