Word of Advice

By Marton Medina  |  October 6, 2025

The harsh truth about small practice valuations and what you can do to protect your future.

The Expectation vs. Reality Gap

You’ve spent decades building your practice. Late nights during tax season. Countless client emergencies. A reputation you earned one relationship at a time. Naturally, you expect your firm to reward you when it’s time to retire. After all, this isn’t just a business—it’s your life’s work. But here’s the harsh truth many CPAs discover too late:

Most small CPA firms are worth far less on the open market than their owners expect. Some aren’t sellable at all.

That realization hits like a gut punch. The good news? There are steps you can take—right now—to increase your firm’s value, protect your legacy, and avoid becoming another statistic.

Why Firm Valuation Matters More Than Ever

Small CPA firms are in the middle of a demographic and economic storm. There’s a retirement surge—nearly 75% of CPAs are nearing retirement age, creating a flood of practices hitting the market in the next decade (Controllers Council, 2023). There’s also a declining number of new CPAs. The pipeline of future firm buyers is shrinking. First-time CPA exam candidates dropped from 48,000 in 2016 to 32,188 in 2021—a 33% decline in just five years (CPA Journal, 2023). And adding to the storm are rising buyer expectations.

Younger accountants and private equity groups want modern firms with recurring revenue and strong systems—not owner-dependent practices running on spreadsheets and goodwill. Put simply, there are more firms for sale than there are buyers. And buyers are choosy.

How Small Firms Get Devalued

If your practice relies on you for nearly everything, it’s not a business—it’s a job you happen to own. Buyers don’t want to buy your job. Here are the top reasons small CPA firms under $500k in revenue are devalued or passed over entirely:

1. Owner Dependency—You are the rainmaker, the lead advisor, and the one everyone trusts. When you leave, the firm’s relationships—and revenue—leave too. Buyers view this as high risk, which can lead to lower offers or them walking away.

    

2. Seasonal Revenue—Most small firms experience a massive spike in spring, followed by slow months. This feast-or-famine model creates cash flow instability, which drags down value. Buyers prefer predictable, recurring monthly revenue.

    

3. Lack of Documented Systems—If processes exist only in your head, transitions are chaotic. Without systems for client onboarding, service delivery, and staff management, the firm is fragile.

    

4. Client Base Concentration—Too many firms rely heavily on a handful of clients for the bulk of revenue. If one leaves, the firm’s future is at risk.

    

5. Tech Deficiencies—Manual processes signal inefficiency and future investment needs. Modern buyers expect cloud accounting, client portals, and integrated workflows.

The Numbers Behind the Shock

A 2023 survey by the AICPA’s Private Companies Practice Section found that only 41% of accounting firms have formal succession plans (AICPA/PCPS Succession Planning Survey). Firms under $1M in revenue are the least prepared. And many owners overestimate their firm’s sale price by 50-100%, leading to crushing disappointment during retirement planning.

The reality is that a small, seasonal, owner-dependent firm might only sell for 0.5x annual revenue—if it sells at all. A firm with recurring revenue and systems in place can command 1.2-1.5x revenue, sometimes more. That’s double or triple the value, just by modernizing the business model before retirement.

What Buyers Really Want

Understanding what today’s buyers value can help you reverse-engineer your firm’s growth. Modern buyers look for predictable recurring revenue through advisory and subscription services. Along with strong client retention and diversified industries. On the operational side, buyers look for documented workflows and SOPs that make the firm scalable. They prefer tech-enabled platforms that streamline the accounting and client experience. And all of these factors with minimal owner dependency. They want to see a team, or the possibility of developing a team capable of running day-to-day operations.

If you can deliver these, your firm won’t just be sellable—it will be highly desirable.

Blueprint to Increasing Your Firm’s Value Before Retirement

Even if you’re planning to retire in 1-5 years, it’s not too late to dramatically increase your firm’s value. Here’s the roadmap then—

Step 1: Add Year-Round Advisory Services – Transition away from tax-season-only services. Bundle bookkeeping, tax planning, and CFO-level advice into a monthly subscription model. This creates recurring, predictable cash flow.

Step 2: Systematize Everything – Document processes for onboarding, payroll, bookkeeping, and client communication. The goal is to make your firm run like a franchise—even if you’re not there.

Step 3: Upgrade Your Tech Stack – Move to cloud-based accounting and client collaboration tools. Use automation to reduce manual tasks and increase scalability.

Step 4: Diversify Clients – Reduce your reliance on a handful of clients by broadening your base. Identify possible niches to focus on that naturally have recurring needs. This is the basis of strong growth potential.

Step 5: Begin Transition Planning Now – Identify potential successors, whether internal or external. Explore innovative transition models like phased mentorship or franchising.

A Partnership That Can Protect and Change Your Future

You don’t have to tackle this transformation alone. Your strength is accounting expertise and client relationships. Our strength at Money CFO® is business systems, marketing, and organizational strategy. When you bring those together, here’s what happens—your firm becomes modern, scalable, and attractive to buyers. You increase its market value while reducing your day-to-day stress. You create a clear, dignified exit plan—one that protects your clients and your legacy.

Your firm is likely one of the most valuable assets you own. Don’t wait until retirement to discover its true worth. You’ve worked too hard for too long to walk away with less than you deserve. Build a business that rewards your years of service—and leaves a legacy your clients and community will remember.

Sources

• AICPA/PCPS: Succession Planning Survey (2023)
• CPA Journal: The Accounting Profession Is In Crisis (2023)
• Controllers Council: Accounting Crisis Report (2023)
• Kiplinger: The CPA Shortage Problem (2024)

Money CFO, Inc. This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for informational purposes only. U.S. residents: Please note that the states of California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, Virginia, Washington, and Wisconsin regulate the offer and sale of franchises. If you are a resident of one of these states, or seeking a franchise in one of these states, we will not offer you a franchise unless and until we have qualified for an exemption, or have complied with applicable pre-sale registration and disclosure requirements in your state.