Succession planning: who's going to catch you if you fall? No one is indispensable, but to your clients, it's close. Consider what would happen to your practice if you were unable to work for a period of time, or permanently.

AuthorGray, Robert H.

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Would your practice continue to operate as usual during your absence, or would it be chaos? In any small business, including an accounting firm, it's easy to neglect your own affairs when you're busy tending to your clients' needs.

According to PCPS's 2008 Succession Planning Survey, 60% of sole practitioners will have succession planning challenges in the next 3-10 years.

It is in the best interest of your family, your employees and your clients to have some type of practice continuation agreement in place. Every business, especially a sole proprietor of a public accounting firm, needs an agreement that will provide for the orderly transition of the client base in the event of permanent disability, retirement or death, as well as for professional assistance during temporary disability.

SINKING STONE

Estimates say that, without a practice continuation agreement, in the week following the death of a sole practitioner, 20% of the clients will leave. Another 21% leave by the end of the second week. By the end of one month, estimates say all but 20% of a firm's clients will form a new and different professional relationship. That means that all the hard work you put in over the years can disappear in no time at all, leaving nothing for family, employees and, perhaps, some clients.

While it's difficult to measure what clients would do in the case of a short-term absence, imagine if the absence was between March 1 and April 15? Would anyone know what to do?

"If the owner passes away suddenly without a practice continuation agreement in place, the value of the firm immediately drops to zero," said Mark Koziel, senior technical manager with AICPA PCPS at the 2008 Annual Meeting and Members Summit. "That leaves nothing to provide for a spouse and family. The estate could also be sued if returns aren't filed in time due to a lack of a succession plan."

With a formal plan covering events such as unexpected disability or death, your family will be assured of receiving a fair value for the practice. Your clients will continue to receive timely, quality service from a professional you have personally selected. Your employees will have an opportunity to continue their careers and the partner you select will have a greater chance of retaining your clients since the business transfer will have already been determined.

The time to act is now. It's not a matter of your age or the size of your business. It's about doing what's right for...

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