The following article, in which I was interviewed,  first appeared in the online Tax and Accounting Insights publication of Thomson Reuters by Kate Southam on 29 September 2014.  I acknowledge their respective copyright. This article should be read in conjunction with:

• The Drivers of Professional Practice
• Audio interview I undertook in November 2016 on "Considerations in introducing a new partner into your business"  (8.08 min)
• Audio interview I undertook in March 2014 on "Considering life after business" (6.47 min)

Remember how long it took you to build your business, develop client relationships and forge your reputation? To protect all that hard work, the experts advise planning for succession at least five years in advance.

Too often accounting firms only start thinking about succession when a partner signals an intention to retire. Experts advise that the longer a firm leaves succession planning, the fewer options it will have. Planning at least five years ahead of time is highly recommended, but even 10 years ahead is not too soon.

“Succession planning is the sort of advice accounting firms are so good at when advising their own clients. They just need to apply it to themselves,” says Peter Black, a business coach specialising in professional services firms.

He says that if a firm plans to recruit an experienced successor, then it needs to start work about five years ahead of when a partner wants to retire, to give the successor the time needed to gel with clients and other staff. Grooming one of the firm’s young accountants to make partner could take up to 10 years.

“If you are 50 and know you want to retire at 60, and you have a talented young accountant of 30 in your business, you can work with that person to move them from employee to principal or salaried partner and then to equity partner by the time they are 35.”

Both partners will remain in the business for another five years, providing the continuity needed for clients and staff to feel secure. There would also be enough time for the firm to use a vendor finance model to get the young accountant to equity partner before the retiring partner wanted to leave the firm.

“A partner who wants to retire but has made no provisions for succession faces either selling the firm or allowing a younger accountant to buy in via vendor finance. Vendor finance is not preferable because when you are ready to retire you want your money now.”

Finding the right successor

Accountants are recruited into firms largely based on their technical skills, but Black and the chair of the Australian Human Resources Institute, Peter Wilson, say a future partner needs a much broader skill set. These include entrepreneurial skills, leadership capability, the ability to manage and inspire a team and good interpersonal skills to work with clients. The succession candidate will also need to have the right chemistry with clients, staff and the other partners.

Using psychometric testing to assess the values and attributes of succession candidates is a cost-effective way of identifying those with the right values and attributes. Such tests can also pinpoint areas for development. Black says partners then need to involve succession candidates in business development, managing client relationships and strategy planning for the business too. Wilson says firms should consider how to attract strong female candidates from the big firms.

“By the time many of these women are 35, they are looking to dip out of the big firms and find something smaller, closer to home or to be self-employed,” says Wilson. “Offering flexibility and structuring work around people with young families, such as only holding meetings between 9am and 4pm and enabling people to log on from home after 8pm to work, can help firms attract female candidates for partnership who might otherwise be out of their reach.”

Challenges of young talent

Director of Adelaide-based HR and recruitment consulting firm Harrison McMillan, Jodi Walton, says involving young accountants in succession could take some creative thinking.

As many young accountants want to try the bigger firms, work overseas or become entrepreneurs, she recommends firms stay in touch with former staff members to create a pool of talent they may be able to tap into down the track. Use social media and networking to keep in touch with talented former employees.

So as not to waste time or resources, Wilson says firms should sound out the long-term career goals of younger staff to help identify those who aspire to become a future partner.

Waiting until you need a succession plan is too late. Keep succession in mind when recruiting, developing the careers of existing staff and networking with other accounting professionals. Weaving succession into other business activities will make planning easier and help protect the value of your firm over the long term.