Who’ll Mind the Store?

Growing up, there was a neighbor down the block who owned a small market that sold food and other sundries. He was the sole owner and, since the store was open six days a week, I rarely saw him except occasionally in church.

He and his wife had no children, so as he was getting ready to retire, he planned to sell the space to a larger chain and retire to a community near Sarasota, FL. As cruel as fate can sometimes be, he was felled by a massive heart attack, leaving his widow to handle the transition. Unfortunately, I have only a fuzzy childhood recollection of what happened next, but something fell through the cracks and ultimately, the store was forced to close. His wife moved away and we never saw her again.

I was reminded of this sad — but hardly isolated — tale when the PCPS Section of the American Institute of CPAs released its 2012 Succession Survey this week. This survey is the institute’s quadrennial poll that gauges the succession readiness quotient of both multi-and-sole-owner CPA firms.

While the results are certainly more encouraging than those of the 2004 and 2008 studies, I still found the numbers disturbing as to the degree — or rather lack of it — that firms have taken the time to craft and implement any type of succession plan.

But since the majority of you deal in numbers, let’s look at some.

Among the 509 multiple owner firms that participated, nearly 80% expect succession planning to be a key issue within their practices over the next decade. Almost half (46%) said they have a succession plan in place versus just 35% in 2008, and among firms with 50 or more full time employees, more than half have a succession plan.

That’s the good news.

The bad news is that for firms with fewer than 15 full-time employees, more than 70% do not. And of those that do, just 19% revealed that little or no progress has been made to implement it.

Among the 428 solo practices included in the 2012 study, a scant 6% admitted to having a practice continuation agreement allowing a takeover in the event of death or disability by another sole proprietor. And just over 40% of sole-owner firms are considering one of the following options: a plan to merge within 2-4 years; a reduction in their hours until retirement and subsequently selling their practices; or, actively looking for a buyer for their client list and staying on just long enough to help with the transition.

To access the survey, click here.

As in the case of my neighbor, or the 2012 study, if you haven’t already, you had better plan now or roll the dice later.

And as we’ve seen countless times in any industry, that strategy usually comes up snake eyes.