you’re probably not an owner.
by marc rosenberg
how to bring in new partners
there are two components to the value of a cpa firm: capital and goodwill, the latter of which is often stated as a percentage of the firm’s annual revenue. capital is on the balance sheet; goodwill is not.
more: why buying into a firm is such a great investment | four philosophies for managing a cpa firm | public accounting as a business, 101 | 16 steps to creating a partnership path | six ways new partners differ from managers | the four essentials for every new partner | tell potential partners what it takes
exclusively for pro members. log in here or 2022世界杯足球排名 today.
here’s a crash course in cpa firm business valuations. assume a firm with annual revenue of $10 million. most firms have accrual basis capital of roughly 20 percent of their revenues, consisting mostly of wip and a/r. if we value the goodwill at 100 percent of revenue (this used to be so common it was automatic; today it is still common but much less so), the total value of the firm is $12 million: $2 million of capital and $10 million of goodwill.
to read the full article
