How Accounting Firms Are Valued in Today’s Market with Doug Lewis
Scaling an accounting firm is one path to growth. But for many firm owners, the real long-term question is this:
What is my firm actually worth?
In a recent episode of the Growing Your Firm podcast, Doug Lewis, Managing Director at Visionary Group, shared how buyers are evaluating accounting firms today, what drives valuation, and what firm owners should be preparing for whether they plan to sell or not.
His message was clear. Whether you sell in two years or twenty, you should be building your firm with value in mind.
Key Takeaways
- Profitability is now the primary driver of accounting firm valuation
- Talent and leadership are becoming just as important as financials
- CAS (Client Accounting Services) is one of the most valuable revenue streams
- Culture fit is often the first and most overlooked factor in M&A deals
- Every firm should be built as if it will eventually be sold
Introduction
The accounting firm M&A landscape has changed significantly over the past few years.
Historically, firms were valued based on a multiple of gross revenue. Today, that model has shifted. Buyers are more focused on profitability, scalability, and long-term sustainability.
Doug Lewis works directly with firms on both the buy side and sell side of transactions. His perspective gives a clear look into what buyers actually care about and what many firm owners misunderstand.
“Number one on the list these days, it’s the profitability in the firm, the EBITDA, the adjusted EBITDA in the firm.” – Doug
What Buyers look for in Accounting Firms today
When buyers evaluate accounting firms, there are a few key factors that consistently rise to the top.
- Profitability, especially adjusted EBITDA
- Strength of the team and leadership pipeline
- Recurring and scalable revenue streams
- Service mix, especially CAS
- Client base and industry focus
Doug emphasized that profitability is now the starting point for most buyers.
In the past, firms were often valued on revenue multiples. Today, buyers want to understand what actually reaches the bottom line before owner compensation.
Why Profitability matters more than ever
Profitability has become the foundation of firm valuation.
- Buyers want predictable, sustainable margins
- Higher profitability signals operational efficiency
- It reduces risk for the acquiring firm
- It makes future scaling easier
A common benchmark mentioned was around 30% profitability before owner compensation, though this can vary widely depending on firm structure.
Firms operating below that may still be valuable, but they will face more scrutiny during evaluation.
The Growing Importance of CAS (Client Accounting Services)
One of the biggest valuation drivers today is CAS.
- CAS provides recurring, predictable revenue
- It is easier to scale than traditional services
- It creates long-term client relationships
- It improves valuation multiples in many cases
Doug explained that buyers love the “stickiness” of CAS revenue. Compared to project-based services, CAS creates ongoing engagement and stability.
Firms that invest in CAS often position themselves as more attractive acquisition targets.
“A strong CAS practice right now, those are trading for premiums.” – Doug
Why Talent can Make or Break a Deal
While financials matter, talent is becoming just as critical.
- Strong leadership ensures continuity after acquisition
- Skilled teams reduce transition risk
- Talent shortages increase the value of existing staff
- Buyers often prioritize firms with stable teams
In some cases, talent is even more important than profitability.
If a firm depends heavily on one owner or partner, it becomes much harder to transition or sell.
“Talent is kind of number two on that list. Some are honestly placing that at number one these days.” – Doug
The Most Overlooked Factor: Culture Fit
One of the most important insights from Doug was this:
Many deals fail because of culture, not numbers.
- Misaligned values create long-term friction
- Poor integration leads to team turnover
- Differences in work style slow down operations
- Lack of trust can derail the entire deal
Doug described what he calls the “airport test”:
If you were stuck in an airport with this person for hours, would you actually want to spend time with them?
If the answer is no, the deal may not work, regardless of the numbers.
Red Flags Buyers Look for
Buyers are also watching for risks that could impact value.
- High partner dependency for billable work
- Lack of succession planning
- Inconsistent profitability
- Weak systems or workflows
- Poor team retention
One major red flag is when partners are doing most of the work themselves. While this can increase short-term profitability, it creates risk because those hours need to be replaced after the transition.
Internal Succession vs Selling Your Firm
Not every firm needs to sell externally.
Doug emphasized that every firm will eventually transition ownership in one way or another.
- Internal succession through partners or managers
- External sale to another firm
- Private equity or outside investment
The key idea is this:
You are always building your firm to sell, even if the buyer is internal.
Firms that prepare early have more options and better outcomes.
The Impact of Private Equity on Firm Valuations
Private equity has changed the accounting M&A landscape.
- Increased focus on profitability over revenue
- More cash in deal structures
- Faster transaction timelines in some cases
- Higher competition for quality firms
However, not all private equity groups are the same.
Some are highly experienced in accounting, while others are still learning the industry. This creates a wide range of deal quality and outcomes.
How to Increase your Firm’s Value Today
Whether you plan to sell or not, the same principles apply.
- Improve profitability and pricing strategy
- Build a strong leadership team
- Expand CAS or recurring service lines
- Standardize workflows and systems
- Reduce reliance on individual partners
Firms that focus on these areas are more scalable, more efficient, and more valuable.
Conclusion
Accounting firm valuations are no longer based on simple revenue multiples.
Today, buyers are looking at profitability, talent, systems, and long-term sustainability.
The firms that command the highest valuations are the ones that operate with structure, consistency, and clear growth potential.
Whether you are planning to sell or stay independent, the strategy is the same:
Build a firm that runs well without relying on you.
Frequently Asked Questions
How are accounting firms valued today?
Most accounting firms are now valued based on profitability, especially adjusted EBITDA, rather than just revenue multiples.
What makes an accounting firm more valuable?
Strong profitability, recurring revenue, a stable team, and scalable systems all increase firm value.
What is CAS in accounting?
CAS stands for Client Accounting Services. It includes recurring services like bookkeeping, reporting, and advisory, which provide predictable revenue.
Does private equity increase firm valuations?
Private equity has increased competition and deal size in many cases, but valuation still depends on the firm’s fundamentals.
Should I build my firm to sell even if I do not plan to?
Yes. Building your firm as if it will be sold improves structure, profitability, and long-term sustainability.
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Build a Firm That’s Ready to Scale or Sell
If your firm relies on manual processes, scattered communication, or unclear workflows, growth becomes harder and valuation suffers. Jetpack Workflow helps accounting firms standardize processes, track deadlines, and manage client work with clarity. Create a firm that is organized, scalable, and ready for whatever comes next.
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