$1.4M
$703K
3.7x
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Total Gross Income: $1,366,192 Net Profit: $703,436 with Owner add backs Purchase Price: $2.6 million – Financing available to qualified applicants. Various programs available. Call for details. Year Established: 1994 Est # of clients Individual – 700 Corporate – 100 Partnerships – 65 Fiduciary...
Why we like it
- Earnings Quality: Clean $703K cash flow on $1.37M revenue delivers 51% net margins, which is exceptional for a service business and indicates disciplined operations with minimal overhead bloat. The cash flow figure includes owner add-backs, suggesting the true operating leverage could be even higher under new ownership with different compensation structures.
- Durability & Moat: Tax compliance creates natural annual recurring revenue with high switching costs, as clients rarely change accountants due to the complexity and risk of tax preparation. Nearly 30 years in business demonstrates staying power through multiple economic cycles, and the 800+ client relationships represent significant enterprise value that compounds annually through referrals and retention.
- Market Tailwinds: New York's complex tax environment creates perpetual demand for professional services, while increasing regulatory complexity favors established practices over DIY solutions. The mix of individual and business clients provides recession resistance, as both segments require tax compliance regardless of economic conditions.
- Operator Advantage: The 3.7x multiple is reasonable for a cash-flowing service business, leaving room for multiple expansion through operational improvements and client base growth. Financing availability mentioned in the listing suggests seller motivation and potential for leveraged acquisition structures.
How to improve it
- Client Value Expansion: Audit the service mix across all 800 clients to identify upsell opportunities in bookkeeping, payroll, business advisory, and financial planning services. Many tax clients only use the firm seasonally, leaving significant wallet share on the table that could double per-client revenue.
- Pricing Optimization: Review and standardize pricing across the client base, as 30-year-old practices often have legacy clients paying below-market rates. Implement annual price increases tied to complexity and inflation to improve margins without losing clients.
- Technology Implementation: Invest in modern tax software and client portals to streamline workflow and improve client experience. This reduces labor costs per return while enabling the practice to handle more volume with the same headcount.
- Talent Development: Cross-train existing staff on multiple service lines and implement performance incentives tied to client retention and revenue per client. Strong staff retention is critical in accounting practices where client relationships often follow individual preparers.
- Strategic Partnerships: Develop referral relationships with estate attorneys, financial advisors, and business brokers to create consistent lead flow. Accounting practices with strong referral networks grow faster and command higher multiples at exit.
Diligence notes
- Client Concentration Risk: Request detailed client aging and revenue concentration analysis to ensure no single client represents more than 5-10% of revenue. Also verify retention rates and identify any clients at risk of departure, particularly in the corporate and partnership segments where relationships may be more personal.
- Seasonal Cash Flow Patterns: Examine monthly cash flow patterns to understand working capital needs and potential financing requirements during slow periods. Tax practices typically see 60-70% of revenue in Q1, creating significant cash flow volatility that needs to be managed.
- Staff Key Person Risk: Identify which employees have direct client relationships and verify employment agreements, non-competes, and retention plans. In professional services, staff departures can trigger client losses that destroy enterprise value quickly.
- Regulatory Compliance: Review professional licenses, E&O insurance, client trust account management, and any regulatory issues or complaints. Accounting practices face significant liability exposure that must be properly insured and managed to protect the investment.