Practice Valuation
How to spot overvaluation in an accountancy practice
Overvaluation can stall accountancy practice sales and put off serious buyers. This article explains the warning signs, from weak retention to inflated fees, and shows how owners can spot red flags early for a smoother sale.
| September 15, 2025 | 2 min read
When practice owners prepare to sell, it’s easy to hope for the highest possible price. But some valuations look too good to be true. Inflated figures often hide one-off income, unrealistic forecasts, or accounting tricks that don’t stand up to buyer scrutiny. Spotting overvaluation early protects deals and ensures a fair outcome. Kingsman Partners has seen how the right checks stop sales from stalling.
Buyers typically check the following:
1. Unrealistic growth forecasts – Sellers may expect repeat strong years. But inflation and market dips can cut future profits. Bright assumptions without proof lead to overvaluation (HiltonsMythe, 2025).
2. Over-reliance on one-off fees – If revenue comes from occasional projects or audits, not recurring work, buyers value it lower. Every buyer prefers steady fee banks.
3. Weak client retention – High churn sends buyers running. Strong repeat clients provide solid valuation support (Financial Accountant, 2023).
4. Aggressive accounting practices – Inflated asset values or hiding costs mislead buyers. Real cash flow matters, not fancy accounting.
5. No tech or systems – Firms that rely heavily on the owner raise risk for buyers. Lack of automation and cloud systems lowers valuation.
It’s useful to compare to market norms:
• GRF (gross recurring fees) multiples typically range from 0.8× to 1.7× depending on client trust and systems (InforManagement, 2024). Any asking price above that warns of overinflation.
• EBITDA multiples for UK practices tend to range from 4× to 10×, depending on efficiency and growth. Private equity may stretch that to 14×, but only for top-tier firms with proven scale.
Other warning signs include split earn-out terms or complex deferred payments hidden in small print. These clauses can reduce actual sale value.
Overvaluation causes deals to stall, leads to buyer distrust, and might erode life-planning trust in the practice owner. Valuations based on credible metrics avoid these traps.
Spotting overvaluation early protects sellers and buyers. It lets practice owners set realistic, fair prices and attract serious buyers. Kingsman Partners can help you identify red flags, align valuation with market norms, and guide you toward a successful sale outcome.
Alfie Charles – Partner at Kingsman Partners
If you’re considering a sale or acquisition, Kingsman Partners is here to help. Schedule your meeting here.
