As the world said goodbye to Queen Elizabeth II and a new king ascended to the throne, we witnessed one of the most well-planned successions in modern history. During a time of great loss, there was a sense of calm in knowing each detail was being carried out according to the queen’s wishes. The precision in the plan’s execution was something to behold.
This royal event is a compelling case study for firm leaders on the need for a succession plan. A closer look reveals many lessons for taking charge of the firm’s legacy, while providing continuity upon entering a new era of leadership.
Whether you are just getting started with your plans or searching for tips of ongoing improvement, this article provides practical advice that you apply in your own firm.
The succession-planning landscape in public accounting
First, let’s explore what is happening across the profession. The latest PCPS CPA Firm Succession Planning Survey offers telling insight.
By the year 2030, every baby boomer will be age 65 or older (US Census Bureau)
44% of multi-owner firms have a mandatory age for retirement or sale of ownership
50% have age 65 as mandatory age
20% at age 67
13% at age 70
Retirement age varies for solo practitioners/sole proprietors
44% of solo practitioners/sole proprietors plan to retire in the next five years
31% in the next 6-10 years
Less than 10% of solo practitioners/sole proprietors have practice continuation agreements with another firm
57% of multi-owner firms do not have written and approved succession plans in place
For a deeper dive, visit the survey results, segmented into solo/sole firms and multi-owner firms. Also listen to these insightful webcasts, Highlights from the Succession Planning Survey, Succession Implementation Ideas and Get up to speed on small firm succession trends.
You don’t need a kingdom’s worth of resources to plan a successful succession. You can take many practical and affordable actions in your own firm. Not sure how to get started? Want additional insight as you review your plans? Here are five best practices to consider.
1. Plan for a successful transition
One effective way to approach this seemingly daunting assignment is to zero in on your role as a trusted adviser. Reframe your attention toward the continued care of your firm, team and clients when you stop working. Ask key questions such as:
Do you have a date in mind for your retirement?
What wishes do you have for handling specific matters?
Are there traditions and special ways of doing things that you want to continue?
Be mindful that succession and continuation plans are not one-and-done documents, rather a dynamic process requiring ongoing attention and nurturing. Just as the queen did, spend time each year to review your plan, expand it and make changes to reflect your desires. There are numerous resources that you can tap in the PCPS Succession Planning Resource Center such as the Succession Planning Guide & Tools and Practice Continuation Agreements.
2. Name and prepare your successor
While King Charles III became heir to the throne based on his birthright, your successor probably will not be so easily identifiable. Consider these questions.
Do you have someone in mind to take over your practice when you step aside?
If so, have you begun conversations to explore their interest?
Once you have identified a successor, it’s time to prepare them for the handoff. Don’t worry, this process will not take seven decades but it will take time and focused attention. Help your successor acquire the skills, practical knowledge and experience they will need to successfully lead your firm in the future. Rather than solely relying on classroom training to develop skills, encourage your successor to join you in action. Show them how you approach important leadership decisions and demanding daily routines. It is no surprise the queen was very conscious about the importance of being seen to be believed and King Charles III had the opportunity to observe this over the years. Being a part of these hands-on experiences in your presence will prove invaluable as your successor grows into their role. For more guidance, check out the CPA Firm Competency Model.
3. Determine whether a merger or acquisition will be your chosen exit strategy
Unlike the monarchy, you may not have a depth of talent to follow you in leading your practice. For many, a merger or acquisition can be the ideal solution.
Consider that 35% of solo practitioners/sole proprietors plan to sell their practice to another firm, while 37% plan to merge their firm with another practice and continue working, according to the 2020 PCPS CPA Firm Succession Planning Survey. What’s more, 24% of solo practitioners/sole proprietors and 46% of multi-owner firms have been in merger discussions or were planning to seek M&A opportunities.
To explore this path, start by determining whether you would like to sell or merge your practice. Next understand your firm’s worth, its most valuable assets and what makes it attractive. Then work to make your practice more appealing to potential buyers in key areas such as competitive rates, quality clients, staffing, up-to-date technology and growth-focused services. For more insight and resources, tune into Work on your firm now and retire well later, What firms should know about succession and M&A, Selling your firm,Merging your firm.
4. Transition the care of your clients
You have worked throughout your career to build trusted relationships with your clients. Think of them as the crown jewels of your practice. Through the years, they have come to expect a certain level of attention, insight and service from you. The thought of you no longer being there for them can cause great concern. Interestingly, more than 40% of multi-owner firms had not addressed client transition, according to the PCPS CPA Firm Succession Planning Survey. When client transitions are not handled properly, they can result in the loss of valuable business. Create a transition plan for each client. Identify who will best serve them. Develop a timetable that allows ample opportunity for them to get to know the other and become familiar with needs and priorities. Work closely with each one during this transitional period to ensure relationships are properly progressing.
5. Encourage future generations
Succession plans can be strong recruiting and retention tools, especially as the Great Resignation continues. Rather than keep your plans secret, use them to begin dialogues with your team and recruits. Help them feel a part of the firm’s future. Queen Elizabeth II was brilliant at keeping the monarchy relevant and moving forward. She evolved with her use of technology, regularly encouraged younger generations and even made cameo appearances with popular characters such as James Bond and Paddington the Bear. Encourage your team to get involved in areas they enjoy and excel. Look to them for ideas, energy and input to advance the firm. Remind them they are in a place where they can make a difference.
Take a lesson from this royal masterclass and prepare your firm for a successful transition. Your colleagues and clients are counting on you provide continuity and a legacy that will evolve with the new leadership.
Here are additional succession planning resources: