Guide
Selling an accounting practice: what a buyer examines
Updated
A practice sale is valued on how much fee income keeps arriving after its builder stops arriving. So diligence lands on the records a practice management system already keeps.
What the buyer is actually buying
The asset is recurring fee income with a named client behind each pound of it. A buyer is testing how much of that recurs without the seller. So the questions are about concentration, tenure and whether the relationship sits with the firm or with one person.
That is a records question before it is a negotiation. Some practices cannot show fees by client by year, or cannot separate recurring compliance work from one-off advisory. Such a practice is asking the buyer to take its word for the thing being priced.
The records diligence asks for
- Fees by client for at least three years, with recurring and non-recurring separated.
- Client tenure, so the buyer can see which relationships predate the last good year.
- Concentration: what share of fee income the largest client and the largest five represent.
- Who does the work and who owns the relationship, partner by partner.
- Work in progress and lock-up at the point of sale, because unbilled time is an asset the buyer pays for and a dispute if it cannot be evidenced.
Why work in progress matters more in a sale than in a month
Work in progress is chargeable time that has been worked and not yet billed. In a normal month it is a cash timing question. In a sale it is part of the consideration, so the buyer tests whether it is real and recoverable rather than a number that has been rolling forward.
A practice that writes off a predictable share of its work in progress every year is telling the buyer something about its pricing and its recovery. A practice that cannot produce the figure at all is telling them something else.
What this has to do with software
Nothing on this page is advice on whether to sell or at what price, and no vendor in the table on the front page is a broker. The connection is narrower, and it is why this guide sits on this site. Every record in the list above is one a practice management system either keeps or does not.
A practice considering a sale in two years is better served by keeping those records from now than by reconstructing them during diligence. Diligence is the least favourable moment to discover that recurring and one-off work were never separated.