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Digital disruption hitting practice valuations

Digital disruption is impacting fees and profit margins, and placing downward pressure on the value of accounting practices, says research company Bstar.

Digital disruption hitting practice valuations
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Bstar chief executive Grant Bloxham says digital disruption has resulted in a decline in compliance fees and profit margins, “so the value of an accounting practice for sale, if you look at the historical profit, it may not look like the future profit”.

“The historical records won’t be representative of what you’re going to do,” Mr Bloxham said.

“We do a lot of consultation with future partners who are looking at buying. We want to make sure the practice has a strategy for the digital disruption technology is having on accounting practices these days.”

Mr Bloxham said accounting practice owners who have not yet developed a cloud accounting strategy would see a decline in their practice value.

“It depends on what ... their cloud accounting strategy [is]. If they’ve got one in place, not a problem, but if the practice is starting to address that issue, then there will be some issues around future profits and cash flow,” he said.

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