Grow or Get Out: An Exit Strategy for Firms

Accountants are excellent at providing advice on business succession planning. Too few CPAs, however, take their own advice. When developing an exit strategy for an accountant's own firm, too often it takes the hazy form of selling the practice to a younger partner, or merging with another firm, but not until the owners are ready for retirement.

That's too late. By the time firm owners near retirement age, the value of their firm is likely to have dropped dramatically, for a number of reasons.

First, with a principal on the cusp of walking away from the business, continuity and client retention will drop. Clients will act in their own interest prior to a partner's actual retirement, affecting the market value of the firm. This also serves to diminish the value to any partners who remain active.

Attracting good partners is also more difficult as time goes on. Bringing aboard competent, ambitious young accountants with an eye toward grooming them for succession is difficult if they are going to be forced to wait 10 or 20 years to assume control. More lucrative positions may lure them away.