St. Louis, Missouri, USA skyline at sunset, taken from the water.

Keys to Successful Transition Planning

A CPA firm, just like any of our corporate clients, is a business first and foremost. Like any thriving business, succession planning considerations should be a component of overall strategic planning. For transition plans to be successful, the process should result in a “win-win” situation for all involved.

A good succession plan depends on an owner or owners who are willing to relinquish control, decision making, and compensation/net income to the successors according to a structure that works for everyone’s mutual goals. Current ownership needs to identify key leaders within the firm who are ready and willing to buy-in under the same structure and time frame. Transition plans can be accomplished through earn-outs, bank or owner financing, or some combination.

Current owners, who are often founding owners, can exit the practice as they desire under a planned succession strategy. Some owners may wish to cut back over a period of time. This allows for owners to maintain a connection with the firm even after the transition is complete. This continued presence provides stability to the next generation leadership and to the firm’s overall operations. This also provides less financial strain on the next generation leaders as they can transition without the burden of financing the buy-in immediately.

Stability and continuity are key objectives of the process. Two of the firm’s key assets are its client base and its people. Direct buy-outs/sales to other firms often creates upheaval and uncertainty that can impact client relationships as well as relationships with staff. A good transition plan minimizes this upheaval and risk of uncertainty. Client relationships are maintained and transitions are planned. Staff mentoring, development and growth plans can continue without interruption. The overall firm culture, knowledge-base, and niche expertise – the attributes that contributed to the firm’s success historically – can continue. In short, these key relationships with clients and staff continue in a “business as usual” manner with the goal of minimizing client and staff attrition rates. In fact, a well-executed and communicated transition plan can enhance client relationships as well as staff development. It’s an opportunity to tell your clients that your firm is here to serve and grow with them in the future. It’s also an opportunity to show staff first-hand that they have real growth opportunities in the firm.

The key to a successful transition plan is to make transition planning a regular part of the overall strategic planning process. Owners should regularly communicate their exit plans and objectives amongst themselves. Additionally, next generation leaders should be identified, and a process for finding, developing, and maintaining those next generation leaders needs to be prioritized.

Abeles and Hoffman, P.C. is the midst of a transition as co-founders Ron Abeles and Stu Hoffman are transitioning ownership to its next generation of firm leaders. The plan allows Ron and Stu to step away gradually and maintain a level of participation on their terms, while providing the opportunity for the next generation of leaders to own a successful CPA firm. Both the timing and structure of the transition meet the objectives and goals of the founding and next generation ownership while maintaining stability and continuity of the business – an overall “win-win” for everyone involved.