5 Guidelines for Contemporary Succession Planning

By Joseph A. Tarasco, CPA, Accountants Advisory Group, LLC – November 7, 2024
5 Guidelines for Contemporary Succession Planning

Contemporary succession planning for CPA firms is crucial to ensuring the continuity, stability, transitioning and growth of the firm. Given the evolving nature and current transformation of the public accounting industry, succession planning must adapt to modern challenges and opportunities. As Charles Darwin aptly said, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

Succession planning should be an everyday event, not a series of events taking place just prior to partner retirements. By running their practices as a business, accounting firms can achieve financial stability, operational efficiency and strategic growth. This approach ensures delivering high-quality services to clients, managing risks effectively and staying competitive in a dynamic market environment. Here are five key guidelines for effective succession planning for today's CPA firms:

1. Develop Leadership

  • Identify future leaders. Assess the current leadership and identify potential successors. Spot potential leaders early and invest in their development through training and exposure to various aspects of the business. Establish mentorship programs to develop future leaders within the firm.
  • Incorporate continuous professional development. Create individualized development plans for potential successors, focusing on their growth areas. Encourage continuous learning and certification to keep up with industry changes.

2. Plan Client Transitions

  • Use gradual introductions. Introduce successors to clients gradually to build trust and maintain relationships. Start succession planning well in advance, ideally five to 10 years before the expected transition.
  • Communicate to clients. Clearly communicate the transition plan to clients to reassure them of continuity. Develop a clear timeline for the transition, outlining key milestones and responsibilities.

3. Integrate Technology  

  • Adopt modern tools. Implement up-to-date accounting software and technology, including artificial intelligence, to streamline operations and attract tech-savvy talent.
  • Use cybersecurity measures. Ensure robust cybersecurity protocols to protect sensitive client data during transitions. 
  • Adopt advanced software. Utilize the latest accounting and financial software to increase efficiency and accuracy.
  • Implement cloud-based solutions. These allow for better accessibility and real-time data sharing.
  • Diversify leadership. Encourage diversity in leadership to bring different perspectives and drive innovation.

4. Ensure Cultural Continuity

  • Maintain core values. Ensure that the firm’s core values and culture are preserved through transitions.
  • Engage employees. Foster a sense of belonging and commitment among employees to reduce turnover. Implement recognition and reward programs to motivate and retain top talent.
  • Communicate plans. Communicate the succession plan to all stakeholders, including employees, clients and partners. Regularly evaluate the firm’s worth to ensure fair and accurate buy-ins and buy-outs.
  • Have flexible work arrangements. Offer flexible working conditions to attract and retain top talent, including remote work options.

5. Implement Succession Planning Oversight

  • Regularly review and update the succession plan to adapt to changes in the firm’s structure, market conditions and regulatory environment. Develop a merger & acquisition/private equity (PE) strategy and implementation plan that will take the firm to the next level of success by acquiring firms with talented professionals, service and industry expertise, and advisory service capabilities.
  • Align firm strategy and partner perfor­mance by defining the roles and goals of the leadership and management of the firm.        
  • Monitor progress and adjust as needed.
  • Review partnership agreements to ascertain that they reflect the current marketplace.
  • Establish clear performance metrics for potential successors to ensure they meet the firm’s standards and goals.
  • Engage external consultants or advisors specializing in succession planning for an unbiased perspective and expert advice.
  • Form a committee responsible for over­seeing the succession planning process, ensuring all aspects are covered.
  • Ensure a seamless and successful transition, maintaining a competitive edge and client trust through generations.
  • Develop contemporary growth and lead generation strategies to position the firm in the marketplace by targeting the right size and types of clients in specific industries that the firm has the best chances of engaging.
  • Use offshore outsourcing to fuel the capacity for growth and as a retention and profitability strategy.
  • Overcome procrastination by the partners in making the tough business and strategy decisions to take the firm to the next level of success.
  • Periodically discuss the pros and cons of merging into a larger firm with more resources or as a tuck-in in a PE transaction. 
Joseph A. Tarasco

Joseph A. Tarasco

Joseph A. Tarasco, CPA, is CEO and senior consultant at Accountants Advisory Group, LLC. He is a member of the NJCPA.

This article appeared in the Fall 2024 issue of New Jersey CPA magazine. Read the full issue.