Passing on a Legacy: The Difficulties of Implementing Proper Succession Planning

*This blog post is part of a series featured in NCACPA’s quarterly publication, Interim Report.*

By David Peters, CPA

We are often identified with the work that we do. If you have ever been to a cocktail party, you know this is true. After you’ve shaken hands, one of the first questions that usually gets asked is “What type of work do you do?” Our occupation gives us a sense of identity. Our work, in many ways, is who we are. Perhaps nowhere is this truer than in the case of business owners who have built their companies from the ground up. Speaking as someone who helped start two companies, I can tell you that whether it is a small mom-and-pop store or an international conglomerate, you are inextricably linked with a business that you start or spend a significant portion of your career with. Your fingerprints are forever on the character of the company, and the company’s success is closely tied to your own.

Perhaps this closeness that business owners feel toward companies they start is the reason why succession planning is so tough. Over the past few years, several articles have been written condemning accounting and other financial services professionals for their failure to plan for their business’s future. For example, in a recent survey by the Global Accounting Alliance, it was discovered that while 78% of accounting practices had identified suitable future business owners, only 53% had offered ownership partner training to them (Knafo & Dennis, 2014). In other words, while a majority of accounting firms recognized the need to plan for the firm’s continuation, the practical steps of implementation had often been neglected. An AICPA survey of 500 multi-owner firms and 400 sole practitioners contained similar results. A majority of senior partners (60%) said that they were training for specific competencies in leadership-targeted staff, but only 15% of practices had identified specific leadership requirements (Amato, 2013). That is, many accounting firms are training for leadership, but without a clear goal of building successors. From these results, it seems clear that leaders within the profession are struggling to take proactive steps to protect the long-term viability of their firms.

However, to be fair, proper succession planning is not easy to execute on. There seems to be very little consensus on what good succession planning looks like. For example, a recent article in Forbes said that the key to good succession planning was a well-thought-out approach. Business owners should engage all stakeholders, thoroughly assess all internal candidates, and even conduct stress tests and simulations (Miles, 2009). Contrast this with a similar article written for Harvard Business Review, which urged simplicity in succession planning, and more of an ongoing approach (Goldsmith, 2009). Both articles come from reputable sources and sound reasonable, yet both come to very different conclusions on what business owners need to do to successfully plan for the next generation of leaders to take over. It is no wonder that partners and owners within the accounting industry are left standing in the middle with no clear direction on how to make their succession goals actually happen.

I don’t have an easy solution to offer either, but based on these mixed messages, I do think some important observations can be made. First, succession planning is multi-faceted. It goes beyond just training exercises, and hits on all aspects of the business (incidentally, this is probably why it is so difficult to identify where to start.) Second, while there are some technical aspects to succession planning, such as how to properly structure a buy-sell agreement, how to purchase insurance on key employees, and how to get the most value from a small business, these are the easier parts. The more difficult areas to address are the non-technical aspects of the issue. How can a long-time business owner step away without eroding the client base of the firm? What qualities are essential in a successor? How does a business owner stepping away affect employee morale? We may take the time to evaluate a potential successor’s technical competencies, but what about their fit within the organization? How do you know if a successor fits your company culture? These questions are not meant to discount the importance of nailing down the details of a properly constructed buy-sell agreement. It is simply to say that it is probably more difficult to pin down concrete answers to these non-technical questions. Addressing these issues in a thoughtful way though would seem to be imperative to a successful transition from one leader to another.

This column will attempt to explore the elements of successful succession planning from both a technical and non-technical lens in upcoming issues. It will begin with the fundamentals. It will touch on the nuts-and-bolts basics of how to properly structure the technical details of a succession plan. From there, we will move to the issues that have less clearly-defined answers. The goal will not so much be to provide answers. As validated in the examples cited above, there are not too many universal answers to be found. Rather, the goal will be to simply frame the issues and figure out the right questions to ask. In short, if you know the right questions to ask, the answers pertaining to your unique business will become clear. This does not mean that all the challenges to succession planning will disappear. However, with a clearer understanding of the issues and questions, the implementation issues will hopefully seem less difficult to overcome.

Works Cited

  • Amato, N. (2013). Succession Planning: The Challenge of What’s Next. Journal of Accountancy, 215(1), 44-47.
  • Goldsmith, M. (2009, May 12). 4 Tips for Efficient Succession Planning. Retrieved from Harvard Business Review Website: https://hbr.org/2009/05/change-succession-planning-to/
  • Knafo, J., & Dennis, A. (2014). Succession Challenges for US. CPA Firms to Tackle. Journal of Accountancy, 218(5), 54-59.
  • Miles, S. A. (2009, July 31). Succession Planning: How To Do It Right. Retrieved from Forbes Website: http://www.forbes.com/2009/07/31/succession-planning-right-leadership-governance-ceos.html

The information discussed herein is general in nature and provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Nothing in this article constitutes an offer to sell or a solicitation of any offer to buy any type of securities.

Registered Representative of and securities offered through Cetera Advisors Network, LLC, Member SIPC/FINRA. Advisory services offered through Carroll Financial Associates, Inc., a Registered Investment Advisor. Carroll Financial and Cetera Advisors Network, LLC are not affiliated.


David Peters, CPA, is the Strategic Relationship Manager and Financial Advisor for Carroll Financial Associates, Inc., in Charlotte. Prior to his current role, he was instrumental in establishing two start-up companies—Elephant Insurance Services and Compare.com. David has over ten years of experience in tax preparation, finance, and insurance, and holds four graduate degrees, including an MBA in investments from Virginia Commonwealth University and a master’s degree in taxation from the University of Illinois. He is also an adjunct professor in accounting, insurance, and ethics, and is a doctoral student in financial planning.