Who will take over your firm?

• Author: Reeb, Bill
• Position: Succession planning

Most CPA firms are not properly prepared for--or simply fail to understand--succession planning, according to a recent PCPS Succession Planning Survey. This is true for both sole proprietors and multipartner firms. In fact, most CPA firms (81%) do not have a written succession plan and 22% do not believe they need a plan of any kind. Yet a majority of firms (62%) expect succession planning to be a significant issue for their firm in the near future.

Although each firm is unique, several similarities emerge. First, partners, like most people, don't want to confront and plan for the possibility of health problems or disability that may disrupt their careers. Second, partners resist setting a specific date for their departure from the firm, a reluctance that arises from economic motives as well as the desire to continue working. Third, firms have not adequately groomed or mentored their replacement partners. But finally, and perhaps most important, a disproportionate number of firms are counting on avoiding succession by either selling or merging their firm when the final date of retirement for the senior partners has been set.

Certainly, a shortage of available CPA talent over the past decade has contributed to the succession problem. Although the number of CPAs has been increasing over the past few years, a greater percentage of them now skip the public arena and opt for corporate work. "Paying your dues" for 10 or 15 years may not appeal to a CPA who can find lucrative work in industry, which honors a better work-life balance. What exacerbates this shortage, especially at the higher levels of experience, is the number of managers opting for part-time work in the firm.

No question, there is a staffing shortage, and many firms insist that this justifies the failure to groom tomorrow's leaders. Most of the time, however, partners themselves are just as much the cause of the firm's success or failure in this area. Consider the following possibilities:

* A strong-willed partner. This partner may have majority interest that controls the decision-making process. Although a very successful leader, the force of his or her personality may also squelch the development of replacements.

* The talented rainmaker. This partner brings in business so effortlessly that the firm gets complacent about creating a marketing foundation for the firm as a whole.

* The super-technician. This partner is the firm's walking tax library. There may be little urgency to...