CPA firms often turn to the topic of succession right after busy season. The issue is not a new one, and the answers are never simple. Whether pursuing internal or external succession, each path will require work. For some firms, both succession paths may be on the table; for others, there may only be one way to go.
As you consider succession options, keep in mind that all successors have these six concerns in common:
Money. External and internal successors both want to understand how they will make money. Internal successors may see the dollar signs accruing from the terms of the buy-in, plus the flexibility to cut clients and streamline operations. External successors will see the upside coming from cost savings, new services, efficiencies, and better talent.
Data. Decisions depend on meaningful and accurate engagement performance data, concentrations of revenue by fee level, and nature of services. Internal successors need access to data before they are presented with an offer to buy; external successors will likewise need a comprehensive data package early in the process.(To learn more using data, read Ira's newest article in CPA Practice Advisor.)
Culture. Comfort with transparency, decision-making, and personnel policies are essential for any succession. Internal successors must feel the firm is moving in the right direction, and that they will have a real impact. External successors need to see synergies and the ability to build a better environment, collaboratively and collegially.
Potential. All successors are motivated by future potential. Being able to quantify and evaluate the potential for new revenues, new services, and new methods will improve the chances of cutting a better internal or external deal.
Technology. A strong commitment to technology indicates higher quality of life with less staff stress for any successor. Willingness to learn and facilitate the next stages of technology will also be crucial to getting a “yes.”
Collaboration. Demonstrating cooperation is key. Push-back on the process and/or an inclination to micromanage will discourage potential successors coming from outside or in. Suggesting ways to stimulate relationships and implementing ways to bond clients to the firm (and not the individual) will bring every successor comfort.
While every successor will have different preferences and needs, the ability to demonstrate strength in these common areas will be an important starting point for achieving viable internal or external succession. Focusing on these areas prior to pursuing a succession strategy will also optimize your competitive advantage and position your CPA firm for a successful transition.