Next up: Preparers discuss their succession plans

Most tax preparers have worked hard to build a practice and want to pass it on in good shape — and to the right person. That’s easier said than done, sometimes. Even though they might not want to think about it as a necessary part of doing business, what’s the average preparer’s succession plan?

“Die at my desk,” said New York Enrolled Agent Phyllis Jo Kubey. “Just kidding. I’ve made preliminary inquiries to some firms that purchase and sell accounting practices. I’m also looking to develop relationships with younger colleagues who would be a good fit for my clients.”

“Die at my desk,” said Daniel Morris, a senior partner at Morris + D’Angelo CPAs in San Jose, California. “No, not really – that would ruin work papers.”

Finding new young staffers to groom as potential owners is tough. “Most CPA firms are small, duplicative of their nearby neighbors, lack innovation, are stale, and but for the important fact that they deliver consistent services that equate to an effective annuity, have little driving interest for young people to invest,” Morris said.

“I’ve worked many long hard hours to build my business and reputation, and am always on the lookout for someone who shares my commitment,” said EA Debra James of Genesis Accounting & Management Services, in Lorain, Ohio. “While I’m looking, I’ve made sure that I have a sound financial plan.”

‘Virtually insolvable’

“Succession planning remains a pressing issue for most firms, as it has for the past decade and will continue for at least another 10 years,” according to a recent Rosenberg Survey. “External issues such as the aging of Baby Boomers and shortage of talent are fueling succession planning challenges. But a major contributor to the problem is firms continuing to focus on client production at the expense of developing talent, making the succession planning conundrum virtually insolvable for 80 percent of all firms under $10 million.”

Bob Lewis, president of The Visionary Group consultancy, painted an even starker picture in his recent article “The grim reality of succession planning.” Among his points: half of firms have no clue how to exit; about one in three think they have a plan (“On paper with names, but there are no execution steps …”) and only 20 percent have a functioning plan.

“I have no real succession plans at the present time and am not sure if I’d sell my practice separately,” said Morris Armstrong, an EA and registered investment advisor at Armstrong Financial Strategies, in Cheshire, Connecticut. “I love my job and have little intention of ever selling. It would be a good idea to develop a relationship with another practitioner and have my executor refer my clients to them. The point is not to leave the client high and dry.”

AT-031819-Succession Planning as an issue in 2019


Preparers have different ways to look ahead to passing the baton. “As my long-term goal, I’m working towards having my practice and staff in a viable position for a potential buyer,” said Twila Midwood, an EA at Advanced Tax Centre, in Rockledge, Florida. “This includes diversifying our services so that we are not just locked into individual/business prep.”

Terri Ryman at Southwest Tax & Accounting, in Elkhart, Kansas, has been in contact with a practice broker for about 15 years. “He’s been giving me pointers so that my practice will be more marketable when I finally decide that it’s time to retire,” Ryman said.

“I merged with a larger CPA firm and I am now am back on my own,” said Gail Rosen, a CPA in Martinsville, N.J. “For me, if I’d merge into a larger CPA firm again, it’d be at a time in my life when I’m closer to slowing down.”

“Should something happen to me before I’m ready to sell, I’ve discussed this possibility with a colleague who’s offered to assist in selling the business,” Midwood said. “I have documents, in a secure location that the family is aware of, that detail important and secure information necessary to run the business with as little interruption and angst as possible until it’s sold.”

Bruce Primeau, a CPA at Summit Wealth Advocates, in Prior Lake, Minnesota, has worked with the company FP Transitions to develop a plan. “We’ve already begun transferring ownership to the next generation,” he said. “Our plan is to continue hiring young, energetic individuals who are interested in an ownership opportunity in the not-to-distant future.”

Morris + D’Angelo’s succession plan involves growth through strategic alliances, incentivizing “new or other voices to join, understanding that ownership and leadership are different and ultimately likely an ESOP of some form,” Morris said. “I’m 58, my co-founding partner is 73 and down to three days per week. My youngest technical partner is 52. My next real emerging leader with real potential is 42. We’re looking for more innovative youth and will home-grow them.”

No matter if it’s an outside buyer or an up-through-the-ranks successor, one characteristic seems key in the next generation of a practice’s leaders.

“I’ve been willing to sacrifice,” James said, “to save for the day when I take my leave from the business I love and live a comfortable life — and allow someone to take the reins and make what I started even better.”

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