Southern Minnesota CPA Firm, $1.9M Full-Service Practice

$1.9M

Revenue

$989K

SDE

3.5x

Multiple

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Full Editorial Writeup

This is an established full-service CPA firm serving clients across Southern Minnesota, generating roughly $1.90 million in trailing revenue and about $989,000 in seller's discretionary earnings. A full-service accounting practice like this typically blends recurring tax preparation, monthly bookkeeping and write-up work, payroll, and advisory or consulting engagements. That mix is the backbone of a durable, high-margin professional services business with clients who return year after year.

The economics here are what stand out. At a 52 percent SDE margin, this firm is running well ahead of the typical accounting practice, which usually lands in the 30 to 45 percent range. That level of profitability signals either strong pricing, efficient staffing, or a favorable service mix weighted toward higher-value work rather than commoditized 1040 prep.

The firm is being marketed at a $3.5 million asking price, or roughly 3.54x cash flow. That is at the upper end of the range for smaller CPA practices, which reflects the strength of the earnings and the stickiness of the client base. For a buyer, the appeal is a business that people pay for in every economic climate, backed by annual renewal cycles that make revenue highly predictable.

Why we like it

Earnings quality is exceptional here: $989k of SDE on $1.9M of revenue is a 52 percent margin, well above the 30 to 45 percent range typical for accounting firms. High margins in a services business usually mean strong pricing power and a favorable mix of recurring compliance and advisory work rather than low-value seasonal prep.
Durability and moat come from switching costs. Clients hand a CPA their books, payroll, and tax history, and moving firms is painful, so retention in well-run practices routinely exceeds 90 percent. That creates a base of revenue that renews by default every year without re-winning the sale.
Market tailwinds favor the buyer. Accounting is a fragmented, aging industry where thousands of partners are retiring without succession plans, and compliance work only grows more complex over time. Tax filing and bookkeeping are non-discretionary, so the demand holds steady through downturns when discretionary businesses get cut.
The operator advantage is clean cash conversion and minimal capital needs. A CPA firm has no inventory, no fleet, and negligible maintenance capex, so nearly all of that $989k flows to the owner. A buyer with a CPA license or an existing platform can bolt this on and immediately capture the earnings.

How to improve it

Segment the client base by revenue and profitability within the first 90 days. Many firms carry a long tail of low-fee, high-hassle clients, so identify the bottom quartile and either re-price them to market or graduate them out to free up staff capacity for higher-value work.
Push a structured price increase on recurring engagements. Accounting fees are notoriously sticky and under-adjusted, and a 5 to 10 percent annual increase on a loyal base flows almost entirely to the bottom line given the fixed cost structure.
Expand advisory and CFO-style services to existing clients. Compliance work is the door opener, but monthly advisory, cash flow forecasting, and tax planning command higher fees and deepen the relationship, raising both revenue per client and retention.
Build a documented workflow and reduce owner dependency before and after close. If the seller personally holds key client relationships, invest early in transitioning those to staff and formalizing processes so the practice is transferable and less concentrated in one person.
Add a light-touch technology layer for scheduling, document collection, and e-signature. Modernizing the client intake and document workflow reduces staff hours during the tax crunch and improves margins without changing the service itself.
Pursue tuck-in acquisitions of nearby retiring sole practitioners. In a fragmented Southern Minnesota market, buying small books of business and migrating them onto this firm's infrastructure is a high-return way to compound the earnings base.

Diligence notes

Verify the revenue mix between recurring compliance work (tax, bookkeeping, payroll) and one-time or advisory engagements. The higher the recurring share, the more predictable and valuable the earnings, and it directly affects what multiple is justified at 3.54x.
Scrutinize the SDE add-backs carefully. A 52 percent margin is unusually high, so confirm whether it reflects genuine efficiency or aggressive add-backs, and whether replacing the owner's billable production would require hiring a licensed professional that eats into cash flow.
Assess client concentration and retention history. Pull the top 10 clients as a percentage of revenue and multi-year retention data, because a few large accounts leaving post-transition could materially impair the earnings you are paying for.
Confirm owner involvement and licensing requirements. Determine how many billable hours the seller personally produces, whether the buyer needs a CPA license to own or operate the firm in Minnesota, and what transition support is actually being offered, since none was disclosed.
Review staff tenure, compensation, and non-compete agreements. In a people-driven business, losing key preparers during transition is a real risk, so understand who does the work and how locked-in they are before close.

Source

Originally listed on Sunbelt Business Brokers. View original listing →