Southern Minnesota CPA Firm, 20-Year 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 operating in Southern Minnesota since 2005, doing roughly $1.90 million in trailing revenue against $989,000 in seller's discretionary earnings. That is a 52 percent SDE margin, which is strong even by the standards of a mature accounting practice. The service mix is deliberately diversified: individual and business tax preparation, payroll, bookkeeping, lawful gambling services, assurance and audit engagements, and consulting.

The firm runs on a six-person team (five full-time, one part-time) covering tax, accounting, payroll, bookkeeping, audit, office management, and client service. That team depth matters because it means the practice is not purely a one-partner shop where the goodwill walks out the door at close. The seller is retiring, which is the classic clean-exit setup for this asset class.

What stands out is the demand narrative: the firm reportedly turns away multiple prospects each week, meaning it is capacity-constrained rather than demand-constrained. That is a rare and valuable position. Real estate is owned separately (a 4,800 SF building valued at $600,000) and is available for purchase or lease, but it is explicitly not included in the $3.5 million asking price.

Why we like it

Earnings quality is excellent for the category, with $988,698 of SDE on $1.9 million of revenue for a 52 percent margin. Accounting practices convert billings to cash efficiently because there is minimal COGS, low capex, and predictable tax-season timing. This kind of margin signals disciplined pricing and a loyal client base rather than a discount-driven book.
The moat is the recurring, relationship-based nature of the work. Tax prep, payroll, bookkeeping, and assurance engagements renew year after year with high switching costs because clients dislike moving their financial data and history. The niche lawful gambling services line is unusual and sticky, since few competitors staff that specialty in Minnesota.
Market tailwinds favor the buyer here because CPA supply is shrinking nationally as older accountants retire faster than new ones enter the profession. Demand for compliance work is non-discretionary and grows with regulatory complexity. This firm literally turns away multiple prospects a week, meaning there is embedded organic growth waiting on capacity.
The operator advantage is that the practice already runs on a six-person team, so it is not a solo book dependent on one rainmaker. A buyer who is a licensed CPA or who retains the staff can absorb the seller's retirement with less client attrition risk than a typical one-partner exit.

How to improve it

Convert the unmet demand immediately by hiring or contracting additional preparer capacity before the next tax season. The firm turns away prospects weekly, so even modest added throughput at 52 percent incremental margins drops straight to earnings. Track a simple pipeline of declined leads to quantify the exact revenue being left on the table.
Raise prices on the existing client base, since a firm operating at capacity has clear pricing power it is not using. Segment clients by complexity and profitability, then push a systematic 8 to 12 percent increase on the bottom tier and low-margin engagements. This is the fastest margin lever and requires no new headcount.
Systematize workflow with modern tax and practice-management software to increase preparer productivity. Tools for document intake, e-signature, and client portals reduce administrative drag and let the same six people serve more clients. Productivity gains here directly relieve the capacity constraint that is capping revenue.
Formalize recurring engagements into signed annual or monthly agreements where they are currently handshake renewals. Converting bookkeeping and payroll clients to auto-renewing retainers stabilizes revenue and improves the multiple on any future resale. Contracted recurring revenue is worth more than habitual repeat business.
Add or deepen advisory and consulting services, which carry higher margins than commodity tax prep. The firm already offers consulting, so packaging fractional CFO, tax planning, and entity structuring for existing business clients expands wallet share. These services also reduce dependence on the seasonal tax-season revenue spike.
Build a light referral and marketing engine to capture the overflow demand more deliberately. Even a basic local SEO presence and a client referral incentive would turn passive inbound into a managed growth channel. Given demand already exceeds capacity, the constraint is delivery, not lead generation, so pair this with the capacity build.
Evaluate the lawful gambling services niche for expansion across Minnesota, since it is a specialized line with limited competition. Marketing this capability to charitable organizations and clubs statewide could differentiate the firm and add high-retention accounts. Assess whether the seller's relationships in this niche are transferable during diligence.

Diligence notes

Scrutinize the SDE build and confirm the $988,698 is defensible after normalizing owner add-backs. At a 52 percent margin, verify how much of the earnings depends on the departing owner's personal book of clients versus staff-serviced accounts. The retiring-seller dynamic makes client concentration and transferability the central risk.
Assess client retention and concentration by pulling a multi-year revenue-by-client analysis. Understand what percentage of billings comes from the top 10 or 20 clients and whether any are tied personally to the seller. Also confirm renewal rates on recurring tax, payroll, and bookkeeping engagements.
Verify staff licensing, tenure, and intentions to stay post-close, since the practice runs on six people and the seller is exiting. Confirm which team members hold CPA credentials and whether the buyer needs a licensed CPA to sign returns and assurance work. Retention agreements for key staff should be part of the deal structure.
Model the real estate decision carefully, because the $600,000 building is not in the asking price but the practice needs a location. Compare buying the property versus leasing, and factor the added capital or rent into total deal economics. A buyer needs roughly $2.8 million down, so financing structure and SBA eligibility should be confirmed with a lender early.
Examine the lawful gambling services line to understand regulatory requirements, licensing, and how transferable that specialty is. This is a niche revenue stream that may carry compliance obligations a general CPA buyer is unfamiliar with. Quantify its revenue contribution and margin to know what is at stake if it does not transfer cleanly.

Source

Originally listed on BizBuySell. View original listing →