Don’t go another year without a succession plan!

By Francesca Zelasko

If a key partner decided to retire or became disabled, would your firm have a plan for transitioning clients, choosing a replacement leader, and ensuring continuity of firm vision and strategy? If your firm has a large number of accountants who will reach retirement age in the next decade, it's not too early to develop a success plan that will insure the likelihood of retiring partners being able to receive the full value of their retirement funds and/or deferred compensation payments.

Make up your mind

The first step in developing a succession plan is to decide what future you want for your firm. If you want the firm to continue and stay independent, prepare younger partners to become future leaders by training them in rainmaking skills, teaching them how to manage the firm, and building future leaders. If merging with or selling out to another firm seems the best course of action, start identifying potential acquirers.

Making a decision to sell or merge can be difficult, especially if there are differing views among your firm's leadership regarding the future of the firm. This future planning can get particularly tricky if individual partners have different goals regarding how long they want to work and whether they truly want to transition their own books of business to new owners.

Keep in mind that if several firm leaders want to retire soon and your firm hasn't groomed younger partners to take over, the decision to combine with another firm may be a requirement instead of a choice. It can take up to five years to prepare junior partners for leadership positions. If their skill sets aren't of the quality of those possessed by the current generation of partners, a merger or acquisition may be your only alternative.

Prepare for change

If you decide to groom internal successors, start developing those future leaders as soon as possible. Because these next generation leaders will need coaching and formal training, consider freeing your partners from some of their high billable goal requirements and getting the younger firm members involved in more demanding engagements and client relationships.

Set out a plan that identifies the roles and responsibilities of the firm's governing partners, and clearly define a succession plan that outlines how to transfer client responsibilities, addresses the mandatory retirement age, and provides a game plan for transitioning older partners out of the firm. Without a clear governance structure, chaos can ensue when key partners leave, and the retirement payout of senior partners can be at risk.

Consider requiring partners to relinquish equity ownership and bow out of key decision-making processes at a certain age - at that point it should be up to the firm to determine the relationship going forward. 

In addition, your plan should cover:

  • Mandatory retirement age
  • Partner retirement agreements
  • Retirement plan funding
  • Compensation structure
  • Accountability for adhering to policies and procedures

Act now

Succession planning is a process, not an event. It can take months to develop a plan, and even if your firm already has one, the plan will need to be adjusted periodically for changes in your firm or the environment. Don't delay: You never know when an unexpected event might make you glad your firm has a succession plan in place.

About the author:

Francesca Zelasko is director of accountant partner programs and partner marketing for SurePayroll. Zelasko has more than 10 years of progressive marketing experience within the technology industry including SaaS, software, hardware, and middleware products and services. She currently oversees the overall Accountant Channel for SurePayroll which includes Referral and Reseller partners and customized products.

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