Buying a practice is buying a set of recurring relationships, which makes it unlike most acquisitions: the asset can decide to leave.
That shapes everything about how these deals are structured. Value is usually expressed against fees, consideration is frequently tied to how many clients stay, and the transition period matters more than the negotiation.
This covers why firms buy, how practices are valued, what diligence should look at beyond the fee schedule, how retention-linked structures work, how these acquisitions are financed, and how to handle the handover.
Why Buy an Accounting Practice?
Acquiring an existing CPA or accounting firm gives you an immediate client base, recurring revenue, staff, and systems. For an experienced accountant ready to go independent, or for a firm looking to grow, acquisition is often faster and cheaper than organic growth through marketing alone.
- Immediate recurring revenue (tax prep, bookkeeping, payroll contracts)
- Established client relationships and referral network
- Existing staff who know the clients
- Software subscriptions, templates, and workflows already in place
- Geographic or niche expansion for an acquiring firm
Look at the client base for the things the fee schedule will not show: how concentrated it is, how old the owners of those clients are, and whether the relationship rests on the seller personally. A fee base of the same size is a completely different asset depending on those answers.
Abhinav Gupta, CPA, CA, MBA · LinkedInHow Accounting Practices Are Valued
The standard valuation metric for accounting practices is a multiple of annual gross recurring fees, not EBITDA. Typical range is 1.0x to 1.4x annual revenue, depending on quality of the practice.
| Practice Characteristic | Valuation Impact |
|---|---|
| Heavy 1040/individual tax (seasonal) | 1.0x-1.1x, lower multiple, lower retention |
| Mix of business returns + advisory | 1.1x-1.3x, more stable, recurring |
| Significant MAS/advisory/CFO services | 1.3x-1.5x+, highest quality revenue |
| Strong staff retention + tenured team | Premium; staff risk = discount |
| Single-owner with all client relationships | Discount, key-person concentration risk |
| Modern software (cloud-based) | Neutral to slight premium vs. legacy desktop |
Pro Tip: Recurring monthly fees (bookkeeping, payroll, advisory retainers) are valued higher than once-a-year tax prep clients. Ask the seller to break out annual vs. recurring revenue.
What to Evaluate in Due Diligence
Client Mix Analysis
Request a client list with anonymized revenue by client. Analyze:
- Concentration risk: does any single client represent over 10% of revenue?
- Service mix: ratio of 1040s to business returns to advisory
- Average fee per client, lower average fees mean higher volume and more operational load
- Client tenure: long-tenured clients (5+ years) have higher retention probability
- Geographic spread: are clients local (relationship-based) or nationwide?
Staff Evaluation
In an accounting practice, clients often follow staff. The senior staff who handle day-to-day client contact are as important as the client list itself.
- Will key staff agree to stay? Get written employment commitments before closing
- Review compensation and benefits, you must be competitive to retain
- Identify which relationships are with the owner vs. the team
- Non-solicitation agreements with staff: are existing ones enforceable?
Technology and Systems
- Tax software: Drake, Lacerte, UltraTax, licensing and data migration
- Practice management: Karbon, Financial Cents, Canopy
- Client portal and document management
- Cloud accounting software used (QuickBooks Online, Xero, etc.)
- Billing software and outstanding AR
Lease and Office Considerations
- Is the office lease transferable? How many months remain?
- Remote vs. in-person client base, does the physical office matter?
- If seller owns the building: is real estate included or separate?
Deal Structure: Earnout on Client Retention
The biggest risk in buying an accounting practice is client attrition, clients who leave after the owner transitions. Earnout provisions protect the buyer.
Typical structure: a base payment at closing (70-80% of total price) plus earnout payments tied to actual client retention over 12-24 months. If 90% of clients are retained through Year 1, the seller receives the full earnout. If retention is 75%, the earnout adjusts proportionally.
| Payment Structure | Typical Approach |
|---|---|
| Closing payment | 70-80% of total agreed price |
| Year 1 earnout | Based on clients retained at 12 months post-close |
| Year 2 earnout (if applicable) | Final true-up at 24 months |
| Earnout measurement | Gross fees billed to transferred clients vs. baseline |
Financing an Accounting Practice Acquisition
SBA 7(a) Loans
SBA 7(a) loans are the most common financing for accounting practice acquisitions. The SBA recognizes accounting practices as good credit risks given their recurring revenue. Expect 10% down, up to 10-year terms, and approval based on historical cash flow of the practice.
Seller Financing
Many retiring CPAs prefer to carry a seller note (20-40% of purchase price) because it provides income during retirement and demonstrates confidence. This is especially common when the seller is staying on for a 1-2 year transition.
The Transition Period: Critical for Client Retention
A 12-24 month seller overlap is the industry norm. During this period, the selling CPA:
- Introduces the buyer to every significant client personally
- Co-signs client communications initially
- Attends client meetings alongside the buyer
- Remains available by phone for the staff and buyer
- Stays on for at least the first full tax season after closing
Pro Tip: Send a formal introduction letter to every client signed by BOTH the selling CPA and you. Personalize for top clients. Clients who receive a phone call from the seller perform significantly better on retention vs. letter only.
Communicating With Clients
The seller's communication plan matters as much as the deal terms. The moment clients hear about a change from someone other than their CPA, you lose them. Plan the communication sequence carefully:
- Tell staff before any client announcement
- Top 20% of clients: seller calls them personally
- All other clients: joint letter from seller and buyer mailed or emailed
- Follow-up outreach from buyer within 30 days
- First meeting with top clients in person within 60 days
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Frequently Asked Questions
How do I find accounting practices for sale?
Poe Group Advisors and Accounting Practice Sales (APS) are the two largest specialized brokers for accounting practice transactions in the US. Also check with state CPA society listings, AICPA resources, and direct outreach to senior practitioners near retirement age.
Can I buy an accounting practice without being a CPA?
In most states, a non-CPA can own an accounting firm but cannot use the CPA designation or perform attest services (audits, reviews, compilations). Tax prep, bookkeeping, and advisory are generally open to non-CPAs. Check your state's accountancy board rules, some states require CPA majority ownership for any firm using 'CPA' in its name.
What retention rate should I expect?
Industry data suggests 85-95% first-year retention with a strong transition. If the seller has strong client relationships and stays involved, expect the higher end. If the seller is abrupt or clients are already dissatisfied, budget for 70-80%.
Should I rebrand or keep the existing firm name?
Keep the existing name for at least the first year unless it includes the seller's personal name. Even then, consider 'Smith & Associates, now part of [your name]' branding. A hard rebrand at acquisition day spooks clients.
What is worth checking in the client base that the numbers will not show?
Concentration, age and the reason each client stays. A fee base of the same size is a different asset if a handful of clients make up most of it, if the owners of those clients are approaching retirement themselves, or if the relationship rests entirely on the seller personally. Ask to see fees by client for several years, look at which ones have grown and which have drifted, and ask how many arrived through referral rather than through the seller.
Written by
Abhinav Gupta, CPA, CA, MBA
Abhinav works with business owners across the US on industry-specific bookkeeping, from dental practices and restaurants to construction and e-commerce. He writes about what each trade's books actually need. Connect on LinkedIn
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