Succession Timing Calculator

Content authored by Joel Sinkin and Terrence Putney, CPA of Transition Advisors LLC.

This tool will provide a means to determine when you should start to plan succession for you and the partners in your firm. It is critical to keep in mind that each accounting firm is unique and no tool will be able to take all the issues distinctive to your firm into consideration. That said there is a lot in common between accounting firms of similar size. It is likely much of what you need to know to execute succession for your firm is addressed in this tool. We trust this discussion will at least provide you a starting point.

There are two types of relationships most practitioners have with their clients. Those are:

  • Partner Loyal clients frequently look to you as their most trusted advisor and take longer to transition.
  • Brand Loyal clients are not as concerned about their relationship with a specific partner in the firm, but rather rely on several key people to provide service to them who are likely replaceable in their mind.

The overwhelming majority of a sole practitioner’s client base is Partner Loyal and for the purposes of this tool, it is assumed clients are Partner Loyal. The proper timetable for transitioning Partner Loyal clients is directly related to the frequency of direct contact a partner has with them.

Succession Planning Considerations

When you think about the timing for your succession consider there is a distinction between retiring and reducing your time commitment to your firm. “Retiring” means you are no longer working at your firm, and, therefore, you are no longer interfacing with your clients. We have found many practitioners these days slow down before retiring. The important question to ask yourself, and your partners (if you are a multi partner firm) is not when you want to retire but when do you believe you will start to slow down and commit less time to the firm? For example, you may want to work eight more years before you retire but only work three more years full time. Such a timetable would allow you to gradually reduce your time commitment which can create a powerful transition plan. Knowing this would allow you to use the three years of full-time status to transition your client relationships, and not wait until you actually slow down. The best transitions occur while you remain in your full time role as your clients’ “go-to person”.

The primary issues that are most important in deciding when to start addressing succession for you or other partners in your firm are:

  • The nature of the relationship you have with your clients
  • The frequency of your contact with your clients
  • If your plan is to provide for succession internally, how well-positioned your firm is to provide replacements for partners that will be leaving
  • The size and location of the market your practice operates in
  • How specialized your practice is
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