Succession Planning and Your Accounting Firm

Every company should have a succession plan, and that includes your PA accounting or CPA firm. After all, you want the firm that you worked so hard to build to continue after you retire. Unfortunately, few businesses, including accounting firms, take the time to create a well-crafted succession plan. With your financial expertise, you should be able to create a powerful plan to keep your firm running long after you’ve gone. And in the process of developing your plan, you may discover that helping companies develop their own succession plans could be a successful new niche for your firm.

A succession plan helps you prepare for your retirement. One way or another, you will eventually exit your firm. The best way to ensure that your firm continues is to plan ahead. That’s the goal of your succession plan.  

More than just preparing for your retirement, your plan should also address sudden illness or injury. What would happen to your firm if you were in a car accident and you were laid up for weeks? Who would do what? How would the firm continue to run efficiently without you? More than one business has quickly failed when the owner suddenly became sick and no one had been prepared to take his or her place. A succession plan will help prepare the right employees to fill your shoes.

Building your succession plan is not a quick process. It should take a little time and should be done in collaboration with your most trusted team members, your family, and various experts. Here are some steps to take to prepare your firm to continue into the future without you:

1. First, talk to your family members to see if anyone has the interest and the skills to continue your firm after you. If one of your children works in your firm, for instance, it is reasonable that he or she should be given the opportunity to take over. However, if you do not think your child has the skills or if your child is not interested in taking over the responsibilities of the whole firm, look to your most trusted staff members. Is there anyone you believe could be mentored to take your place?

2. Analyze future trends and the outlook of the industry to guide you in the right direction when deciding the qualities and skills of a successor.

3. Develop a short list of possible successors based on the previous steps. Develop a plan to discuss the possibility of succession with these individuals, along with a mentorship approach to get them up to speed in areas of leadership and management. You may even consider more than one successor, as you evaluate the strengths of each candidate.

4. Assemble a planning team, including diverse stakeholders and experts, such as members of your staff and family, as well as experts in legal, finance, etc. These advisors will help you develop a successful plan and implement it.

5. Perform a valuation of the company or firm to determine a fair buyout that won’t break the back of the firm or new partner(s) or owner(s). You can also consider a long-term profit-sharing arrangement as part of the terms.

6. Set a timeline for all these steps to be put into practice and a likely time for your retirement. Your potential successor will want to know when he or she will take over the reins. Saying you want to work until you can’t work anymore is not an incentive for your brightest team members to stick around. You may arrange to continue to work part-time, but provide a reasonable window of time when you plan to retire. It may take several years of mentorship to prepare your successor, so even a timeframe of five to ten years is not unreasonable.

7. Inform your staff about your plans and help them to gradually receive more and more direction from your successor as you begin to turn over the reins.

A succession plan isn’t just for your own retirement. If you have other principal members of your team whose loss would severely hamper the efficient administration of the firm, expand your succession plan to create successors for these members as well. This is a form of continuity planning. A continuity plan creates policies and procedures that are to be implemented in the case of a natural disaster, cyberattack, or some other disaster that prevents the normal conducting of business. This should include the sudden death, injury or illness, or departure of key employees.

Creating policies and procedures and choosing people who will be able to perform the duties of your essential employees in the event of an emergency should be a part of your business succession plan. Each of your key people should mentor one or two individuals to fulfill his or her role in the case of an emergency. This should not make your key people feel like they are being replaced. The purpose is to make sure there will be no interruption of business.

The other benefit of succession planning for your key employees is that it helps your other staff members feel like they are valued members of the firm. When one of your important team members goes on vacation and the person being mentored is able to step in and do the work, that person will feel more appreciated and will be more committed to your firm.

Prepare your succession plan early, for yourself and your core team. And with your knowledge, consider expanding your firm’s services to help your clients develop their own succession plans.