Succession planning is non-negotiable

Succession planning is a critical and often overlooked aspect of running a tax and accounting firm. Whether preparing for retirement, navigating unexpected crisis scenarios, or simply laying the groundwork to ensure the longevity of a practice, a well-considered plan is essential. During my recent webinar, “Succession Planning Considerations for Accountants,” we explored the intricacies of succession planning for accounting firms, offering actionable strategies to help attendees make the most of the session.

Research from a recent AICPA survey shows that the majority of firms are unprepared for their future, with only 46% of multi-owner firms and a mere 6% of sole practitioners having a succession plan in place. This trend could have consequences for business continuity, client relationships, and long-term sustainability.

Succession planning is not just about retirement; it’s also a safeguard against unexpected events such as death or disability, or crises that could derail your practice. Without a written plan in place, accounting firms risk losing significant value, fracturing key client relationships, and jeopardizing the futures of staff, partners, and loved ones.

The bottom line is this: It’s never too early to start planning.

5 key components of succession planning

1. Crisis planning: Create written agreements which define how your business continues to operate if an unexpected crisis occurs. This plan can be tailored to your firm’s structure, such as provisions built into the operating agreement or a practice continuation agreement with another firm. These documents ensure clarity and mitigate risks during unforeseen events.

2. Retirement planning: With a significant percentage of sole practitioners planning to retire in the next decade, you’ll want to have plans in place for handling these transitions, including internal transfers, external sales, or mergers and buyouts.

3. Valuation considerations: What is your practice worth? It’s probably more than you think. Client relationships, fee structures, and intangible assets such as goodwill play a pivotal role in valuation. You will want to set payment terms upfront and properly factor in cash flow, client retention, and profitability to maximize value.

4. Management of practice during transition: Provisions in a succession plan should address things such as the role of a surviving spouse or heirs of a deceased firm member, as well as the mechanics of access to client records and firm accounts. This will support smooth transitions through clear documentation of terms and expectations.

5. Ease the transition: Communicating effectively with clients during the transition phase and maintaining consistent fee structures are critical to ensuring a seamless experience for the firm and your clients.

Timing and regular reviews are crucial

Succession planning isn’t a “set it and forget it” strategy. Start succession planning as soon as you can, and review it regularly to adapt to changes in business conditions, industry trends, and personal goals. Integrating succession planning into hiring and training processes is another key to ensuring smooth leadership transitions.

The Intuit Client Referral Program

Intuit’s Client Referral Program is a solution tailored specifically for professionals nearing retirement or looking to offload clients. This program helps tax professionals find a suitable exit strategy while preserving client relationships:

• It connects retiring professionals with experienced tax experts across the country who are prepared to take on new clients.
• Retirees receive a referral fee for each client transferred, offering a financial incentive to participate.
• Clients benefit from the flexibility of choosing a new tax professional, ensuring their needs are met even as their accountant transitions.

This program offers an opportunity to ensure your clients are served by high-quality professionals, while securing a reliable exit path for your practice.

Plan early and plan thoughtfully

Succession planning is a proactive process that requires careful thought and regular reassessment. Whether addressing crisis situations, preparing for retirement, or exploring opportunities for firm valuation, proper planning ensures long-term sustainability for your business.