Yes, you can buy an accounting practice without being a certified public accountant (CPA), as long as the work that needs a license is handled by someone who has one. We've closed two where the buyer had no license and no tax background. Both used about 10 percent down, a Small Business Administration (SBA) loan for 80 percent, and a seller note for the last 10 percent that shrinks if clients leave. Both paid roughly two and a half times the firm's yearly cash flow. The license gap was solved by contract, not by the buyer.
The license question everyone asks first
Most people assume you need to be a CPA to own a CPA firm. For most of the work, you don't.
It helps if you understand professional services, or financials, since those are the people you'll be working with.
Tax returns, bookkeeping and advisory work don't need the owner to hold a license. The work that does is attest work: audits, reviews and compilations. Those carry a CPA's signature, so a licensed CPA has to do them. Most states also require licensed CPAs to own the majority of any firm that calls itself a CPA firm, so check your state's rules on the name and the license before you sign.
On the virtual practice we sold, that was the first problem. The firm did attest work and the buyer had no license. We found an outside CPA to contract for that work, paid on a commission for the referrals. The clients kept their service. The buyer kept the firm.
That's the pattern. You don't need the license. You need to know which part of the revenue depends on one, and have a licensed person lined up before you close.
What two CPA firm deals actually looked like
| Virtual CPA practice | Illinois CPA firm | |
|---|---|---|
| Price | $1.4M | $2.25M |
| Yearly cash flow (profit before financing) | $600,000 | $850,000 |
| Price as a multiple of cash flow | about 2.3 times | about 2.6 times |
| Buyer | Ran a cleaning and services business before. No license. | A couple from tech and investing. No license. |
| Down payment | 10%, $140,000 | 10%, $225,000, from the buyers and investors we brought in |
| SBA loan | 80% | 80% |
| Seller note | 10%, no payments for two years, cut if clients leave | Same |
| Cash covering the loan payments, year one | 1.9 times (bank wanted 1.3) | Over 2.0 times (bank wanted 1.3) |
Full write-ups are on the case studies: the virtual CPA practice and the Illinois CPA firm.
Two numbers are worth reading twice.
The first is the price. Both firms sold for roughly two and a half times what they produce in a year. That's why these deals work with 10 percent down. The business pays its own loan with room to spare.
The second is the coverage. Banks want the business to bring in at least 1.3 dollars for every dollar of loan payment. Both of these did 1.9 to 2.0 or better in year one. That margin is what lets a first-time owner sleep.
The real risk is clients walking out the door
A CPA firm is its client list. If the clients leave when the old owner does, you bought an office lease and some software.
Both deals handled that the same way. The seller carried the last 10 percent of the price as a note, took no payments on it for two years, and agreed that the note shrinks if client retention drops below a set level. If clients stay, the seller gets paid in full. If they don't, the buyer isn't stuck paying for revenue that left.
That one clause does more than any amount of diligence. It puts the seller on your side for the two years that matter most. Seller financing works the same way in any industry, but in accounting it's the piece we push hardest for.
The sellers helped in other ways too. The Illinois owner wanted to stay on through a two-year handover. The virtual practice's owner wanted a buyer who'd keep the team and the clients. A seller who cares where the clients land is worth more than a slightly lower price.
What slowed them down
Neither deal went in a straight line.
On the Illinois deal, a government shutdown froze SBA lending in the middle of closing. Then we found a bank with a better interest rate, but it wasn't an SBA-approved lender, which meant more underwriting and more waiting. The better rate was worth it. The waiting was real.
On the virtual practice, the seller didn't want to keep the office lease and hadn't told the buyer, the landlord or us. We brought in a real estate attorney and got out of the lease without paying a fee. Things like that surface in every deal. The job is finding them before closing, not after.
Even so, the virtual practice closed in under 90 days from start to finish, before the next tax season. The Illinois firm took about four months. Timing a close around tax season matters in this industry. Nobody wants to change owners in March. More on how long buying takes is in our five closed buy-side deals.
What you're really buying
Recurring revenue. Accounting clients come back every year, and most of them don't shop around. That's why a buyer with no accounting background can make this work: the clients and the staff are already there.
What the owner brings is the growth. On the virtual practice we found three things before closing: a neglected Google business listing, a website that needed work, and clients who'd never been asked for more work. Together they were projected to add 10 to 15 percent in new sales in the first 45 days. The Illinois buyers had two small add-on firms in view before the ink dried.
This is the same idea behind the absentee playbook. You don't need to have done the work. You need the right people doing it and a structure that holds.
If you're thinking about buying one
- Find out what share of revenue is attest work. That's the part that needs a licensed CPA. Line one up before you sign.
- Ask for a seller note tied to client retention. It's the cheapest protection you'll get.
- Check the payment coverage. If year-one cash doesn't cover the loan payments at 1.3 times or better, the bank won't lend, and you shouldn't want it to.
- Plan the close around tax season. Fall and early winter are easier than spring.
- Look for the growth the current owner stopped chasing. It's usually sitting in the client list.
The SBA loan guide covers what lenders want now. And if you'd rather have someone run the search and the deal, that's what we do on the buy side.
Our job is sometimes to tell you not to buy that business. With these two, the numbers said buy.
Frequently asked questions
Can a non-CPA own a CPA firm?
A non-CPA can own an accounting practice that does tax, bookkeeping and advisory work. Audits, reviews and compilations need a licensed CPA to sign them, and most states require CPAs to own the majority of a firm that uses the CPA name, so a non-CPA owner contracts that work to a licensed CPA. We've closed two accounting firms for buyers with no license.
How much does a CPA firm sell for?
On the two we've closed, about 2.3 and 2.6 times the firm's yearly cash flow: $1.4M for $600,000, and $2.25M for $850,000.
Can you use an SBA loan to buy an accounting firm?
Yes. Both of our deals used an SBA loan for 80 percent of the price, with 10 percent down and a 10 percent seller note.
How do you protect yourself if clients leave after the sale?
Tie the seller note to client retention. On both of our deals the note shrinks if retention drops below a set level, and the seller takes no payments on it for two years.
When you're ready to talk about buying a business, start here.
