In the modern landscape of tax, audit & accounting, firm leaders are navigating a complex web of challenges and opportunities and understanding the key elements of their firm’s valuation and strategic growth is essential for long-term success
Among the many competing evolutionary factors — such as the impact of advanced technology, the challenge of finding top talent, and the shift in clients’ expectations — leaders of tax, audit & accounting firms face mounting pressure to grow their business and do so wisely.
Indeed, growth has surged as the second-highest strategic priority for firms worldwide, jumping from fifth place in 2024, according to the Thomson Reuters Institute’s 2025 State of Tax Professionals Report.
That means, for tax firm leaders who are considering their growth options — whether planning for a merger, acquisition, internal succession, or just a more profitable future — it is critical for them to understand their firm’s valuation and the strategic underpinnings of scalable growth.
The report shows that over the past five years, the tax, audit & accounting industry has experienced increased consolidation, driven primarily by mergers and acquisitions (M&A), private equity interest in the industry, and contraction in the available pool of talent. At the same time, clients are indicating that they want their outside tax firms to offer more advisory services and new non-traditional competitors, such as tax-focused fintech firms and AI-powered platforms, are entering the market.
In response, tax firm leaders should be asking some variation of the following three questions:
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- How do we stay competitive and attract the right clients?
- Are we building a firm that will be desirable to a buyer or to the next generation of partners?
- What is our firm worth, and how do we increase that value over time?
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Factors that drive valuation
Valuation is about more than revenue. A buyer or successor is buying into the firm’s future — such as what potential revenue opportunities exist or can be created — not the past. While historic financial performance is foundational, tax firm value should be based on the following:
Recurring revenue and client mix — This can be a key indicator of a firms’ value. Firms whose business is primarily seasonal tax prep without any significant ongoing advisory work are clearly less valuable than those firms that can offer that. With the increase of tax prep work automation, clients can become agnostic as to where their tax prep work is done; or even may decide to utilize tax tools for themselves, depending on the levels of complexity they require. Thus, an outside tax firm that has a mix of tax prep and strong advisory service offerings may have the breadth in revenue stream and the potential for increasing offerings that makes it more valuable.
Owner dependence — If the survival of a firm is solely or mostly dependent on its founders or some of its partners its value is inherently less. For example, if the founder or key partner is hit by the proverbial beer truck and all or most of the firm’s clients head for the door, the firm will likely go under. This clearly isn’t a sound business model, and no one likely would invest in something that seems so tenuous. For most owners and founders the tendency is to do all or most of the heavy lifting work because they know what they want to get done. However, if firm growth in anywhere in your valuation consideration, then firm leaders should delegate to ensure clients not only have strong relationships with the owner, but with the firm’s entire staff.
Technology & operational efficiency — The Tax Professionals report highlights the correlation between a firm’s desire to grow and the understanding that to drive efficiency you have to utilize advanced technology. Today, tax firms still using outdated technology or those that are mired in manual processes will be unable to scale up enough to become attractive to a buyer, investor, or even potential talent.
Staff & culture — As the war for talent rages on in the tax, audit & accounting profession, those firms with stable, engaged teams obviously are more valuable than those with high turnover or looming mass retirements. Firms that foster a culture of strength and flexibility are more attractive to potential buyers, whether through M&A or private equity investment.
Brand & market position — Naturally, a firm brand and where it sits in the market is a significant valuation factor for a potential buyer or investor. Firms that operate in a profitable niche and have a strong reputation are clearly more valuable, period. For example, a firm specializing in an industry can position itself as an expert and therefore attract and retain clients in those target markets.
What growth really requires
For many tax, audit & accounting firms, growth isn’t just about adding more clients or increasing revenue. It’s about building systems, teams, and strategies that create sustainable, transferable value. In terms of being truly strategic, firm leaders should start by looking at their roster of clients and how each is served and priced. Knowing where each client resides — as high-value or low-margin customers — is the first step to making the necessary adjustments and focusing on more productive relationships.
Similarly, if growth is top of mind, then so must be succession planning. Firms that want to grow and retain value need to identify and groom future leaders early. This includes not just offering technical training, but also providing leadership development, creating equity pathways, and establishing client relationship handoffs.
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Further, investing in technology and client experience is no longer a nice to have, it’s an essential requirement. Most of us live in a world in which we expect immediacy and ease for everything, and tax firm clients are no different. They now expect fast responses, online access, and proactive advice — not just a completed tax return each year. Firms that invest in client relationship management systems, client portals, and advisory frameworks are better positioned to retain clients, charge premium fees, and scale effectively than those firms that don’t.
Yet, despite best intentions, some firm leaders fall into avoidable traps on their path to increasing valuation, including:
Focusing only on tax season — Firms that don’t develop year-round advisory-based services miss major opportunities for revenue and client loyalty.
Underpricing services — Undervaluing your firm’s own expertise hurts margins and attracts the wrong type of clients.
Failing to document processes — Institutional knowledge can become trapped in the owner’s head, which limits scalability and valuation, and is disastrous should a sudden loss of owner occur.
Ignoring succession planning — Similarly, many firm leaders wait too long to think about a transition to new leadership or managerial talent, which can result in the loss of firm valuation, key talent, and most importantly, clients.
Much like test driving a vehicle before you need one, firm leaders should get a fix on the valuation of their firm before any transaction or major change. Determining a baseline valuation is a good exercise that can help set goals and spot red flags. Based on the valuation data, firms then can use the information to help move everything forward, from streamlining processes and automating operations to defining ideal clients and what type of additional services (think advisory) the firm could offer or what other revenue opportunities it could pursue.
The foundation of a more valuable and scalable tax, audit & accounting firm isn’t built on working harder every tax season; rather it’s built on making intentional decisions, creating repeatable systems, establishing strong teams, and forging a deep understanding of what drives value in today’s tax, audit & accounting firm market.
