Seller Notes, Earnouts and Retention Adjustments: How Accounting Practice Sales Are Structured
The purchase price is only half of an accounting practice sale. The other half is how that price gets paid — and in this industry, that question is unusually important.
Accounting practices are valued largely on client relationships, and some clients inevitably leave after an ownership change. Buyers and sellers have developed several ways to share that client-retention risk, including seller notes, retention-based price adjustments, holdbacks and earnouts. Accounting practice seller financing is one of the most common of these tools, but it interacts with bank and SBA financing in ways that many buyers and sellers do not realize until late in a deal.
This guide explains each structure, who carries the risk under each one, and how lender requirements — particularly SBA rules — can determine which structures are available.
If you are preparing to buy or sell, accounting firm acquisition financing should be discussed before the deal terms are finalized, not after.
The Building Blocks of an Accounting Practice Deal
Most accounting practice transactions are assembled from some combination of the following components:
- Cash at closing — paid to the seller when the transaction closes, funded by the buyer’s own money, a loan, or both
- Buyer equity — the buyer’s own cash invested in the transaction
- Bank or SBA financing — a loan to the buyer used to fund some or all of the cash at closing
- A seller note — a portion of the price the seller agrees to receive later, with repayment terms set in a promissory note
- Retention-based adjustments — terms that change the final price based on how many clients stay after closing
- Earnouts — additional payments tied to future performance, such as revenue from retained clients
- Holdbacks or escrows — part of the price withheld at closing and released later if conditions are met
The combination chosen affects how much cash the seller receives at closing, how much risk each party carries, and whether a lender can finance the deal.
Seller Notes
A seller note means the seller effectively finances part of the purchase price. The buyer repays the seller over time under agreed terms.
Seller notes are common in accounting practice sales because they:
- Reduce the amount of cash the buyer needs at closing
- Give the seller a financial reason to support client transition
- Signal to lenders that the seller believes in the practice’s continued performance
- Can help bridge a gap between the buyer’s financing and the agreed price
When a bank or SBA loan is also involved, the lender will typically require the seller note to be subordinate to its loan, and may restrict when and how the seller can be repaid. Those restrictions can be significant, so sellers should understand them before agreeing to carry a note.
Seller Notes in SBA-Financed Deals
SBA rules treat seller notes differently depending on their purpose. Under current SBA policy, a seller note can count toward the buyer’s required equity only if it meets strict standby conditions — meaning the seller receives no payments on that note for an extended period, as defined in the current SBA Standard Operating Procedure. Seller notes that do not count toward equity may be permitted on other terms, subject to the lender’s requirements and SBA rules.
These rules were revised in 2025 and again for loans receiving an SBA loan number on or after October 1, 2026. Because the requirements are detailed and subject to change, both parties should confirm how any proposed seller note will be treated with an experienced SBA lender before signing a letter of intent.
For a deeper explanation of the 2025 changes, see our article on buying a business with 5% down under the SBA seller-note rules.
Retention-Based Price Adjustments
Retention-based pricing, sometimes called look-back pricing, ties the final purchase price to the clients who actually remain with the buyer after closing. If fewer clients stay than expected, the price goes down; in some agreements, it can also go up.
This structure appeals to buyers because it shifts client-loss risk to the seller. It appeals to some sellers because it can support a higher headline price and rewards a strong transition effort.
The challenge is financing. A price that can change after closing is difficult for many lenders to underwrite, because the lender is lending against a number that may not be final.
Earnouts
An earnout pays the seller additional money after closing if the practice reaches defined targets, such as a level of retained revenue. Earnouts are common in larger professional-services transactions and in some sales to consolidators.
An important SBA limitation: current SBA rules for 7(a) change-of-ownership loans prohibit seller earnouts and require a purchase price that is fixed and determinable at closing. This means a traditional earnout or a post-closing price adjustment generally cannot be combined with an SBA 7(a) acquisition loan. Structures that attempt to recreate an earnout through escrows or holdbacks may also be scrutinized.
This is one of the most frequently misunderstood points in accounting practice sales. Many deal discussions assume that an earnout and an SBA loan can be used together. Buyers and sellers who plan to use SBA financing should design the deal around a fixed price from the start.
Holdbacks and Escrows
A holdback withholds part of the purchase price at closing and releases it later if specified conditions are met. Holdbacks are sometimes used to protect a buyer against inaccurate representations or unexpected liabilities.
Whether a holdback is acceptable depends on its purpose and the type of financing. Holdbacks that effectively make the purchase price contingent on future performance may raise the same concerns as earnouts in SBA-financed transactions.
Comparing Accounting Practice Deal Structures
| Structure | Who carries client-retention risk | Seller’s cash at closing | Compatibility with SBA 7(a) acquisition financing* |
|---|---|---|---|
| All cash at closing (buyer equity plus loan) | Buyer | Highest | Generally compatible |
| Seller note with a fixed balance | Shared | Reduced by the note amount | Permitted subject to SBA and lender conditions |
| Retention-based price adjustment | Seller | Varies | Generally conflicts with the fixed-price requirement |
| Earnout | Seller | Reduced; more paid later if targets are met | Prohibited for seller earnouts under current rules |
| Holdback or escrow | Depends on purpose | Reduced by the holdback | Depends on purpose; performance-based holdbacks may be scrutinized |
*Summary for general education only. SBA rules change and lender requirements vary; confirm current treatment with your lender before structuring a transaction.
Choosing a Structure: Questions for Buyers
- Will you use SBA financing, conventional financing, or no outside financing?
- How much of the purchase price can you fund with your own cash?
- How confident are you in client retention, and what protects you if retention is lower than expected?
- Will the seller remain involved during the transition, and what motivates that involvement?
- Will you have enough working capital after closing?
Our guide to how to buy an accounting firm walks through the full acquisition process.
Choosing a Structure: Questions for Sellers
- How much cash do you need at closing?
- Are you comfortable carrying a note, and on what terms?
- If you accept retention-based pricing, how much of the outcome can you actually influence?
- Does the structure you prefer limit your pool of qualified buyers?
- What happens to your payments if the buyer struggles after closing?
Sellers who insist on structures that SBA-financed buyers cannot use may narrow their buyer pool. Understanding financing limitations early can lead to a stronger, faster sale.
Why the Structure Should Be Set With Financing in Mind
Many accounting practice deals are negotiated first and financed second. When the agreed structure turns out to be incompatible with the buyer’s financing, the parties must renegotiate, often late in the process.
A better sequence is:
- Understand the practice’s value and cash flow
- Speak with a lender about what structures are financeable
- Negotiate a letter of intent that reflects those constraints
- Complete due diligence and final documents
The SBA Loan Calculator can help buyers estimate how different loan amounts might affect monthly payments. Results are estimates only.
For valuation fundamentals, see our guide to accounting firm valuation, and for financing mechanics, review accounting practice acquisition loans.
Frequently Asked Questions
Can seller financing be used with an SBA loan to buy an accounting practice?
Yes, seller notes can be used alongside SBA financing, but they must meet SBA and lender conditions. A seller note used toward the buyer’s required equity must meet strict standby requirements. Confirm current rules with your lender.
Can an earnout be used in an SBA-financed accounting practice purchase?
Current SBA rules for 7(a) change-of-ownership loans prohibit seller earnouts and require a fixed purchase price at closing. Deals that rely on an earnout typically use other financing or no outside financing.
Why do accounting practice sales use retention-based pricing?
Because much of a practice’s value depends on clients staying after the sale. Retention-based pricing shifts some of that risk to the seller, but it can limit financing options.
Who benefits most from a seller note?
Both parties can benefit. The buyer needs less cash at closing, and the seller may receive a higher price or faster sale. The seller takes on repayment risk in exchange.
Final Thoughts
In accounting practice sales, the structure of the payment can matter as much as the price. Seller notes, retention adjustments, earnouts and holdbacks each divide client-retention risk differently, and each interacts with lender requirements in its own way.
Buyers and sellers who understand those differences — and who set the structure with financing in mind — are far more likely to reach a deal that closes and a transition that succeeds.
