Accounting Practice Valuation in NZ: Why the Market May See More Than You Do

By Greg Tapper, specialist accountancy practice broker

Recently, I was asked what an accounting practice had sold for.‍ ‍Confidentiality prevented me from answering, so I said what I could:

The practice was on the market at a price I believed was achievable.

‍His response was immediate.‍ ‍

"Someone overpaid."

I hear a version of this reasonably often. Usually from an accountant discussing someone else's practice. They have a calculation in mind, cents in the dollar, an earnings multiple or perhaps a comparison with a deal their mate completed in 2019.

They might be right.‍ For them.

Every accounting practice has a likely market value. But what a practice is worth to one buyer may be quite different from what it is worth to another.‍ That difference is why an accounting practice valuation is rarely answered properly by one formula, and why the market may see more value in a practice than its owner expects.

An appraisal is a range, not a prediction

‍The terminology is important.‍ As a licensed business broker, I provide a market appraisal of a practice's likely selling range. I do not issue an independent formal valuation.‍ A formal valuation may be required for purposes such as litigation, relationship property, estate planning or a shareholder dispute. A broker's market appraisal serves a different purpose. It gives an owner a reasoned view of the range within which the practice may sell in the current market.

‍ That range provides a starting point. It does not tell us exactly what every buyer will be prepared to pay.‍ Accounting practices are often discussed as though there should be one correct answer. Apply the accepted measure, check the calculation and arrive at the value.

‍ ‍Markets are less tidy than that.

‍ ‍The eventual result depends not only on the practice being sold, but also on the buyers considering it and what the acquisition would mean within their existing operations.‍ ‍

The number owners read backwards: the wage bill

‍Before we get to the buyers, it is worth looking at the one figure inside a practice that owners most often misread. It is the wage bill.‍ When an owner works out what their practice might be worth, they look at the fees, then the profit. A large wage bill looks like a problem on that second line. Less profit, less to sell. Often it is telling the opposite story. A low wage bill can simply mean the owner is doing the work, while a higher one can mean capable staff hold the clients and the business runs without its owner at the desk. I look at that more closely in

[What Your Wage Bill Really Tells a Buyer].

‍ ‍Either way, the wage bill is a window into how a vendor chose to run their practice, and into where the client relationships actually sit. That matters enormously to a buyer, and it is a large part of why the same practice is worth different amounts to different people.

‍The same practice will have different values to different buyers

‍ Consider two buyers looking at exactly the same accounting practice.‍ ‍

The first is an established firm nearby. It has spare staff capacity, suitable premises and systems already in place. It may be able to absorb the practice without duplicating every cost, and could benefit immediately from greater scale.‍ ‍

This is where the wage bill comes back in. A practice that already runs on a capable team is a clean addition for that established firm, because the work and the client relationships travel with people who stay. The buyer can often carry it with little duplicated cost and still pay toward the top of the range. A practice that runs on the departing owner is a different proposition entirely, because much of what is being bought walks out the door on settlement day.

‍ The second buyer is a first-time buyer who needs to borrow most of the purchase price, secure premises and recruit additional staff. The acquisition may still work, but the economics will be quite different. The same wage bill that looked like a strength to the established firm now reads as a cost they must carry in full.

Same fees. Two different right answers.

The established firm may be able to pay more and still achieve a better return. The first-time buyer may need to pay less for the purchase to remain viable, and perhaps should.‍ Another buyer may have a strategic reason for entering that region. One may already serve a complementary client base. Another may have been trying to recruit the capability that the practice and its team would provide immediately.

‍ A calculation based only on the practice's historical performance cannot fully measure those advantages, because they belong to the buyer, not the seller.‍That does not make the eventual price irrational. It explains why a practice can be worth more in one buyer's hands than another's.‍ ‍

The market does not always agree with the owner

‍ ‍I recently received a testimonial from an accountant whose practice I sold. One sentence captured this particularly well:‍ ‍

"As an accountant, we supposedly have the skills to value a business; however, the market may dictate differently."

‍He and I had been in contact for approximately two years before he decided to sell.

He was unsure whether he was ready to retire, and I understood that. There was no reason to force the decision or turn every conversation into a sales pitch. We spoke occasionally about what was happening in the accounting practice market and what those trends might mean for him.

‍ ‍As he later wrote:

‍"At no time was any sales pitch or pressure to sell made. He would keep in touch by the odd phone call, and given his expertise and experience in selling accountancy practices was always a worthwhile chat." When the time became right for him, the practice was brought to market.

‍ The outcome was not simply a confirmation of the alternatives he already knew about. The market produced a substantially stronger result.‍ ‍

In his words:

"This is where Greg's true value came to play, and I'm pleased to say that the sale price achieved was far greater than the other options I had considered."

Accountants understand financial performance, risk and return exceptionally well.‍What an owner cannot determine from the accounts alone is which buyer will see the greatest value in that particular practice.‍ That has to be discovered through a structured sale process and market exposure.

Why one buyer cannot establish market value ‍

An owner may already know someone interested in buying their practice. It might be another local firm, a former employee or a practitioner who has mentioned over the years that they would like the first opportunity if the owner ever sells.

‍That buyer may ultimately be the right one.

‍ But their proposal reflects their view of the practice, their capacity and their circumstances. It does not establish how the wider relevant market would respond.‍

A genuine market result requires the practice to be visible to the credible buyers most capable of recognising its value. That does not mean pursuing the greatest possible number of enquiries. It means reaching buyers with different resources, locations and strategic reasons for making an acquisition.

The owner's existing buyer can remain part of that process. They are simply considered alongside the market rather than being assumed to represent it.

This is the part of accounting practice valuation that a formula cannot reproduce. A calculation can support a range. It cannot reveal which qualified buyer has the strongest reason to acquire the practice, or what that opportunity may be worth within their operation.

A price at the top of the range is not necessarily an overpayment

When a practice sells near the upper end of its appraisal range, it can look expensive to someone outside the transaction.

‍ What they cannot see is the buyer's complete position.

‍The buyer may be able to remove duplicated costs. The acquisition may create immediate scale, solve a staffing need or establish a presence that would otherwise take years to build. It may give them access to clients or capabilities that fit naturally with their existing operation.‍ ‍

A price that would be too high for one buyer may be commercially sensible for another.‍ Of course, buyers can overpay. But a strong selling price is not evidence of that by itself.‍ ‍

Sometimes it simply means the practice reached the buyer for whom it held the greatest value.

The cost should be considered against the result

The vendor who provided the testimonial made another observation:‍ ‍

"We often baulk when we are presented with fees, but we shouldn't let this predetermine the outcome."

Professional fees should always be understood and considered. But the relevant comparison is not the broker's fee in isolation.

It is the seller's final net position compared with the realistic alternatives.

‍A less expensive route does not necessarily produce the better financial result if the practice is exposed to only one buyer's assessment of its worth. Equally, using a broker only makes commercial sense if the additional value achieved justifies the cost.

In this vendor's case, the sale price was far greater than the other options he had considered. His conclusion was:

‍"We are not marketers, and sometimes we need to take a step back and let others use their expertise, which Greg has in this field."

That is not an argument that every practice will sell above expectations. No responsible broker can promise that.

‍It is an argument for allowing the relevant market to establish the answer before an owner commits to one buyer or one view of value.

What is your accounting practice really worth?

The honest answer begins with an appraisal.

‍A market appraisal establishes a supportable likely selling range. The eventual result depends on how credible buyers respond, and whether the practice reaches the buyer to whom it offers the greatest economic or strategic value. It also depends on the things inside the practice that decide how much of its value survives the sale, and the wage bill is one of the clearest of those, because it tells you whether the practice runs on its team or on its owner.

‍ My role is not to argue with prospective buyers about price. It is to understand where the practice is likely to sit, bring it to the relevant market and find the buyer the practice is worth the most to.‍So, did someone overpay for the practice I was asked about?

‍ Perhaps it looked that way to someone applying their own calculation from outside the transaction.‍ To the buyer who understood what the practice could add to their existing operation, it was exactly the right price.‍ ‍

If you are considering selling now or within the next few years, a confidential conversation can provide some perspective on your practice's likely market position without committing you to a sale.‍ ‍

I am a specialist accountancy practice broker with Barker Business Brokerage, licensed under the Real Estate Agents Act 2008. I have brokered more than 70 business sales across New Zealand, over 60 of them accounting practices.

‍ gregtapper@barkerbusiness.co.nz | 022 342 7758

‍ ‍The market commentary in this article is general in nature. A broker's market appraisal is an estimate of the likely selling range in current market conditions and is not an independent formal valuation.

‍ ‍Licensed REA 2008. Copyright Barker Business Brokerage Ltd 2026.

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