Small business succession: an economic recovery tool?

In recent years, The Practicing CPA has several times addressed the issue of planning for succession in a firm. The articles responded to survey findings, along with demographic data, which led to conclusions that CPA firms, as well as many of their client companies, are unprepared for a smooth transition. For example, in the March/April 2007 issue of The Practicing CPA, Gary R. Trugman, CPA/ABV, MCBA, ASA, MVS, cited the effect of demographics on the accounting profession. In his article titled "The Graying of the Profession," Trugman warned that "the aging of so many of us [CPAs] will be a serious problem for the profession if we do not do something about it."

Although the aging of the profession needs to be addressed, unexpected events might arise from other causes (for example, death or illness) that may place firms in difficult positions. Consider also, for example, the impact of the recession on companies, their owners, and employees. Firms and their clients can avoid the disorder of being unprepared for transitions by planning well before partners are ready to retire.

Succession and Economic Growth

Another perspective is that of Mike Handelsman, general manager of BizBuySell.com, an Internet business brokerage. His perspective focuses on "our nation's stalled business succession engine" as "a primary cause of stifled economic growth in the small business economy ... ." Handelsman hypothesizes that "if we're truly invested in recovery we need to focus on small businesses, because the real crisis lies on Main Street, not Wall Street." Small businesses drive the economy, Handelsman says. However, "the small business economy has been ... unable to compete and contribute at its full potential."

Handelsman explains that "without financing, business owners who want to exit their businesses are unable to do so, and aspiring entrepreneurs who want to purchase a business cannot transition to business ownership ... The tragic result of this lack of business acquisition capital is that thousands of business owners who were planning to exit their business in 2008, 2009, or 2010 must stay the course, or for many, abandon course. This dynamic is compounded when you consider the largenumber of baby boomer business owners looking to sell, but instead are forced to simply close up shop."

Handelsman is optimistic about the potential role of displaced business owners and employees. He believes that "plenty of eager entrepreneurs" are "just waiting to...