Buying an Accounting Practice – 2025 Guide

A few years ago, I sat in a seller’s conference room flipping through file folders while the owner told me, with a grin, that “one times gross is the law.” It sounded simple, then I mapped revenue to the top ten clients and watched half the book rest on three relationships he handled personally. That was my reminder. You are not buying yesterday’s revenue, you are buying tomorrow’s cash flow that must keep showing up after the handoff.

This guide gives you a practical route from first look to first busy season. You will see how to price with confidence, fund the deal without draining working capital, and protect the clients and team you just acquired. I will also note a few moments where specialized support, like a white‑label back office, can reduce risk during the first year.

Key Takeaways

• Most small to mid‑size practices trade near 0.8–1.2 times annual revenue, with the range shifting up for advisory‑heavy, growing firms and down for owner‑dependent bookkeeping books. Independent brokers often quote 0.8–1.2 times as a realistic band, not a rule.
• Cross‑check top‑line pricing with earnings. About 2.5–4.5 times SDE fits many owner‑operated shops, while larger firms often price around 4–7 times EBITDA, depending on margin quality and risk.
• Expect blended consideration, for example, cash at close plus 30–50 percent seller financing and an earnout tied to retention for alignment.
• SBA 7(a) loans can finance acquisitions and working capital, with maximum loan amounts up to 5 million, guaranty percentages that scale by size, and rate caps tied to a base rate. Owners at 20 percent or more generally provide a personal guarantee through lender underwriting. Build in time for documentation and approvals.
• Cyber and data protection are now core diligence items. Tax and accounting firms that fall under the FTC Safeguards Rule must report certain breaches involving 500 or more people to the FTC within 30 days. The IRS and Security Summit also provide an updated WISP template tailored to tax and accounting practices.

Why Buying Makes Sense

Buying an accounting practice lets you skip the slow part of firm building. You walk into day one with a paying client roster, a trained team, and working systems. That means your calendar fills with client introductions and planning calls instead of cold outreach. If the book includes recurring compliance plus advisory, average revenue per client climbs, and margins often improve because advisory work is less price sensitive.

There is also a credibility boost. When you take over a respected firm with a long track record, referrals continue, and consultations feel warmer. You can offer advisory upgrades without sounding like a stranger pitching add‑ons. That mix is part of why advisory‑heavy firms tend to command stronger pricing than pure compliance shops. (poegroupadvisors.com)

Financing is often more accessible than buyers expect. Many sellers like a note tied to retention, which keeps everyone rowing the same direction through the first filing season. SBA 7(a) loans can cover a meaningful share of the purchase price plus some working capital, so you do not starve the business right after closing. (sba.gov)

You are not paying for the past, you are paying for transferable cash flow that survives the handoff.

Risks That Can Sink ROI

• Client concentration. If the top ten accounts drive 40 percent of fees, one departure can dent your DSCR. Reflect concentration in price, holdbacks, and earnouts.
• Owner dependency. When the seller controls key relationships, value depends on a documented, paid handover. Tie part of consideration to retention to align incentives.
• Compliance and quality. If the firm performs attest work, pull peer review outcomes and remediation letters. Confirm policies for acceptance and continuance are not just binders on a shelf.
• Cybersecurity. Firms covered by the FTC Safeguards Rule must notify the FTC within 30 days when a breach meets the threshold. Ask for the Written Information Security Plan, check multi‑factor authentication coverage, and review restore tests. The IRS provides updated WISP resources that reflect current expectations for tax and accounting practices. (ftc.gov)

Do not accept “no incidents” as proof. Ask for the plan, the logs, the drill, and the last restore.

When you find gaps, you do not have to walk away. You can fix them with price, structure, or a day‑one integration budget. The goal is to underwrite the real risk, then own it with a practical plan

What An Accounting Practice Costs

Headline pricing usually starts with a revenue multiple. For many small to mid‑size firms, a realistic band is 0.8–1.2 times annual gross. That is not a law, it is a starting point. Location, margins, service mix, client retention, and how dependent the book is on the owner will push valuation up or down. Advisory‑heavy work and strong fee discipline typically pull pricing higher, while a bookkeeping‑heavy mix or heavy owner dependency pulls pricing lower. (accountingpracticesales.com)

Because top‑line can hide risk, cross‑check with earnings. For owner‑operated firms, rebuild SDE and apply a sensible multiple that reflects durability and transferability. For multi‑partner firms, normalize EBITDA for market comp and apply a range that reflects service mix and margin quality. Larger practices commonly transact around 4–7 times EBITDA, with disciplined, advisory‑led firms at the upper end.

Quick Valuation Crosswalk

Metric	Best fit	Typical range	Use it to
Revenue multiple	Small to mid‑size firms with simple mix	0.8–1.2× gross, sometimes higher with advisory	Set the initial target band, then adjust for risk.
SDE multiple	Owner‑operated firms	2.5–4.5× SDE	Pay for repeatable cash flow, not one‑off add backs.
EBITDA multiple	Larger, multi‑partner firms	4–7× EBITDA	Aligns with lender view of earnings quality.

Market listings show the spread. A California firm with roughly 2.65 million in gross and strong margins asks near 1.4 times revenue, while a smaller virtual CPA firm in Georgia hovers close to one times gross. Listings are not closed comps, yet they illustrate how mix, growth, and staff depth shape the number.

How To Structure The Deal

Price is only half the equation. Structure turns a headline number into something safe to close.

• Cash at close gives certainty.
• A seller note, often 30–50 percent, keeps the seller engaged and aligned.
• An earnout ties real money to 12–24 month retention or revenue milestones.
• Reps, warranties, limited indemnities, and non‑compete terms reduce surprises.
• A clear schedule for A, R and WIP avoids friction later.

Revenue Multiple, Done Right

Use top‑line as a guide, then tune it to the book. A practice at 1.2 times gross with 90 percent recurring fees and no client above 3 percent is a different animal than a 1.0 times practice where the owner personally handles three anchor clients. If there is uncertainty, let structure do the work with holdbacks and retention‑based earnouts.

Earnings‑Based Cross‑Check

• Rebuild SDE from source data, not only from a summary. Discount if the owner carries key technical delivery or relationship control.
• For EBITDA, normalize partner comp and test whether margins stand after you plug in the people you need to run the book.
• Pay more for advisory mix and durable margins, pay less for concentration, owner dependency, or declining revenue.

Price sets expectations, structure manages reality.

Due Diligence, The Right Way

Treat diligence like an audit of future cash flow. You are validating that clients will stay, staff will show up, and systems will support the work.

Financial Quality

• Tie P and L to tax returns and bank statements. Reconcile seasonality.
• Review A, R aging and write‑off history. Weak collections compress DSCR.
• Test WIP reasonableness. Watch for stale items that overstate earnings.
• Rebuild SDE or EBITDA from source, then run sensitivities for any client over 3 percent of revenue.

Client Durability

• Map revenue by client, service, and tenure.
• Pull the last two years of engagement letters. Confirm scope, fees, and renewal patterns.
• Identify owner‑dependent relationships and plan paid handoffs.
• Sample files for scope creep and discount habits.

Operations and Quality Control

If there is attest work, request peer review results and any remediation letters. Confirm that acceptance and continuance policies are documented and used. Clean results, real policies, and documented remediation all reduce downside risk.

Security and Data Protection

Security is now a gating item. Ask for the Written Information Security Plan, then verify practical controls. The FTC Safeguards Rule requires covered financial institutions, which can include tax and accounting firms, to notify the FTC as soon as possible and no later than 30 days after discovery of a breach that involves 500 or more people. Your WISP should reflect this requirement along with multi‑factor authentication, endpoint protection, backups, and restore drills. The IRS and its Security Summit partners released an updated WISP template tailored to tax and accounting practices, which makes it easier to build or refresh your plan. (ftc.gov)

Ask to see the last successful restore and the incident response playbook, not just a policy binder.

People and Culture

• Inventory licenses, CPE status, and coverage by service line.
• Review employment agreements, restrictive covenants, and tenure data.
• Hold stay conversations with revenue‑critical staff and align compensation where needed.
• Put retention bonuses on paper for roles that protect the top 20 percent of the book.

Risk Table, Actions That Protect You

Risk area	What to look for	Deal action
Client concentration	Top 10 share of revenue, fee history	Holdbacks, retention‑tied earnout
Owner dependency	Seller in key delivery or relationships	Paid handover, staged payouts
Compliance gaps	Peer review issues, missing policies	Reps, warranties, targeted escrow
Security gaps	No WISP, weak MFA, no restore tests	Pre‑close fixes, cyber insurance, FTC reporting workflow

Anchor diligence on evidence, not hope. Follow the numbers, the files, and the logs.

Financing Options, Including SBA 7(a)

SBA 7(a) remains the default path for many practice acquisitions. It can fund a change of ownership and provide working capital in one facility. The program caps loan size at 5 million, guarantees a portion of the loan for the lender, and sets maximum interest rates as a spread over a base rate that scales by loan size. Specific terms are negotiated with your lender within SBA limits. Owners at 20 percent or more should plan on personal guarantees in lender underwriting.

Preferred Lender Program banks can move faster, yet you should still allow time for underwriting, diligence, and closing logistics. While exact timelines vary by lender and borrower, build a realistic calendar that includes document collection, quality of earnings work, and legal review. Use that time to refine your 90‑day integration plan so you are ready on day one.

A Practical Capital Stack

Component	Role	Typical range	Notes
Cash at close	Certainty for seller, skin in the game	10–20 percent, sometimes less with standby seller debt	Preserve working capital for onboarding and the first season.
SBA 7(a) term loan	Core acquisition debt	Balance after equity and seller note	Rate caps and guaranty percentages apply, confirm with a practice‑savvy lender.
Seller note	Alignment and gap‑bridger	20–50 percent of price	Link to retention milestones to protect both sides.
Earnout	Risk share on retention or revenue	5–20 percent of price over 12–24 months	Define client lists, measurement windows, and dispute process first.

Underwriting Tips That Save Time

• Start with a complete personal financial statement and tax returns.
• Prepare a staffing and transition plan that explains how you will keep revenue stable.
• Bring a month‑by‑month cash flow model that reflects seasonality.
• Show how seller financing and earnouts align incentives and protect the bank.

Alternatives When SBA Is Not A Fit

• Conventional bank debt with tighter covenants and different amortization.
• ROBS only with careful guidance and risk awareness.
• Private capital paired with seller financing when speed matters more than cost.

Price gets attention, financing gets you to the table, and the integration plan gets you through the first season.

Transition, Culture, and Capacity

From LOI to close, your top job is to protect the clients you are buying. Draft a handover plan that fits complexity. A solo tax practice may need one to three months. A multi‑service firm may require six to twelve months with scheduled joint meetings, shadowing, and clear milestones. Put the seller’s time, responsibilities, and compensation in writing.

Focus on the top 20 percent of clients by revenue and influence. Schedule joint introductions early, keep the service team steady, and let the seller tell the origin story of the relationship. It lowers anxiety and earns you room to suggest improvements later.

Keep your core team. Confirm compensation and benefits, pay retention bonuses where they truly protect revenue, and communicate a believable growth plan. If capacity is tight, add trained help during the first season so deadlines do not slip. A white‑label back office like Accountably can slot into your software and processes, align with U.S. standards and IRS rules, and cover overflow while you hire and train permanent staff. Use this selectively to protect timelines and quality.

Technology, Security, and Operational Readiness

Inventory the stack, for example, tax, write‑up, document management, portal, payroll, and CRM. Confirm license counts, support status, and upgrade needs. Price the lift to standardize on your core systems and schedule changes away from deadline peaks.

Security is non‑negotiable. Ask for the WISP and verify it reflects current expectations. Confirm multi‑factor authentication for cloud apps, endpoint protection, role‑based access, encryption in transit and at rest, backup locations and frequency, and the last successful restore test. The IRS Security Summit provides updated WISP templates for tax and accounting firms, and the FTC Safeguards Rule requires covered financial institutions to notify the FTC within 30 days when a breach involves 500 or more people. Your incident response plan should reflect both.

Profit Levers For Year One

• Balance the book so no single client exceeds 10 percent of revenue.
• Tighten scope control and pricing discipline to lift realization.
• Raise advisory mix with CAS, sales tax and nexus reviews, or niche vertical advisory.
• Standardize checklists, templates, and review steps to trim cycle time.
• Build team leverage with experienced reviewers and scalable staff ratios.

FAQs

Should I buy an accounting practice this year?

If the numbers support debt service with a cushion and you have a believable plan to keep clients and staff, yes. Start early with a preferred SBA lender, then structure part of the price around retention. Your first busy season together is where the deal proves out.

What are firms worth right now?

For many small to mid‑size practices, a realistic range is 0.8–1.2 times annual revenue, with higher pricing for sticky advisory work and premium fee schedules. Larger firms often transact around 4–7 times EBITDA when margins are strong. Always cross‑check headline price with earnings quality and retention risk.

What security steps are required for tax and accounting firms?

Maintain a Written Information Security Plan, test controls, and drill restore procedures. If you fall under the FTC Safeguards Rule and a breach affects 500 or more people, you must notify the FTC within 30 days of discovery. The IRS provides updated WISP tools tailored to tax and accounting practices.

Conclusion and Next Steps

You are not buying a pile of files, you are buying trust. Price with both revenue and earnings lenses, finance carefully so you keep working capital intact, and engineer a handover that your top clients feel good about. Write the security plan down, test it, and keep the team steady through the first season. If capacity becomes your bottleneck, our team at Accountably can help you scope staffing, add white‑label capacity that works inside your process, and keep service levels steady while you build the bench you want.