The Succession Situation for Accounting and CPA Practices

Succession is a major issue that is not being effectively dealt with by the CPA profession. All you have to do is read the most recent AICPA publication on succession. Almost 80% of the CPA firms interviewed for the survey indicate that succession will be a major issue for their firms in the next 10 years. Fewer than 50% of all multiple owner accounting firms had a written succession plan. These percentages drop even further if you include the smaller firm or single practitioners. Only 14% replied they had a succession plan in place among this group. When considering a succession plan, one has many things to consider and trends are beginning to develop that indicate several new factors that will impact the succession planning and principal exit. These should be considered when starting your succession planning.

1) There are fewer entrants into the public accounting field. Because there are fewer young CPAs coming out of college or industry that have a desire to go into business themselves, larger firms that count on young CPAs buying into the firms partnership structure are finding it difficult to locate hire and train a new generation of CPAs. The success of a longer term and multi-generational succession planning can only succeed if there is a ready supply of young CPAs coming into the firm and buying in.

2) The aging demographics of the CPA and accounting principles are causing an uneven flow of available practices. As the baby boomer population ages and exits there will be an oversupply of firms to sell or principals wanting to exit.

3) Retention based buy/sell agreements are the dominant trend with 1-2 years client retention requirements in the contract. This trend is causing exiting principals to consider staying on with the firm for a longer period of time.

4) Mergers and Acquisitions are becoming the dominant trend and surpassing succession agreements. Instead of the multi-year succession planning that firms have counted on in the past, accounting practice principals are merging or selling their firms instead of using the tried and true succession planning.

The baby boomers are heading into their retirement years. Baby boomer CPAs and accountants are in charge of most of the U.S. accounting firms in existence today. The best time to consider succession is upon entrance but if you are like most you have put off the succession planning because it doesn’t generate income and quite frankly it is hard to get started. If exit is on your mind but still several years away, do not delay! Reach out and find a business intermediary to start the dialog with. Berkshire Business Sales & Acquisitions has been helping CPA and accounting practice principals exit for years. We are happy to begin the dialog and refer you to the most appropriate channel to meet your needs.

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