When buying fees, what is the buyer actually acquiring?
Breaking down the four components of a practice acquisition — updated for 2026
Accountancy practices typically have four constituent parts to a sale, though the exact mix can be adjusted depending on what’s actually being bought.
1. Goodwill
This is, in effect, the client files and the right to offer services to that client base. It usually — though not always — includes the practice name, and the website is normally part of the arrangement at no extra cost. Because the purchaser is acquiring the goodwill itself, any new clients who come to the practice after completion aren’t an additional cost — they’re simply a benefit of the acquisition. Payment for specific post-sale clients almost never happens; where it does, it’s known as a claw forward.
In some deals, a purchaser may want to incentivise the vendor to keep introducing new clients for a year or two after completion, typically by offering them a percentage of the fees billed to any new client in their first year with the practice — a structure that benefits both sides.
2. Debts
These represent work that’s already been completed and invoiced. More often than not, the vendor collects these using their usual approach to debt collection, so as not to disrupt the relationship with a transferring client. Occasionally the buyer takes on collection instead, sometimes for a handling fee, depending on what’s agreed. The right approach here often comes down to the payment culture of each party, and the track record of any clients already in debt.
3. Work in progress
WIP is usually valued at the point of completion; the purchaser finishes the job, bills it, collects payment, and remits the vendor’s share — often monthly — with any under-recovery apportioned between the two. It can be in the vendor’s interest to get WIP as low as possible before completion, though this isn’t always practical given the circumstances of the sale.
Payment for WIP sits over and above what’s paid for goodwill, but it isn’t really an extra cost to the purchaser: they only pay the vendor’s share once they’ve billed and been paid for it themselves. A job still in progress at completion stays on the client schedule of expected fees, because that income has occurred this year and is expected to recur next.
4. Other assets
This covers equipment — PCs, software licences, phone systems, office furniture — typically sold by agreement or at arm’s-length valuation, and rarely worth anything close to replacement cost. More complex acquisitions may also involve the purchaser taking on borrowings or other liabilities, which can be traded off against the sale price, or acquiring property or shares in a subsidiary entity such as an IFA firm or a bookkeeping business.
Pre-payments
Money clients have paid in advance for work not yet done or billed can be handled one of two ways: it’s either calculated and netted off the completion payment to the vendor, or it’s passed to the new owner’s bank account along with the accumulated prepayments themselves.
Contact Lucinda Kitchin for advice on your options.