What Your Wage Bill Really Tells a Buyer

By Greg Tapper, specialist accountancy practice broker

If you were looking at two accountancy practices with similar fees, but one spent considerably more on wages, which would you expect to be worth more?

You might lean towards the one with the lower wage bill. More profit is left over, so it seems a reasonable place to start.

But I would want to know a bit more before reaching that conclusion. Who is doing the work? Who looks after the clients? And how much profit depends on the owner putting in hours someone else would need to pick up?

These are the conversations I have with owners when we look at what their practice might be worth. The figures matter, but we need to understand what sits behind them.

What does the wage bill actually tell us?

Take two practices, each billing $600,000 a year. One spends around 30% of its fees on staff, while the other spends closer to 50%.

That is a substantial difference. But it does not, by itself, tell us which is the better business or which will achieve the better sale price.

The owner of the first practice might be doing most of the technical work, managing the staff and personally looking after the clients. The wage bill is low partly because so much of the workload sits with them.

In the second practice, staff might handle much of that work and manage the day-to-day client relationships. The owner is still involved, but their role is quite different.

I sold a practice recently where wages were close to half the fee income. Two experienced chartered accountants carried much of the client work and relationships. Understanding their roles was an important part of understanding the business.

Of course, a higher wage bill can also reflect spare capacity, inefficiency or fees that have not kept pace with costs. We need to ask the questions before deciding what the percentage means.

How have you chosen to run your practice?

Some owners are happy to carry a substantial workload themselves. Others employ more support because they want shorter hours, time with family or the ability to take a holiday without everything waiting for their return.

Neither approach is wrong. They reflect different priorities.

When it comes to selling, though, we need to understand what the buyer would be taking over. How much work would they need to do personally? Would they need to employ someone to replace you? Or is there already a team capable of handling much of that responsibility?

Profit still matters. But comparing the reported profits of two practices without understanding the owners’ roles can give a misleading impression.

It also depends on who is buying

An established firm and someone buying their first practice may see quite different opportunities in the same business.

An existing firm might have management support, systems or capacity that changes how the practice would operate after purchase. Someone buying their first practice may expect to take over much of the vendor’s work themselves.

Equally, an established buyer may particularly value a capable team because they do not have spare capacity.

This is why I am cautious about applying a standard multiple to the fee income and treating that as the answer. It can be a reference point, but it does not explain how the practice would fit a particular buyer, what it would cost them to run, or the handover arrangements they would need.

Bringing it back to your practice

The wage bill is one part of the discussion. We also need to look at the consistency of the fees, the spread of clients, the staff’s responsibilities and how dependent the business is on you.

So if you are looking at your accounts and wondering whether your staffing costs will hold back the value, I would not jump to that conclusion. I would want to understand what those costs provide.

You may have built a team that allows someone else to take over with confidence. Or there may be things worth addressing before you sell. An appraisal should help you understand both.

If you are starting to think about selling your accountancy practice, now or a few years down the track, I am happy to talk through how you run it and what that could mean for a sale. You do not need to have decided to sell before we have that conversation.

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.