Two Blueprints for Succession Failure

When it comes to facing succession and ownership transition within CPA firms, experience has taught me there are two types of practitioners – those who are proactive to securing their next generation of leaders and those who continue to procrastinate despite repeated efforts to convince them otherwise.

Cases in point.

Late last week I was speaking to an owner in his mid-60s who runs a CPA practice in the Northeast. He has no succession plan, nor has he taken anything but cursory steps to rectify his situation. I had him meet with several firms and not surprisingly he found something he didn’t like in each – mind you nothing that could not have been easily overcome.

In fact, in one of his meetings, he deliberately put his feet on the desk of the managing partner and told him he didn’t want to go from owning a firm to becoming an employee.

That would be the Webster’s official definition of making a wrong impression. Trust me, I heard about it chapter and verse afterward from the buyer firm. I said when something like that happens, it’s obvious he wasn’t the least bit interested from day one.

Not to be outdone, earlier I had visited a long-time client, who, as he approaches 70, continues to log ridiculous hours when at that period in his life he should be more concerned about lowering his handicap.

Instead, he comes into the office on most weekends even during the 1040 off-season. His daughter also works at the firm, but the owner told me in all honesty that she lacks the requisite leadership and business development skills to pilot the practice into the future as do several of his long-time senior managers.

In essence, his “bench” is empty, effectively ruling out any possibility of an internal succession plan.

So, I addressed the elephant on the room by recommending the “M” strategy – merger.

By his reaction you would have thought I asked him to sign over his capital account to me. Without disclosing the colorful language that ensued, which would unquestionably have earned an NC-17 rating if it were a movie, it’s fair to say that he was less than enthusiastic about the idea.

“Just find me a young guy or gal (sic) and that will solve any succession problem we may or may not have,” were his marching orders.

It was a sure-fire strategy with one glaring exception.

Some 50,000 or so firms across the country are searching for the same exact thing – what we like to call “The Holy Grail” – a young “high potential” CPA with the requisite skill set to assume the leadership reins of a succession-starved practice. Unfortunately, many firms with far greater resources than were at my client’s disposal had hired nationally known recruiters to help them find just such a person.

He remained defiant to the idea of merging with a larger firm and said he had to get back to work. Call me skeptical but I doubt that our conversation will pick up again anytime soon.

Each firm suggested I call them in two years. I said I would, but at this rate I seriously doubt one or both will still be standing.