A successful handover

A recent survey found only 20% of firms feel they have addressed their
succession planning successfully. This implies that 80% feel they have not
addressed their succession planning issues successfully.

I observe all too many firms and individuals who fail to plan for their
succession and in the event try to sell their practice at the last minute –
inevitably ending in tears as the price is often far lower than expected.

You should agree a succession plan as soon as possible, write it into the
firm’s strategic plan and tell staff about it.

Differentiate where appropriate, between succession planning of the ownership
and succession planning of the management of the practice.

Structure the business so that all the assets can be sold separately if
necessary. The liabilities should be isolated where possible, including
contingent liabilities.

Ensure that you have kept an eye on tax consequences of the structuring of
the business before a sale.

Keep good records for due diligence purposes and include all client and
staffing issues, financial issues and compliance with regulation and best
practice. Due diligence issues that often effect the price include: contracts;
malpractice issues; after sale professional indemnity insurance; employee
claims; health and safety; compliance procedures in line with legislation; and
standards of practice.

All of the above are often used to reduce the sellout price.

The prospects of succession within the firm are the most likely course of
action. All key managers and future owners of the business should engage in a
form of professional development programme so the successors are qualified to
take on the management of the business.

Verify, annually, the accuracy of the succession plan and reconfirm that it
is still appropriate.

The wiser firms always have an option to retain the services of the selling
partners. This option is very important for the new owners and normally entails
the retention of the retiring partners for a minimum of six months, though this
may be cut once the new owners have settled in and got to know the clients.

Start the planning process now. Ensure that retiring partners are looking
forward to retirement and therefore committed to the plan.

Finally, this is a prime example of ‘do as I say, not as I do!’ Accountants
should take care of their succession as they would their own clients.

Gordon Gilchrist is a consultant at 20/20 Innovation Group