I'm currently looking at an accounting prep / bookkeeping firm with ~$3.7M in revenue and ~$1.6M in EBITDA. I have already backed the fees they earned from ERC filings and PPP out of both revenue and EBITDA - without taking out the associated cost for the work done, so arguably their EBITDA should be a little higher.
That gives me a 42% EBITDA margin, which is in-line with the previous 3 years. They supposedly price competitively, but my research shows most tax prep / bookkeeping companies earn about 20% gross margins, so I am wondering if 40%+ is really sustainable.
As of now I have asked for pricing sheets and personnel costs to try to understand margins at the unit level.
Any thoughts on anything else similar to PPP / ERC that I could be missing? Or anything else I should be looking at?
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by a searcher
from Massachusetts Institute of Technology - MIT Sloan School of Management
in Miami, FL, USA
in Miami, FL, USA
1yr ago
42% EBITDA Margin too high for Bookkeeping / tax prep?
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by a searcher
1yr ago
from Northwestern University in Chicago, IL, USA
from Northwestern University in Chicago, IL, USA
I talked to a few of these during my search and at a small scale the margins were usually pretty good, but in those cases either the owner was doing a lot or it was an offshoring business. I would also check if implementation work was a part of what they did (it's lower multiple/value and higher margin). In many cases I would guess that the gross margins are sustainable, but the management structure likely doesn't scale as well, at which point it would be more a question of if you can outgrow the increasing cost structure.
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by a professional
1yr ago
from University of Nebraska at Kearney in Boca Raton, FL, USA
from University of Nebraska at Kearney in Boca Raton, FL, USA
Do this. Bookkeeping with overseas staff can also have higher margins although that comes with its own challenges. I have seen 100% USA based firms with 60 clients per bookkeeper which would give you 50% or greater margins. So, I wouldn't let that number keep you from diving deeper. Good luck
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