Set a High Bar for Successors That Is Achievable

by Ira S. Rosenbloom, CPA (Inactive) | Jun 04, 2018

The need to find the right successor is an ongoing challenge for CPA firms, no matter the size. Many owners who see a successor coming from another firm – through merger or combination – often set the bar so high that it would take an almost messianic experience. Yes, there should be high expectations set for strong leadership, planning, and communication skills. Perfection, though, should not be the goal. Here are four realistic high-bar requirements for optimal succession.

Unified Front

There must be a consensus among the stakeholders to support a transaction with a successor firm, as well as with the goals for combining, the desired profile of potential targets, and any line-in-the-sand issues.

A questionnaire may be a good way to get all the partners on the same page. It would also create a document to refer to later. Enlist a trusted third-party adviser early on to help the team build consensus without damaging egos and relationships.

Firms seeking succession are often intimidated and worried. The consistency that comes from a united front will allow the focus to be on finding the candidates who align with the succession goals. This should promote excitement for the proposition, rather than confusion or fear.

Hearing matching priorities from members of a successor’s leadership team presents that successor as a competent and capable organization that will be able to figure out the right answers to issues that can’t be fully vetted up front.

Present a Vision

You must be able to present an intellectual rendering of what the firm will look like post-closing – even one year after closing. This picture’s details will be touched up while being finalized, but it should reflect vital operational components.

Client transition, staff integration and onboarding, internal review policies, technology conversion and assimilation, communication plans, employee compensation and benefits, billing and collection protocols, and marketing outreach are all attributes that should be envisioned.

Start planning before entering negotiations. The key here is to convey to an interested party how seriously you are taking this, and how committed you are to succeeding.

Be Realistic

A blended firm is different than a firm that expands organically. Each party brings clients of all qualities and calibers. The successor must be comfortable with the composition of the client base joining the firm, and initially welcome the other side’s clients at their historical caliber, especially top-tier clients.

Be realistic as to your ability to handle and service clients. Tackling the capacity requirements early with work flow analytics, production parameters, and demographic evaluations is essential to being honest and realistic about what can be accomplished.

The successor, too, must generate confidence in the other party that clients will be retained, strong staff will stay and grow, and that administrative efficiencies and best practices will prevail. The successor must know what it can deliver, without overselling or overpromising.

Lead Aggressively

The successor firm should not be viewed as a savior; though it should be prepared to be the leader, especially when it comes to setting the tone, cadence, and process of meetings. Meeting agendas and structured follow-up communications are essential.

Let all of the players know what to expect with the flow of actions (the process), including at what point financial terms will be discussed. Declare timing and timelines so everyone knows what to expect. Invite input. Take inventory of open issues and the priorities that may be associated with them.

There will be a lot of emotions during negotiations, so you want to be clear and reduce ambiguity. Also, be clear as to how you are going to make yourselves available to one another during the negotiations.

Succession is, by no means, a one-way street or an easy process. To meet the expectations set, the successor candidate must recognize the need for the transaction to produce mutual benefit, respect the history of the firm seeking succession, and be committed to do the hard work to succeed. The bar is rightfully set high for successors because the stakes – and the rewards – are equally high.


Ira S. Rosenbloom, CPA (inactive), is chief operating executive for Optimum Strategies LLC in Spring House. He can be reached at ira@optimumstrategies.com.
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