Selling an accounting practice: A comprehensive checklist

Selling an accounting practice is about more than money. 

It represents years of dedication, hard work, and personal relationships built with clients, colleagues, and suppliers. And when you face retirement, new growth opportunities, changing financial markets, or new priorities, selling your practice may be the best choice for you, despite how emotionally difficult it might be.

The process can be complex, requiring thoughtful planning and attention to detail in order to minimize disruptions to your team and clients, maximize stakeholder benefit, and navigate the waters of selling your practice with confidence.

Here’s a comprehensive checklist to help you do just that.

The step-by-step checklist for selling an accounting practice

1. Plan for the sale

2. Set up your finances

3. Clean up your systems and processes

4. Value your firm

5. Find the right buyer

6. Conduct the legal processes

Step 1: Plan for the sale

A sale doesn’t happen overnight. It can take anywhere between 3 and 12 months of planning and preparation. And it depends on several factors like the firm’s size and financial health, and the current market demand. Oftentimes, firm owners start thinking about the sale at least a year in advance.

In order to pitch your firm and understand what makes it an attractive business, you need the right sales pitch. 

Start by revisiting your firm’s unique selling point (USP), which is likely a key part of your firm’s business plan, to find answers to questions like: 

• Why is my firm successful? 

• How are our services and expertise unique from other firms in the space? 

• Why is it valuable?

• Why is it attractive?

This is information you’ll use in conversations throughout the entire buying process, from initial calls to when the deal is finalized, to remind the buyer of why your firm is a valuable investment and worth your ideal selling price.

Step 2: Set up your finances

Clean financial records make your firm an attractive prospect for buyers, which isn’t news to accounting professionals.

Make sure all financial records are up-to-date, accurate, and transparent by:

1. Resolving and consolidating your debts, accounts receivable, and outstanding client accounts.

2. Auditing and assessing your financial statements and cash flow.

3. Preparing financial plans and projections that demonstrate your firm’s healthy bottom line.

It can also be helpful to highlight exactly what’s working. Showcase your stable revenue streams, long-term client contracts, and any recurring revenue models to put extra emphasis on your practice’s appeal from a financial standpoint.

Step 3: Clean up your systems and processes

Optimizing your firm’s systems and processes not only makes your accounting business more desirable to the buyer, but it also promotes a smooth transition of ownership and an overall graceful merger.

• Streamline, optimize and document your firm’s critical processes.

• Invest in a robust accounting practice management tool to act as your firm’s control center, ensuring there’s visibility and flexibility across all work and communication.

• Build a modern accounting tech stack around your practice management tool that is connected and efficient.

• Train your team members on each tool and process.

This is a great time to ask critical questions of your tech vendors, and make necessary changes based on how they align with your firm’s goals. For example, if your practice management tool isn’t investing in AI but your firm does, then perhaps it’s time to search for a practice management tool that does.

Step 4: Value your firm

Putting a price tag on your firm can be challenging. From fluctuating market conditions to the unique characteristics of your firm, there’s a lot to consider. 

At this stage, you should seek external advisors. Business valuation experts bring a wealth of knowledge that you can use to inform your pricing strategy, offering insights into your practice value, industry benchmarks, and strategic recommendations for enhancing your firm’s value.

Based on the valuation of your firm, you can set a fair and competitive market price for your firm—and be ready to justify it with sound systems, processes, and financial records.

Step 5: Find the right buyer

It’s important to remember that not every buyer is the right buyer. As well as meeting your financial expectations, a buyer should align with your firm’s values and culture.

For Wilson Pateras, who’s led his firm through over ten acquisitions, assessing ethical and positive personality fit is priority number one. “We look for the right personality fit to begin with,” he says. “Truthfully, the metrics often come secondarily.”

Jason Blumer, from Thriveal CPA Network, similarly values a firm’s culture, highlighting that it’s something that takes consideration and drive to build. “Building a culture that is considerate, consistent, and intentional takes a lot of work,” Jason says. “[The amount of work] is wild.” 

The right buyer will understand the critical role culture plays at your firm.

Step 6: Conduct the legal processes

Before you close the deal, you need to do your M&A (Mergers & Acquisitions) due diligence and make sure that the sale is legally sound. That typically involves a few key steps.

1. Engage legal counsel: Hire an experienced attorney who specializes in the sale of accounting firms.

2. Create a non-disclosure agreement (NDA): Protect your most confidential information by having potential buyers sign an agreement to keep everything under wraps.

3. Put a letter of intent (LOI) in place: Outline the initial agreement and set preliminary terms and conditions with a non-binding LOI.

4. Write the purchase agreement: Include as many details of the arrangement as possible, such as preliminary terms, conditions, and disclaimers.

5. Finalize terms: Negotiate and sign a legally binding purchase agreement detailing sale terms, asset transfers, warranties, intellectual property, and non-compete information.

Your legal counsel should handle most of this process for you, facilitating a smooth sale with your best interests at heart.  

6 tips to make selling your accounting practice easier

Even with a checklist, navigating the practice marketplace can still be more complicated than it needs to be. And with the buying/selling season only open for around 8 months, it can feel like you’re in a fight against time.

There are a few things you can do to get ahead and help you better position your firm.

1. List your firm on a marketplace for accounting firms

Practice Marketplace by Karbon is a platform specifically designed for firm owners to connect and initiate accounting practice sales in a secure environment. They can list their businesses for sale, and potential buyers can browse, filter, and connect based on various criteria.

You can also connect with experts to optimize your workflow, gain advice on M&A, and tackle your biggest operational challenges.

2. Assess your firm’s business strengths and opportunities

The biggest challenge accounting firm owners face isn’t how to be an accountant, but how to be an effective business owner. That’s why the Practice Excellence framework exists: to highlight your firm’s strengths and opportunities across its business functions, helping you optimize your operations.

After completing a 20-minute survey, you’ll receive your personalized scorecard across four areas—strategy, efficiency, growth, and management—and your overall Practice Excellence Score, which is benchmarked against firms from across the world. You’ll also receive recommendations and further resources to help improve each area.

Completing the Practice Excellence Assessment will help you improve your firm’s overall health, making it a more attractive option for potential buyers.

3. Find the buyer: Internal or external?

Sometimes, the right buyer already exists within your firm. Internal succession can be a more stable option, ensuring continuity with minimal disruption to your existing staff and clients. On the other hand, external buyers offer fresh perspectives and ideas, and potentially more capital to invest in the growth of your firm.

If you’re deciding between internal and external buyers, consider these pros and cons:

Pros and cons of selling to external buyers 

Pros and cons of selling to internal buyers 

4. Downsizing before a sale

Downsizing can enhance the appeal of your accounting practice to potential buyers. With less overhead, some may see it as a potentially more efficient and profitable investment opportunity. 

But no one likes making cuts. 

Downsizing needs to be approached thoughtfully to keep team morale, client relationships, and process models healthy, and ensure client retention. Remember to do the following:

• Focus on retaining talent: Identify and retain employees wherever possible, especially teams and individuals who are crucial to maintaining client relationships and delivering quality service.

• Communicate openly with your team: In his decades of accounting leadership, Kenji Kuramato says there is nothing worse than a poorly communicated decision. “Facilitate these [difficult] conversations internally,” he says. Show empathy and leadership by being transparent with your team throughout the downsizing process.

• Keep profitability top of mind: Downsizing is about doing (and earning) more with less. Prioritize profitable services and clients, considering scaling back less profitable areas.

• Automate processes: Implementing workflow automation empowers your firm to maximize productivity for the high-value tasks that matter. “If you can automate all the other stuff and get that done in 10% of the amount of time, You could spend twice the amount of time on tasks you can’t automate and still be 50% [more] efficient,” says Bruce Philips, former Partner and Managing Director at Aprio.

5. Knowing when to sell

Timing is everything.

According to Poe Group Advisors, the majority of closings occur between September and January, with deals heating up in late summer and into the fall.

But there are many more factors to consider than time of year.

Market trends and conditions in the accounting industry play a big role. Ideally, aim to sell during a period of strong demand for accounting practices similar to yours. Factors such as economic stability, interest rates, and industry consolidation trends can influence market timing.

It’s also important to consider your own readiness. Selling a business is emotionally challenging—period. So consider your retirement plans, future career aspirations, and personal financial goals. If you aren’t mentally, emotionally, or financially prepared for change, it may not be the time to sell.

6. Expected timeframe of sale

It’s important to be realistic about how long the sales process will take.

Build your timeline around key milestones and deadlines for each phase of the sale process. This will act as your map. Consider: 

• What specific tasks need to be completed to prepare your firm for sale (e.g. building client lists, assessing balance sheets and total cash flow, succession planning, etc.)?

• When will you bring in external advisors? Have they already been selected or will you need to recruit them? 

• When do you plan to start actively searching for and engaging with prospective buyers?

• How much time do you want to allow for the transition period, and what support will be provided to facilitate this process?

While the sale process can be unpredictable, having a structured timeline can help you navigate the uncertainties and increase the likelihood of an outcome in your favour.

Most importantly, remember to be agile—even the best laid plans can be adjusted as needed. 

Build a more desirable accounting firm using practice intelligence

If you’re putting in the work to get your firm in the best possible position for a buyout, accounting practice management software can help get you there faster and more efficiently. 

Not to mention that a strong, united tech stack drives efficiency, and so tends to command higher valuations. 

The right tool can also streamline the M&A process.

Victoria Peters who helped lead the merger between Envolta and Gauvreau credits both firms' similar tech stacks—centered around Karbon as the practice management tool—as a key component in making the transition much smoother.

“With Karbon everything is there. We can see history from long before the merge for either side, ensuring we can answer questions as a complete group with the complete picture,” says Victoria.

Discover how you can ensure your own sale is as smooth with the help of a consolidated and modern accounting tech stack with Karbon at the core: book a demo today.