Succession Planning: Exit Ramps for Your Practice

Succession planning is often treated as the elephant in the room. Although a vital inclusion to the overall prolongation of a firm, it is the most likely to be disregarded or overlooked business practice. Succession planning only becomes important in the face of adversity, which, in In most cases, is a little too late because by the time a firm is ready to implement any type of succession planning there may already be a downward spiral of the firm.


Future business thinking, including the capacity to obtain insights into long-term realities with inevitable challenges and discontinuities, must be a fundamental component of a firm’s strategic efforts. Demographics indicate that members of the baby boomer generation will reach standard retirement age within the next 10 years. They are practically at the pinnacle of retirement and at this stage they should begin preparing the course of action that will safeguard the continuity of their firm as soon as feasible. As a result firms with executives and owners in categorized in the baby boomer generation need a thorough understanding of every exit option for their accounting practice to ensure the best possible outcome.


So, what is the best course of action? This installment will explore the three most common strategies one can execute in relinquishing or transferring ownership of firms profitably.

1. Selling

Selling a practice is a standard succession solution for smaller firms, especially sole proprietors. However, many of them make the mistake of treating the sale of their practice as if it were selling a car. They intend to work until the very last minute, find a buyer, and hand over the keys to the buyer.

A CPA firm’s value depends entirely on a seller’s capacity to transition client relationships to a buyer, so the buyer has a great chance of retaining those relationships in the long run. Therefore, the deal should be structured properly. When starting a succession plan, an owner, partner or executive must determine how many more years they intend to work full-time before significantly reducing their time commitment to the practice. As they near retirement and plan to sell their firm, they should invest their remaining hours in their practice as a mentor to the buyer, guiding the firm’s overall direction, such as its goals and objectives. This allows the seller to gradually accustom clients to the successor firm with the seller’s assistance and engagement. This will also result in much higher retention, maximum practice value, and the continuation of your legacy.

2. Internal Succession

Many CPA firm owners prefer to deal with owner succession internally. It is because it causes relatively fewer changes in day-to-day transactions. There is a continuity of culture as employees of the firm get to keep working for people in a culture, they are already familiar with, plus the new owners also have the advantage of taking over a firm which they are familiar with the way business operates. Also, fewer changes also mean more consistent service for the firm’s clientele.

For this strategy to be successfully executed owner candidates should be acquainted with and compatible with the company’s culture. They should have formed bonds with their coworkers, crucial for success in new management or upper-level roles. The candidate should have demonstrated a track record of achievement within the organization which can be easily recognized.

To execute such a plan, the proprietor, owner, or executive must cultivate internal talent capable of filling this vital role. The succession candidate’s skills and experience should guarantee that workforce changes will not create gaps in knowledge or expertise, which might influence operations and jeopardize the firm.

3. Merging Upstream

Another course of action that can be executed is looking elsewhere for a successor if there is no internal succession plan. An upstream merger into a more prominent firm holds several advantages for partners exiting within five years or fewer, including greater resources, a wider platform of services, a broader product line, geographical reach, expertise, and more cross-selling opportunities.

(We will discuss this segment in more detail in our next installment, see Mergers and Acquisitions: Am Emerging Succession Strategy.)

Business Valuation Empowers a Successful Succession

It can be difficult for a business owner to decide whether to sell, dissolve, or transfer ownership to family members, employees, or other interested parties. That’s why they should consider planning it as early as possible in order to establish the best road map for the firm’s future. One factor to take into consideration when developing a succession plan is estimating a firm’s current valuation. It’s imperative to include not just your financial and legal consultants in your succession planning, but also a business valuation specialist. Doing so will help you build your business in strategic ways, so it’s worth more when you are ready to exit. This will also strengthen and increase the firm’s overall performance after your departure.


Business valuation is imperative in business succession, whether through selling the business, establishing partner ownership percentages, or seeking financing. HWA Alliance of CPA Firms is here to help. You can rely on us for professional, competent, and cost-effective service. We have the knowledge and expertise to assist you in determining the worth of a company. By doing so, you can be more effective and accurate when succession planning. Today is your chance to make financial plans for your firm’s future. Know your worth with us.


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