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Respect the wisdom of our forefathers…with a little tweaking

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September 26, 2011

While at lunch the other day with a couple of very cool sole practitioner grandpa CPAs, I learned one very interesting tidbit—succession planning doesn’t seem to be a priority (at least not within my focus group of two that day). Now, to be sure proper respect is applied here, the term “grandpa” is used only in reference to experience and is not proposed to be insulting in any way. After all, grandfathers in general are kindly thought of as wise and insightful. I know I certainly feel that way about my own father (who has reached the grandpa CPA level). And while being wise is certainly a laudable quality, let it be respectfully said that even the wisest of professionals sometimes require a bit of insight themselves.

So back to lunch…the “tidbit” I picked up after speaking with my experienced colleagues was that neither of them had spent much time on succession planning, and didn’t necessarily view it as a priority. In fact, many of the older CPAs I’ve talked to have made little to no preparation for firm succession.

There is something very wrong with this picture. Planning for retirement is one thing, but what if you suddenly take ill, or worse, pass away? What will your employees do? What will happen to your clients? What will your family do? And trust me, simply talking to your spouse about who they should call in the event of such an emergency is not a plan.

Think about it. In the event of an unexpected tragedy, your family can’t begin to deal with transitioning your business—mourning and grief tend to override everything else. What would your family do with your 200,000-plus book of business? How would they manage staff, transition responsibility, keep the firm operational? This is where a solid transition plan can take away these pain points.

I will also tell you that I know firsthand the harm that comes from not having a plan in place. Just last year I was deeply involved in a firm where the owner had suddenly passed away. With no formal plan, the firm quickly began to fall apart. It was hard to watch and has left a lasting impression on me. Eventually, I moved on. It all could have been avoided with proper planning.

I am a professional interested in helping others successfully plan their transitions, and I have some fresh new alternatives in mind. If you want to hear more, shoot me an email at Jody@newvisioncpagroup.com. I would love to discuss my new ideas with you and hear your thoughts on this critical subject as well.

Jody L. Padar, CPA, MST, is a Certified Public Accountant experienced with Complex Federal & State Income Tax Compliance for Business & Individuals. Jody is an adjunct professor at Oakton Community College, where she teaches Taxation and QuickBooks Courses. She is part of Intuit Trainer Writer Network and speaks nationally on various Technologies and Taxation. She can be reached at www.newvisioncpagroup.com.

 

Comments (6)
The Exit Planning Institute (www.exit-planning-institute.org) has a number of free resources at http://tinyurl.com/3vpfoy4 . EPI specializes in educating financial professionals to work with small and medium-sized business owners interested in putting together exit plans. The National Association of Certified Valuators and Analysts (NACVA) also has a monthly newsletter that covers "Exit Planning" and "Succession Strategies" quarterly http://www.nacva.com/QuickReadSearch/ - search using those options from the pulldown "Categories" options.
Posted by davedix | Wednesday, September 28 2011 at 10:45AM ET
The Exit Planning Institute (www.exit-planning-institute.org) has a number of free resources at http://tinyurl.com/3vpfoy4 . EPI specializes in educating financial professionals to work with small and medium-sized business owners interested in putting together exit plans. The National Association of Certified Valuators and Analysts (NACVA) also has a monthly newsletter that covers "Exit Planning" and "Succession Strategies" quarterly http://www.nacva.com/QuickReadSearch/ - search using those options from the pulldown "Categories" options.
Posted by davedix | Wednesday, September 28 2011 at 10:33AM ET
As always Ed comes to the rescue with a document. Thanks Ed! My point was that the document is not a PLAN. At what point does a "Grandpa" detirmine he needs a plan, after he is diagnosed with Cancer? That isn't going to protect the asset. Innovation is key here and I think I might have the solution.
Posted by jodypadar | Tuesday, September 27 2011 at 12:48PM ET
A great point Jody! A Practice Continuation Agreement (PCA) for sole practitioners is an excellent concept. The flaw is people use it as a succession plan when what it is more like is an insurance policy. A succession plan calls for an orderly transition of the relationships. A PCA is predominantly for emergencies caused by unexpected death, temporary or permanent disability. This link brings you to an article on what should be in your PCA and how to make them successful: http://www.transitionadvisors.com/articles/who_would_run_your_firm_joa_february_2011_copy1.pdf
An excellent idea for a succession plan for small practitioners would be this link to another article: http://www.transitionadvisors.com/articles/two_stage_deals.pdf
Posted by jsinkin | Tuesday, September 27 2011 at 8:11AM ET
I have a practice continuation "kit" posted on the ATI website. http://www.accountingtoday.com/pdfs/ATI_PracticeContinuation_Death_Disaster.pdf
Ed Mendlowitz
Posted by emendlowitz | Monday, September 26 2011 at 11:16PM ET
I am interested in setting up a practice continuation agreement with a similar firm but I have not really found any good resources like a sample agreement. Do you know where we can find these types of resources?
Posted by Donna B | Monday, September 26 2011 at 7:16PM ET
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