Our accounting practice for sale guide

Accountants shake hands during accounting practice sale

At The Access Group, we work with accountants in Australia and New Zealand buying and selling accounting practices. Our clients understand that fast and powerful accounting practice management software is becoming a fundamental tool that will improve the value of their accounting practice and give complete visibility to their client and practice performance.

In this article, we will explain how selling an accountancy practice works, why you should consider selling your accounting practice, and a handy selling an accounting practice checklist you can refer to.

After reading this article, you will be better equipped to understand everything about selling your accounting practice.

What does selling your accounting practice involve?

Selling your accounting practice refers to transferring ownership and control of your accounting firm to another individual, entity, or organisation, involving selling the rights, assets, and your accounting client base associated with your practice.

Putting up your accountancy practice for sale typically includes the transfer of the following:

Accounting client relationships,
Intellectual property,
Accounting practice management software,
Physical assets for your accounting practice, such as office space or equipment.

Selling an accounting practice allows you, as the current owner, to exit the business and transition it to a new owner who will assume responsibility for servicing existing clients and managing the practice moving forward.

It's crucial to consult with a solicitor and a financial adviser in the earliest stages to help you successfully selling your accounting practice.

An alternative avenue to put your accounting practice for sale is succession planning for your accounting practice. Explore more about this topic in our guide: accounting firm succession planning.

Why should I sell my accounting practice?

The decision to sell your accountancy practice is complex and will usually be based on personal, financial and market-related factors.

Here are some potential reasons why you may want to consider selling your accounting practice:

Retirement: If you are approaching retirement age or considering a career change, selling your accounting practice could allow you to realise the value you've built over the years and transition into the next phase of your life. Check out our article on this topic: Accounting firm succession planning.
Health or personal reasons: Sometimes, unexpected health issues or personal circumstances may prompt individuals to put their accounting business up for sale to reduce stress and focus on their well-being.
Market conditions: At moments when the current state of the market is in your favour, such as when there is a high demand for accounting practices or a robust economy, it could potentially lead to higher valuations and more interest from accountants looking at buying your accounting practice.
Changes in the accounting industry: Significant changes in the accounting industry, such as new regulations, emerging technologies in accounting, or shifts in client preferences, might influence your decision to sell your accounting practice.
Partnership dissolution: In cases where you co-own the accounting practice with partners, a partnership dissolution may lead to putting up your accounting practice for sale or buying out one another.
Capitalising on the value of your accounting practice: If you believe your accounting practice has reached its peak value, selling your accountancy practice now might allow you to maximise your return on your investment.
Lifestyle changes: Selling your accounting practice might align with your desire for a different lifestyle or pursuing other interests.

Before you commit to selling your accounting practice, consider performing a business health check. You can find more information about this in our article: Is it time for an accounting practice health check?

How do I sell my accountancy practice?

If you're considering selling your accounting practice, there are several steps you can take to ensure a smooth and successful transaction.

Here is our selling an accounting practice checklist to help make your accounting practice sale easier:

Value your accounting practice

Ever wondered what your accounting practice is worth? An accounting business valuation can help evaluate the financial health of your accounting practice.

The value of your accounting practice is a combination of numerous factors, as this article by Bookept details:

The office location of your accounting practice.
The worth of your client base.
Your accounting practice staff.
The growth of your accounting practice
The profitability of your accounting practice.
The technology your accounting practice uses, such as accounting practice management software.

Consider working with a financial advisor to obtain an accounting business valuation. The value of your accounting practice will help you determine an appropriate asking price when selling your accounting practice.

Preparing an information memorandum

An information memorandum is a detailed snapshot of your accounting practice's history, status and projected future growth. An accounting practice information memorandum can increase the number of parties interested in buying your accounting practice.

Your accountancy practice information memorandum should include the following information presented in an attractive, logical way to reflect the professionalism and quality of your firm:

Executive summary: an overview of the accountancy practice for sale, including the sale price, any essential required terms of purchase, and the handover support you will offer.
The background of your practice: this will include the accounting firm's history, an overview of the accounting services provided, a client profile, a description of the office premises, details of the accounting practice management software used, unique selling points or competitive advantages and your accounting team structure.
The reasons behind the sale: include the reason(s) or issue(s) which have informed your decision to put the accountancy practice for sale.
Suppliers: detail the suppliers for your accounting business and any expense items. Also, include any accounting outsourcing service providers if relevant.
A financial analysis: include reports for the KPIs in your accounting practice, current balance sheets, the last three years profit and loss statements, prepaid expenses and any finance leases or contracts.
Your marketing plan: include information and strategy details on how you market your accounting practice services to the public to attract new accounting clients. For more on this topic, check out our guide: marketing for accountants.
Accounting firm staff details: provide an organisational chart, explain your staff's qualifications and areas of expertise, how much experience they've had, total salaries, and leave accruals.

Timing your accounting practice sale is everything

Accountants will be familiar with busy and slow seasons that impact their accounting firm's cash flow and revenue. Tax time is the perfect example of a busy period.

Potential accounting practice buyers will be more willing to purchase your accounting practice during higher earning periods.

The perfect time for attracting potential buyers to purchase your accounting practice is typically at the start of each calendar year or just before the new financial year.

Check out our end-of-financial-year checklist for accountants.

Negotiate the terms of the accounting practice sale

Once you've identified potential buyers, negotiate the terms of the accounting practice sale.

The terms for selling your accounting practice may include the following:

The purchase price,
The payment structure,
The transition period to new accounting practice owners, and
Any non-compete agreements.

It would be best if you considered seeking legal and financial advice during this stage of selling your accounting practice to protect your interests.

Prepare necessary documents for due diligence

The buyer will conduct due diligence, examining your practice's financial and operational details to verify its value and uncover potential risks or liabilities.

Due diligence ensures that the buyer of the accounting practice is taking reasonable steps to prevent themselves from making risky or poor decisions, such as paying too much in the sale or breaking any regulations or rules.

Gather the following essential documentation for the due diligence investigations:

Contracts: for accounting practice sales, including existing agreements between the practice and its staff, suppliers and partners.
Records: including income, profit and loss statements and tax returns.
Expenses: such as any bank loans, lease agreements and utility accounts.
Business operations: which may include intellectual property, business equipment and accounting practice management software.

It will help if you prepare to provide this requested information promptly and accurately to ease your accounting practice sale.

Purchase agreement

Work with your solicitor to draft a comprehensive purchase agreement that outlines the terms and conditions of the accounting practice sale.

The purchase agreement of your accounting practice sale should include the assets transferred, payment terms, and any warranties or representations.

Transition period

Planning for a smooth transition of clients and operations to the new accounting practice owner is essential to ensure continuity.

It would help if you considered staying on for a period to facilitate the handover. Consider the following when establishing a transition plan:

Introducing the new owner to your accounting practice clients: usually, sending a letter or email to practice clients advising them of the ownership changes and an invitation to a social function to meet the new owner. For more on this topic, check our guide on mastering client relationships for accounting practices.
Walking the new owner through practice systems and procedures: for a seamless transition, you should consider familiarising the buyer with your accounting practice procedures and systems, such as your accounting practice management software. This will help the new owner to understand how you do business before they begin to develop their ways of doing business and make changes.

Closing the deal

You should ensure the terms of the accounting practice acquisition are negotiated carefully to ensure that both you, as the seller and the new owner, are satisfied with the outcome.

At this stage of buying an accounting practice, the new owner may want to negotiate the purchase price, payment terms, and any other vital details of the deal. The buyer should clearly understand the value of the practice and your motivations for putting the accounting practice for sale.

Once the accounting practice sale terms have been agreed upon, and all necessary legal and financial formalities are addressed, sign the purchase agreement, and your accounting practice sale is complete.

How to set up your practice for the future

As with any significant financial decision, before selling your accountancy practice, it is essential to thoroughly assess your situation and consult with relevant professionals who can advise you and help you manage the sale's complexities.

Remember, the specific details of selling your accounting practice may vary depending on your location, the size of your practice, and other factors.

Whether you are thinking about selling an accounting practice in a decade or year, planning effectively is all important.

The right client management software for accountants will help you maintain a robust client database and support the sale of your practice. Client management software enables all client information to be accessible from a centralised location, making it easier to handle the transition, introduce clients to the new accounting firm owner and get them used to change.

Talk to a specialist today and see how we can help to sell your accounting practice with our best-in-class software for accountants.