Selling a Regional Accounting Practice: Why the Rules Are Different

I spend a good part of every year on the road, sitting across the table from practitioners in regional towns. The longer I do it, the more I notice how often the competitive logic that drives firms in the capital cities does not travel well. For Australian accounting practices in regional and rural markets, buying, selling and succession run on a different set of rules.

None of what follows is a knock on regional firms. Some of the best-run practices I see are in country towns, and plenty of them are busier and more profitable than their city equivalents. The point is simpler: these markets often behave differently, and if you walk in applying city assumptions, you can misread them.

Here is the pattern I tend to see across many of the towns I visit, and what it can mean if you are thinking about a transaction.

In a capital city, a firm that lands a client from a rival keeps quiet about it. In a country town, I have lost count of the number of principals who tell me they will pick up the phone to the firm a new client is leaving and simply ask what they are like to deal with. Much the same often happens with staff. A candidate comes in for an interview, and the principal rings the firm they are coming from for a quiet word.

To a city practitioner this sounds extraordinary, even improper. In context it usually makes sense. Where there is enough work for everyone, there is little to gain from poaching, and a great deal to lose from a reputation for it. These principals will often see each other at the football, at the school gate and at the same handful of restaurants. The relationship outlasts any single client.

This is where buyers can get caught. When you acquire a practice, you expect to lose a proportion of clients — that is normal, and you price for it. But in a small market, the number leaving can become a message in itself. If a noticeable share of a practice's clients walk after a change of ownership, a small town will not always read it as ordinary attrition. People may ask why so many are leaving, and the answer they settle on can attach to the new owner rather than the old one.

That is a reputational cost, and it can outlast the financial one. It is why the origin of a practice's clients matters so much in due diligence. If a large group of a target's clients came from one other firm, that is worth knowing before you buy — and it is a very good reason not to sell a practice back to a firm you once drew clients from, because you will simply lose them again.

The other thing city assumptions miss is the shape of the practices themselves. Not every regional owner is trying to build the biggest firm in the district. A fair number have deliberately built a practice around a defined slice of work — a book of individual returns that occupies half the year and leaves the rest for a life. Others want to sell only their business clients and keep the individual work, or the reverse.

These are not lesser practices. They are specific, well-defined and, handled properly, very saleable — often to a buyer looking for exactly that kind of change. I also see owners stepping back earlier than people tend to assume, in their forties and fifties rather than at the traditional retirement age. The market for these practices is real, but it is a matching exercise, and it rewards knowing the territory.