Quick-Start Guide to CPA Firm Succession Planning: 5 Crucial Areas


Well begun is half done.

Succession planning sneaks up on a lot of CPAs. It’s one of those areas that has some uncertainty around it which causes procrastination, but there is a giant silver lining in succession planning. When an owner finally rolls up the proverbial sleeves and focuses on this issue, it can be an incredibly energizing process. In fact, taking action on a succession plan often breathes new life into a CPA practice and the owner(s) that lasts all the way to the last day at the office.

5 Crucial Areas to Focus on to Start Your Succession Plan:

  1. When to exit?
  2. Timing is a very personal and sometimes emotional decision. For many, it’s the most difficult part of this process. Unfortunately, it’s also the first decision to be made.

    Too soon, and letting go is difficult or even impossible which often leads to owners micromanaging their successors, damaging the hand-off. When owners have no definite plans pulling them out of the practice, they may unknowingly sabotage their own arrangements. The succession process can suffer from “death by a thousand cuts” as they go through multiple rounds of changes and tweaks to the plan.

    Too late, and owners can experience burnout. Their energy for the business can gradually fade to the point where the practice isn’t growing or improving. Or, worse, the practice can go into decline.

    From our experience in helping CPAs navigate their exits, the most important planning step an exiting owner can take regarding timing, is to create a clear vision of what they want to do after the exit. What does life look like after public accounting? Ideally, that vision is an exciting one that “pulls” the CPA out of the firm. Essentially, rather than getting away from something, the focus is on going towards something better.

  3. Assess and tell the truth about your current situation.
  4. Perform a SWOT (strengths, weaknesses, opportunities and threats) analysis on the practice. How would an outsider look at your practice? Would it be attractive to a junior? Would it be attractive in the marketplace if you wanted to go out and sell the firm? This doesn’t have to initially be something that requires a tremendous amount of data. It requires stepping back and thinking critically about the practice. If you can be honest and objective, you can probably crank out a high-level analysis in fifteen minutes. Start by identifying your top 3 in each category.

  5. Who would want your firm and why?
  6. The best way to come up with the answer is by asking - who could best operate your firm and why? What are the possible successor profiles that would make the most sense? If you have a reasonable inventory of the knowledge and talents that have driven the success of the practice, then you are well on your way. However, going through this exercise may provide some unexpected insights. The exercise can also point to internal team development needs, hiring needs, or help you determine if you really do need look outside the firm for the proper leadership capabilities necessary to insure the future of the firm.

  7. Brainstorm optimization solutions – How could you could improve your practice to make it more attractive?
  8. Armed with a commitment around your timing, and an accurate assessment of your current situation, you can create the necessary action steps to get your practice ready for your exit. The key to this step is to get your ideas on paper quickly, to not get bogged down in too much detail. The more time you have until your exit, the bigger your ideas can be. For example, you may determine that certain staff and clients are not a fit for your practice, or that entire lines of business need to be eliminated - or greatly expanded. You may identify the people that have the most potential that need to learn and grow in certain ways in order to take over the practice. You might decide to overhaul your pricing models or workflow processes. Think big! Worry about implementation later.

  9. Prioritize your actions. Keep in mind that cash (and time) are king.
  10. This is when you decide on which actions to take. The best succession plan is to build a better CPA firm! It’s simple really…build something that people want. What do they want? They want to be able to be prosperous without working too many hours. With that in mind, which of the action steps you have identified will have the biggest impact? Which ones are you willing and able to implement? Time is of course a very important consideration in all of this. It’s paradoxical, but time away from the office can actually help provide the clarity needed to help CPAs take on the big changes needed to improve their practices. If you want to learn more about creating more personal time as you head towards your exit, you might enjoy our column on working less.

    What’s often surprising is when owners make significant practice improvements, they don’t mind working longer--sometimes years longer. Improving a business and making it more profitable is fun and energizing. It’s also the best, the most practical, and the only succession plan that many practice owners need.

Brannon Poe, CPA, is the founder of Poe Group Advisors, a premier accounting practice brokerage firm. He is the author of Accountant’s Flight Plan: Best Practices for Today’s Firms and On Your Own: How to Start Your Own CPA Firm, and blogs and podcasts at http://www.poegroupadvisors.com/blog/.