STAGE 1 -
FINDING / EXPLORING A PRACTICE
Is this accounting practice worth investigating further?
When the opportunity lands
You may have found an accounting practice through a business broker, been approached directly by another practitioner, heard about an opportunity through your network, or simply started looking at what is available.
At this stage, you are not trying to complete due diligence or decide whether you should definitely buy the practice.
Your immediate objective is simpler:
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Understand what is being offered, establish the headline facts, identify the obvious questions and decide whether the opportunity deserves further investigation.
You do not need every answer yet.
You need enough information to decide whether it is worth moving to the next stage.
1. Understand what is actually being sold
“Accounting practice for sale” can mean different things.
You may be considering:
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an entire accounting practice;
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a fee book or parcel of clients;
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selected clients from a larger practice;
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a business with staff transferring;
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a practice where the vendor remains involved for a transition period;
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premises, equipment or other assets; or
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some combination of these.
Before concentrating on price, establish the basic commercial proposition.
Questions to consider
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What exactly is included in the sale?
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Is the whole practice being sold?
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Are staff expected to transfer?
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Are debtors or work in progress included?
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Is there a lease?
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What handover is the vendor proposing?
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What does the vendor intend to retain?
You do not need to resolve every legal detail at this stage. The objective is simply to understand what opportunity you are actually investigating.
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DEEP DIVE ARTICLE >
Buying an Accounting Practice vs Buying a Fee Book: What Are You Actually Acquiring?
2. Establish the headline numbers
An asking price on its own does not tell you whether the opportunity deserves further investigation.
Try to establish, at a minimum:
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the asking price;
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annual revenue;
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represented profit or earnings;
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the period those figures relate to;
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any significant adjustments being made to earnings; and
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whether recent financial performance differs materially from prior years.
You are not trying to determine the final value of the practice at this stage.
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Instead ask:
Do the headline numbers give me enough reason to investigate further?
Two practices with similar revenue may represent very different acquisitions because of differences in profitability, staffing, client concentration, owner dependence and retention risk.
SUGGESTED DEEP DIVE ARTICLE >
What Does the Asking Price Really Tell You When Buying an Accounting Practice?
3. Get an early picture of the clients
For an accounting practice, the client base is a major part of what you are considering acquiring.
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At this stage, you may only have high-level information.
Try to understand:​
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approximately how many clients there are;
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the main types of clients;
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whether revenue is recurring;
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whether a small number of clients account for a large portion of revenue;
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whether the vendor personally manages important relationships; and
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whether there have been notable recent client departures.
You are not completing client-retention due diligence yet.
You are simply trying to identify whether there are obvious matters that deserve further investigation.
SUGGESTED DEEP DIVE ARTICLE >
What Should You Look for in the Client Base of an Accounting Practice?
4. Understand the owner and staff dependency
A practice may generate attractive revenue but still depend heavily on the outgoing owner or a small number of key employees.
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Hence, you might want to get a high-level understanding of:
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The vendor
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What does the owner actually do?
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How many hours do they work?
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Which clients deal directly with them?
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Who brings in new work?
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What handover are they proposing?
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The staff
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How many staff are employed?
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What are their roles?
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Who manages important client relationships?
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Are key employees expected to remain after settlement?
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Can the practice continue operating effectively without the current owner?
These issues become more important during due diligence, but the broad picture is useful from the beginning.
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SUGGESTED DEEP DIVE ARTICLE >
Owner Dependence and Key Staff Risk When Buying an Accounting Practice
5. Understand what information is available
Different brokers and vendors provide different amounts of information at the beginning.
You may receive a mix of:
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a short business advertisement;
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an Information Memorandum;
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headline financial figures;
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financial statements;
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client revenue information;
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staff information;
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an Expression of Interest;
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an offer document; or
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little more than a conversation and asking price.
Do not assume that a professionally prepared Information Memorandum is the same thing as verified due-diligence information.
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At this stage, the information helps you decide whether the opportunity deserves further investigation. This information can be tested later.
Similarly, to assess financing, an acquisition finance advisor may also ask for limited information such as the Information Memorandum, asking price and initial financial summary before moving into fuller information requests. See Aligned Acquisition Journey>
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SUGGESTED DEEP DIVE ARTICLE >
What Information Should a Broker or Vendor Provide When Selling an Accounting Practice?
6. Ask useful questions early
Your first conversation with the broker or vendor does not need to become abrupt and invasive.
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You are merely trying to understand the broad commercial picture.
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Useful questions may include:
About the sale
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Why is the vendor selling?
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What exactly is included?
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What is the asking price?
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Is there a preferred transaction structure?
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Is the vendor working toward a particular settlement date?
About the practice
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How long has it operated?
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What services does it provide?
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How many clients does it have?
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How many staff are employed?
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What role does the owner currently perform?
About the transition
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What handover will the vendor provide?
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Does the vendor expect staff to remain?
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How will clients be introduced to the buyer?
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Is the vendor proposing any ongoing involvement?
About the process
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What information is available now?
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What additional information will be provided later?
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What does the seller expect the buyer to do next?
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Is an offer, deposit or Heads of Agreement being requested?
You can use our checklist below to structure this conversation.​​
STAGE 1
RESOURCES
1. Opportunity Snapshot >
Use this tool to put the key facts of the accounting practice in one place.
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2. Questions Checklist >
A practical question list to ask the vendor or business broker.
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3. Progression Checklist >
Use this short checklist before deciding whether the opportunity is worth progressing into a more structured information-gathering process.
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KEEP IN MIND
1. Keep finance in mind early
If external finance will be required, it can be useful to raise it early. You do not need every document before having an initial conversation, but early discussions can help shape expectations.
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2. Be careful before you commit
​If you are asked to sign an offer/agreement, pay a deposit or meet a short deadline, pause before committing. Early documents or payments can create obligations or put money at risk, so involve your solicitor where appropriate.
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Before You Sign or Pay: Early Commitments When Buying an Accounting Practice >
IMPORTANT INFORMATION: This guide provides general educational information for accountants considering the acquisition of an accounting practice. It is not legal, tax, accounting, valuation, investment or credit advice and is not a complete due-diligence checklist. The information appropriate to request will depend on the transaction, the stage of negotiations and the advice of your professional advisers. Obtain appropriate advice before making commitments or relying on information supplied by a vendor or business broker.