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Project Management

6 Ways Small Accounting Firms Can Prepare for Succession

Small accounting firms who neglect succession planning are missing an opportunity to increase the value and marketability of their firm.

For most small accounting firms, especially those with a single owner/partner, a large part of your retirement plan is probably your firm itself, as well as its potential market value when you eventually choose to sell it. Keep in mind that your firms value is in not only present-day revenue, but also what your clients are worth as potential clients to the professional or firm that eventually takes over your practice. 

Sole practitioners and partners of small accounting firms who neglect succession planning are missing an opportunity to increase the value and marketability of their firm while there’s still time.

So, what can you do to help increase the potential value of your practice? And who is your prospective buyer? 

Who Buys Out Accounting Firms and Partner Shares

  1. The Firm Itself: Mid-sized and larger accounting firms may repurchase a retiring partner’s shares.
  2. Other Firm Partners: Firms with multiple existing partners may have first-buy options for other partners who retire or leave.
  3. New Internally-Progressed Partners: Experienced staff within the firm may be given the option of partnership buy-in.
  4. External Buyers: A party outside the firm (such as another accounting firm) may see strategic value in adding the firm’s locations, talent, niches, clients, and technology to enhance their practice.

So, what can you do to prepare? 

Take special note of your firm’s strengths, infrastructure, professional staff, and its clients. 

Whether you plan to sell to another firm, a singular outside professional, or to a junior partner, here are the core assets that matter the most.

Firm Technologies and Workflow

If your firm is running on technology made before 2015, you are running far below peak efficiency, and have lower profitability than you would otherwise. While it’s not necessary to be on the cutting edge of the latest and greatest technology, your firm should at least adapt standard practice technologies, such as a variety of cloud-based applications that make it easier to more frequently and more efficiently interact with your clients. 

These range from cloud bookkeeping solutions and document management to firm workflow tools and secure collaboration tools for sharing financials and tax documents. If a potential buyer sees old technology and an AOL email address, they may assume that other parts of your practice, including client development, have been neglected as well. Keep in mind that the technologies you use can also have a direct effect on the types of clients you attract and represent, as well as how viable your firm may be in the future.


If your firm’s technologies and workflow practices are out of date, there’s a high probability that your clients are too. A firm that still prefers clients to hand-deliver accounting files or produces reams of printed document is unlikely to have efficient clients. While the clients they do have may be providing a stable income for now, the ability of those clients to continue to compete and thrive in their industries may be questionable if they are still utilizing old-school methods. Less effective firms often mirror the technologies and practices of their clients, whereas the most efficient firms help their clients become more productive through optimized technologies and workflows.

Firm Staff

Your firm’s staff is the third pillar.  A firm that is stagnant and refuses to adopt technologies that younger professionals are more adept and productive with will have a difficult time attracting - and retaining - skilled staff. While the new firm owner will ultimately determine workflow practices, firms that have adopted more flexibility in their work environments tend to have higher productivity, which attracts a higher caliber of candidates. 

Firm Services

While there are still plenty of accounting firms that generate decent revenue from tax preparation, the market is becoming less lucrative as more and more individuals turn to do-it-yourself tax systems. While automation and the digitization of tax documents still make tax preparation a viable service offering, and particularly for those serving business entities, many accounting professionals are turning to other services instead. Virtual CFO and cloud-bookkeeping services are becoming a core service offering for many firms, with technologies greatly streamlining write-up and reconciliation tasks. Payroll and benefits services, as well as business planning and strategic consulting services, are also becoming more mainstream, since firms see these services as more profitable and in demand. Accounting firms that have a stable revenue stream across multiple client services - particularly services that are not being commoditized - are more attractive to firm buyers.

Firm Branding

While some U.S. state accounting boards still require the name of at least one partner to be in the name of the firm, most have adapted policies that allow firms to use virtually any name, as long as it is not misleading. Many accounting firms have found success by branding themselves after notable area landmarks, rivers, and neighborhoods. Examples include New Vision CPAs, Cloud Business CPAs, Adirondack Accounting, and New Haven Bookkeepers. By not branding a firm around an individual’s name, the brand itself can still be retained, even through transition/succession.  This eliminates the chaos and client confusion that often occurs when a firm’s name changes.  

Sales and Business Development

Accounting firms that generate too much revenue from only a handful of clients can see extreme financial ups and downs. Stable firms, which are more attractive to buyout, are those with an active and defined sales and business development program that helps ensure new clients are constantly coming on board to replace those that are lost through attrition. While many mid-sized and larger firms have a full-time sales or marketing professional, smaller firms and solo practitioners can still develop a business development plan simply by attending networking events, meeting with area business owners, and engaging existing clients with new services. Firm partners should consider sales and business development a core part of their own job description.

Added Value

Your accounting firm should be invested in the strength and vitality of your business clients, since doing so makes them stronger and your client list more durable. And just as you will eventually move out of your practice one day, the same thing holds true for many of your small business clients.  So, whether it’s preparing for an eventual sale of the business, transition to a family member, or creating a contingency plan in case of the unexpected loss of the principal, a small business contingency plan is prudent and good business sense for all involved. 


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