Succession Planning for Smaller CPA Firms

 Succession planning has not been on the minds of small firm managers, according to The PCPS AICPA CPA Firm 2013 Top Issues Diagnostic Report.  The report is based on surveys of firms of varying sizes (sole practitioner, 2-5 professionals, 6-10 professionals, 11-20 professionals, and 21+).  The surveys are conducted every two years. 

From year to year, the top priorities tend to be remarkably similar across all sizes of firms, with just a few exceptions.  Larger firms, for example, show a strong interest in staffing issues and strategic planning not seen in smaller firms.  Smaller firms identify changing tax laws and the need to keep pace with those changes as a priority – particularly given such initiatives as tax preparer validation of health care coverage under the Affordable Care Act. 

But there is little disagreement on the issue of succession planning.  

For sole practitioners, the issue becomes most critical as the principals near retirement.  At this point, it becomes necessary to find a buyer, or to hire a replacement from outside the firm.  Since this is a single event in the firm’s future, this is not among the top five priorities cited in the survey – but important enough to weigh in at #7. 

For firms of 2-5 professionals, existing partners can maintain the health of the firm for long enough to make the succession decisions required.  These firms also have to consider the impact of an active mergers & acquisitions market.  Succession management joins “Finding Qualified Staff” and “Bringing In New Clients” in the list of top five issues.  For these firms, succession is part of practice management aimed at carrying the practice into a more secure future. 

Larger firms also have these three issues of success planning, staff hiring, and new client development among their top five priorities.  From a focus on surviving the economic downturn in 2009, these firms appear to be seeking a path for future robust growth, ideally by developing new leaders internally.  

The focus on succession planning means that sole practitioners must begin planning now for the eventual change in management.  Firms of larger sizes will need to turn their attention to management development programs for the partners and recruiting strong professionals to be developed.

Source:  The PCPS AICPA CPA Firm 2013 Top Issues Diagnostic Report at http://www.aicpa.org/InterestAreas/PrivateCompaniesPracticeSection/StrategyPlanning/FirmStrategyandPlanning/DownloadableDocuments/2013-Top-Issues-Commentary.pdf