A Buyer’s Guide to Purchasing an Accounting Practice

If you’re planning to purchase an accounting practice, it’s understandable to feel a mix of excitement and hesitation. It’s a big leap, no doubt. Acquiring a firm can provide a shortcut to growth, a ready-made client base, and a team in place, but there are pitfalls to navigate. 

If you’re considering this path, let’s break down everything you need to know to make a confident, informed decision and reduce as much risk as possible. 

Why Buy an Accounting Practice?

Before diving into logistics, let’s explore why buying an accounting practice might be right for you. 

1. Immediate Client Base – Acquiring an existing practice means you’ll have clients from day one. You won’t have to start from scratch, saving you the time and money it takes to build a base organically. 
2. Established Revenues Stream – With an established book of business, you benefit from predictable revenue immediately. This is a far cry from the flow (and sometimes grueling) process of growing from zero.
3. Brand Recognition and Reputation – Assuming the practice has a positive reputation, you buy into an established brand. In a field where trust is critical, this can help you transition smoothly without needing to build credibility.
4. Experienced Staff and Systems – In most cases, you’re not just buying clients but inheriting the team and systems that support them. This can allow for smoother integration and a faster path to profitability. 

However, it’s important to be clear about your goals. Is your primary motivation revenue growth? Expanding into a new region? Enhancing services capabilities? Getting a handle on your “why” will guide the rest of the process, keeping you focused as you assess potential practices. 

Finding the Right Firm

When finding an accounting firm for sale, you have more options than you might think. The search starts with knowing where to look and being open to a few unexpected sources. Here’s where I suggest starting: 

1. Google Search – A simple Google search can yield a lot more than you might expect. Try keywords like “accounting firms for sale in [your location]” or specialty if you’re focused on a particular type of practice. Many sellers or brokers post listings directly online; little search time can get you options.
   
   
   
2. Business Brokers – Brokers specializing in the accounting industry, like the Poe Group Advisors, can be your greatest asset, especially if this is your first acquisition. They know the market well, have established networks and can introduce you to sellers who align with your goals. While there’s a fee involved, the guidance and connections they provide are often worth it.
3. Online Marketplace – There are several dedicated sites where accounting practices are listed for sale, such as Practice Marketplace by Karbon, Accounting Practice Exchange or BizBuySell. These platforms are updated regularly and provide details on location, size, and asking prices. Make it a habit to check these sites so you don’t miss a potential match.
   
   
   
4. Networking Within Your Circles – Don’t underestimate the value of tapping into your existing network. Let colleagues, industry contacts, and even clients know you’re looking. Many practice sales happen quietly through personal referrals; someone in your circle may know a practice owner thinking about selling.  

Assessing the Practice Value

Understanding the valuation of an accounting practice can seem like a black box, but it boils down to a few key factors. 

Revenue Multiple

The most common approach is to price the practice as a multiple of its annual gross revenues. This multiple can range from 0.5 to 1.5 times the revenue, depending on market demand and the firm’s specifics, such as location, client base, reputation, etc. 

For example, let’s say you’re looking at a firm with an annual revenue of $500,000. If the practice is priced at a 1.2 multiple, that would mean a valuation of $600,000. 

Earnings Multiple

Another valuation method involves using a multiplier on the business’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). 

For instance, if the agreed multiplier is 2.5 and the practice’s EBITDA stands at $400,000, the calculated valuation would be $1,000,000. 

Conducting Thorough Due Diligence

Once you’ve identified a practice and agreed on a price, the next step is to do your due diligence. This is your chance to ensure you’re fully aware of your purchase. No surprises, no regrets. 

Evaluating Client Portfolios

Look into the types of clients the firm serves, including their size, industry, and length of relationship with the practice. Assessing client concentration is essential, as reliance on a few big clients can be risky if they leave after the transition. 

• Client Demographics & Industry Niches – Understanding the makeup of the client base will help you determine whether this practice aligns with your specialty. If the firm services various clients across industries, consider which groups would benefit most from your experience.
• Revenue Concentration Risks – A strong, diverse client portfolio means the practice isn’t overly reliant on a few high-revenue clients. If 60% of revenue comes from just a handful of clients, there’s a significant risk if even one leaves after the transition.
• Client Relationship Health – The strength of client relationships often determines retention. Look for signs of loyalty and satisfaction and note any clients who might be dissatisfied or ready to move on. An informal survey or conversations with the seller can give you a sense of the firm’s rapport.  

Understanding Financial Performance

Analyzing financial performance goes beyond the top-line numbers. You’ll want a full picture of how the practice makes money, spends it, and where optimization is possible. 

• Revenue Trends & Profitability – Assess the firm’s revenue growth over time. Is revenue increasing, decreasing, or holding steady? Review profitability trends to see if the firm has maintained margins, especially during challenging economic periods. Revenue fluctuations could affect the stability you aim to achieve.
• Expenses & Cash Flow Management – Understanding the cost structure is as important as revenue. Take a close look at recurring expenses and cash flow. Are there any areas of excessive spending or inefficiency? Cash flow stability will play a big role in your ability to keep operations running after acquisition. 

Operational Processes

How does the firm manage workflows? Look into their client intake, billing, reporting, and communication systems. You might need to invest more if they use outdated or inefficient systems. 

Personnel

Meet with key staff members and assess their value, experience, motivation, and alignment with your goals. Decide if you plan to keep the current team and factor this into your post-purchase strategy. 

Navigating Legal and Contractual Considerations

Legal review is crucial, especially for contracts with clients, employees, and vendors. Ensure no pending litigations or unresolved issues could impact the transition. 

Cultural Compatibility

Every firm has a unique culture that’s often hard to quantify. Observe how the team interacts and handles client relationships. A good cultural fit can make for a smoother transition, while a poor fit could lead to client churn or morale issues. 

IT and Security

Data security is essential in today’s digital age. Assess the practice’s technology stack to ensure it meets industry standards for data protection. Cybersecurity risks are significant, with the accounting industry facing a 300% increase in cyber-attacks since the pandemic. Older systems can pose serious challenges. 

Post-Purchase Strategies for Integration and Retention

Once the deal is done, it’s time to roll up your sleeves and integrate the new practice into your operations. The goal is to maintain client satisfaction while blending the acquired firm’s operations with your own. 

1. Client Communication Plan – Clients should hear about the change directly from you. Personalize the transition by introducing yourself, explaining your vision, and reassuring them of continuity in service quality.
2. Retaining Key Staff – A seamless transition often hinges on keeping key personnel in place. Recognize their value, communicate your plans, and give them a reason to stay. Engaging staff can also prevent potential disruption and client attrition.
3. Standardize Processes Gradually – It can be tempting to impose your systems immediately, but that can backfire. Instead, take time to understand the existing workflows, then integrate or refine the system in phases to avoid overwhelming staff or clients. 
4. Preserving Client Relationships – Acquired clients may feel unsettled, so prioritize building trust. Have regular touchpoints, actively listen to feedback, and emphasize that their satisfaction remains a top priority. 
5. Monitor and Adapt – The first few months are pivotal. Monitor performance indicators, from client retention to staff productivity, closely. Based on feedback and observations, don’t hesitate to adjust your approach. 

Understanding the Risks

Buying a practice comes with risks, and it’s important to go in with eyes wide open. 

• Client Retention Risks – No matter how much effort you put in, some clients may choose to leave. Accept this as part of the process and focus on building strong relationships with those who stay.
• Operational Disruptions – The integration phase can be rocky, especially if you make significant changes. Allow time for adjustment and be prepared for some temporary setbacks.
• Financial Risks – Overpaying or underestimating expenses can pressure cash flow, especially in the early months. Ensure you have a financial buffer to manage any unexpected costs.

Hit the Ground Running Post-purchase with TopFirm

Buying an accounting practice is a transformative step. The journey from finding the right fit to integrating a new business is filled with opportunity and challenge. By following these steps, you’re setting yourself up to make an informed, strategic decision that aligns with your professional goals.  

Another essential step after purchasing an accounting firm is having a growth strategy, and that’s where we can help. TopFirm specializes in helping accounting firm owners like you supercharge their business growth through well-crafted, personalized growth plans, high-level coaching and masterclass sessions, proven playbooks, and more. 

Let us help you after the transition and avoid getting stuck in limbo. Schedule a Free Growth Session with us today!