If you are like many firm owners, your personal balance sheet looks something like this: a solid home, respectable retirement accounts, maybe a brokerage account, and then one outsized line item that dwarfs everything else: your CPA practice.
You tell yourself that the practice is your retirement plan. One day you will sell, cash out years of sweat equity, and that will close the gap between “comfortable” and “secure.” Until you start running real numbers and asking hard questions about timing, valuation, and who will actually write the check.
When most of your net worth is tied up in a single private business, you do not have a retirement plan so much as a thesis. The thesis might work out. It might not. The risk is not theoretical. A growing wave of U.S. business owners are at or near retirement age, and most intend to sell or transfer their companies, yet many still lack concrete succession plans and face uncertainty about exit outcomes (Gallup small‑business succession research). Your CPA practice is subject to the same forces.
This article looks at what concentration risk really means for CPA firm owners, how the current M&A market is valuing firms, and practical ways to start shifting from “the firm is my plan” to “the firm is one asset inside a broader plan.”
Recognizing When Your Firm Has Become a Concentrated Bet
Most business owners, including accountants, carry a high percentage of their net worth inside their companies. Studies of closely held businesses suggest that it is common for 80 to 90 percent of an owner’s wealth to be tied up in the business itself (The Planning Center article on concentrated business risk). For many CPA firm owners, that figure would not be surprising.
On paper, this feels rational. You know the firm better than any outside investment, you control major decisions, and you understand the cash flows. Compared with a volatile stock market, the practice can look stable.
The risk shows up when you shift from annual cash flow to terminal value. If 60, 70, or 80 percent of your retirement picture depends on finding a successor or external buyer at the right time and price, you are no longer just an owner. You are a highly concentrated investor in a single illiquid asset whose value you cannot check on a screen.
Concentration risk for CPA firm owners often shows up in a few familiar patterns. You may assume a high exit multiple because you have heard of headline deals, without confirming whether your firm’s size, margins, client mix, and systems justify similar pricing. Your personal spending and savings may assume a successful sale, leading you to underfund diversified retirement accounts or delay building outside assets because “the practice will cover it.” Your succession plan may be informal, hinging on one manager, one junior partner, or a hoped‑for merger, with no clear contingency if that person leaves or the deal terms change.
You do not have to view your firm as a problem asset. It is an important and often highly productive piece of your plan. The goal is to reduce the degree to which your future depends on a single outcome at a single point in time.
What the Current Market Is Really Paying for CPA Firms
A key part of taming concentration risk is replacing stories with data. Many CPA owners still think in terms of “1 to 1.5 times revenue.” That might be possible, but assuming the high end as a baseline can create a dangerous gap between expectations and reality.
Recent market data suggest a more nuanced picture. Surveys of small and mid‑sized accounting firm transactions in 2025 and into early 2026 show that smaller traditional firms often sell for roughly 0.7 to 1.1 times gross revenue, depending on client mix, location, and revenue structure (TaxDome overview of accounting firm valuation multiples). Seller’s discretionary earnings (SDE) multiples commonly fall between roughly 1.8 and 3.25 times SDE for small to mid‑sized practices, with higher pricing tied to stronger systems and more transferable cash flow (TaxDome multiples summary; LinkedIn analysis of 2025 CPA firm valuation factors). For firms where EBITDA is a more meaningful measure, advisory and M&A specialists report many mid‑sized CPA firms in 2026 trading in roughly the 3.0 to 5.5 times adjusted EBITDA range, with premium pricing for firms that are profitable, systematized, and not overly dependent on one or two rainmakers (Ashley‑Kincaid 2026 CPA M&A market snapshot; FirmLever 2025–2026 valuation guide).
These are broad ranges, not promises. They depend on the size and growth rate of your firm, your client concentration and industry mix, the balance between recurring and purely seasonal work, the depth of your team and documented processes, and the quality of your technology stack and integration capabilities. When you overlay those ranges on your own firm’s financials, you often discover that the assumed sale proceeds in your personal spreadsheet are optimistic. The gap between “hoped‑for” and “likely” is the concentration risk you have to manage.
Why Concentration Risk Is Different for CPAs
Every business owner with the bulk of their wealth in one company has a concentration issue. For CPAs, several additional dynamics are in play.
First, a large share of U.S. employer firms are already owned by people 55 and older (Gallup small‑business ownership data). Within accounting, the age skew can be even more pronounced. As that cohort transitions out, there will be more firms trying to sell, merge, or execute internal succession than there are ready buyers and next‑generation partners.
Second, the work itself is changing. Articles on the “silver tsunami” of retiring business owners have noted that many entrepreneurs have as much as 90 percent of their net worth tied up in their businesses and that a significant share of business sales are forced by events such as death, disability, or distress rather than careful planning (Kiplinger coverage of the business owner silver tsunami). At the same time, technology and AI are reshaping compliance work. Buyers are more selective about the firms and client bases they want to acquire. That makes the range of potential outcomes wider.
Third, you are acutely aware of risk in other contexts. You advise clients not to put their entire portfolio into one stock or one rental property, yet it is very easy to rationalize an exception when the concentrated asset is your own practice. That tension is worth acknowledging. It is uncomfortable to shift from being the expert in the room to being the one with the concentrated position. But that is where the real planning work begins.
Turning an Illiquid Practice into a Portfolio: A Phased Mindset
Taming concentration risk is not about rushing to sell or starving the firm of needed capital. It is about deliberately converting portions of your firm’s value into diversified assets and alternative income streams over time.
It can help to think in phases. In the early and mid‑growth years, your focus is often reinvestment. You may reasonably accept a higher concentration in the firm because the marginal return on invested time and capital is attractive. Even then, seeding retirement accounts, building some after‑tax liquidity, and involving your spouse in big‑picture planning can keep you from starting from zero later.
As you reach your 50s or early 60s, the return calculus shifts. The firm is more mature. Growth may be steadier rather than explosive. You may feel the grind of another tax season more acutely. At this stage, holding 70 or 80 percent of your net worth in the firm can start to feel less like focus and more like exposure. This is when we encourage owners to reframe their central question. Instead of asking how to maximize what you get from selling the firm someday, you might ask how to steadily convert firm value into a diversified retirement strategy while still running a healthy practice today.
There are several levers that support that shift, some of which you may have seen discussed in more detail in our pieces on qualified plans for CPAs and on building a succession‑ready retirement strategy.
Using Retirement Plans to Gradually Reallocate Wealth
Tax‑advantaged retirement plans can be one of the cleanest tools for pulling cash flow off the firm’s income statement and onto your personal balance sheet.
As you know from your work with clients, SEP IRAs, SIMPLE IRAs, 401(k)s, and cash balance plans all allow owners to defer income, reduce current taxes, and build diversified assets in a protected environment. The same concepts apply to your own situation. Market and legislative changes, such as provisions in the SECURE 2.0 Act that make it easier for small businesses to start and administer 401(k) plans, have expanded the options and incentives available to business owners (Planning Center overview of SECURE 2.0’s impact on small employer plans).
From a concentration‑risk perspective, consistency is more important than any single year’s contribution. Each year that you maximize contributions to a well‑designed plan, you are converting a slice of your practice’s current earnings into a separate, growing pool of capital that does not depend on next year’s client retention or future deal terms. The firm remains important, but its relative weight in your net worth starts to shift.
Aligning Succession Structure with Risk Management
The way you plan to exit has a direct impact on your concentration risk.
An internal succession, where managers or junior partners purchase equity over time, can be an elegant solution. It develops leaders, rewards loyalty, and preserves culture. It can also leave you with extended exposure to firm performance if most of your proceeds arrive through long‑term note payments or profit allocations.
A third‑party sale or merger may produce more cash at closing, along with equity or earn‑out components depending on the buyer profile. For owners of certain sizes or niches, private‑equity backed platforms have created new pathways, with buyers that focus heavily on EBITDA, recurring advisory revenue, and the scalability of your model (Ashley‑Kincaid 2026 CPA M&A market snapshot). This can accelerate the conversion of firm value into liquid assets, but also introduces its own risks and cultural tradeoffs.
There is no universal right answer. What matters is that you model how different structures affect the timing and reliability of your retirement funding. A nominally higher total price that is spread over many years and contingent on future performance you no longer fully control may represent more concentration risk than a slightly lower price with stronger protections and earlier liquidity.
Stress‑Testing Your Personal Plan Against Realistic Firm Outcomes
One of the most effective ways to confront concentration risk is to stress‑test your plan. This is where your skills as a CPA can work for you rather than against you.
You might begin by anchoring your analysis in a realistic valuation range, not your best‑case number. Using conservative assumptions on multiples for revenue, SDE, or EBITDA based on current market data, you can map several scenarios. In one, the firm sells at the low end of that range rather than the high end. In another, the sale is delayed by three or five years due to market conditions, buyer disruptions, or personal factors. In a third, a portion of the price is paid over time and a buyer misses one or more payments.
For each scenario, you can then examine your household balance sheet and cash flow. You can ask how much needs to come from existing retirement accounts, taxable investment accounts, real estate or other outside assets, and any partial work, consulting, or phased role with the acquiring firm. The goal is not to talk yourself out of owning your practice. It is to identify the points where outcomes start to break down and to use the years you have between now and transition to close those gaps.
This is also where integrating Social Security claiming decisions, spousal benefits, and other income sources into your firm exit planning can be important. The more you diversify your retirement income streams, the less any one asset or decision has to carry on its own.
Deciding How Much Concentration You Can Live With
Risk tolerance is not just about market volatility. It is also about how much of your future you are comfortable tying to one enterprise.
For some CPAs, the right answer may be to accept a higher ongoing concentration while insuring more aggressively, maintaining a stronger cash reserve, and investing heavily in leadership development so that the firm is less dependent on any one person. For others, particularly those who are closer to retirement age or whose personal goals have changed, the answer may be to deliberately lower that concentration over a defined period. That might involve increasing qualified plan and after‑tax savings rates, even if it modestly reduces current lifestyle, or restructuring ownership and compensation so that more of your value is captured through diversified savings rather than retained equity. Some owners explore minority recapitalizations, mergers, or strategic investments that create liquidity now while preserving upside.
What matters is that the choice becomes explicit. Instead of drifting toward a future where “everything is tied up in the business,” you are deciding what percentage of your net worth you want in the practice and working toward that target.
Bringing It All Together
You know better than most that the numbers rarely lie. When you lay out your personal balance sheet honestly, many CPA firm owners see the same picture: a healthy, profitable practice that has quietly become their single largest and riskiest asset.
Taming that concentration risk does not require you to stop growing, selling, or investing in your firm. It means using the planning tools and analytical skills you already apply for clients to your own situation. That includes grounding your expectations in current, realistic valuation data; using retirement plans and other vehicles to steadily move value off the firm’s ledger and onto your personal one; aligning succession and exit structures with the level of risk you are willing to carry; and stress‑testing your retirement plan against less‑than‑perfect firm outcomes and adjusting while you still have time.
Over time, the story on your balance sheet changes. The firm remains important, but it is no longer the entire plan. It becomes one strong pillar among several rather than the single beam holding up the whole structure.
If you are looking at your own numbers and wondering how concentrated you really are, a focused conversation with a qualified advisor can help you evaluate options in light of your goals and circumstances.
Appendix: Sources
Most Small‑Business Owners Lack a Succession Plan (Gallup)
How to Value an Accounting Firm: The Complete Guide to CPA Practice Valuation 2025–2026 (FirmLever)
How to value an accounting firm: Proven methods (TaxDome)
It’s Not Too Late for Wealth Advisers to Participate in the Silver Tsunami (Kiplinger)
