The Succession Plan Most CPA Firms Write Down and Never Execute

A succession plan for a CPA firm should explain who will take over, when the transition will begin, how ownership will transfer, and what happens if the owner must leave unexpectedly. A written agreement is an important starting point, but it needs assigned responsibilities, realistic deadlines, and regular reviews to become an actionable plan.

You may have discussed retirement with your partners. Perhaps you’ve identified a senior accountant who could eventually take over, or you’ve considered selling to another firm.

But has anyone taken the next step?

A succession plan can look complete on paper while important decisions remain unresolved. The intended successor may not have agreed to the arrangement. The purchase terms may be undecided. Or the owner may have no specific date for transferring responsibilities.

At New Clients, Inc. (NCI), we help accounting professionals explore practice sales and ownership transitions. One useful starting point is reviewing whether the existing plan identifies what needs to happen next.

What is succession planning for CPA firms?

Succession planning for CPA firms is the process of preparing for the transfer of ownership, leadership, and client-service responsibilities when an owner retires, leaves, or becomes unable to continue working.

An effective plan should address five questions:

1. Who will assume ownership or management responsibilities?
2. When will the transition begin?
3. How will the ownership transfer be funded?
4. Who is responsible for completing each preparation step?
5. What happens if the intended transition cannot proceed?

The answers may change over time. That’s why a succession plan should be reviewed and updated rather than treated as a document that’s finished once it’s signed.

Why do written succession plans sometimes stall?

The problem isn’t always a lack of planning. Sometimes owners have agreed on the general direction without making the decisions needed to proceed.

For example, a partner agreement might state that the remaining partners have the option to purchase a retiring owner’s interest.

But it may not clearly establish how the purchase price will be determined, whether the remaining partners can finance the transaction, or when discussions must begin.

Other plans depend on a senior employee becoming an owner without confirming that person’s interest, qualifications, or financial readiness.

These gaps are easier to address before a retirement date is approaching.

What should happen after a succession plan is written?

The next step is to turn the plan into an action schedule.

Consider this hypothetical example of an owner planning to retire in December 2029.

Target date	Action	Responsible party
January 2027	Confirm preferred succession arrangement	Firm owner and partners
April 2027	Review valuation and funding options	Owner and professional advisers
July 2027	Discuss proposed terms with intended successor	Owner and successor
January 2028	Begin transferring selected management responsibilities	Owner and successor
June 2029	Review transition readiness and outstanding issues	All involved parties
December 2029	Complete the planned ownership transition	Parties to the transaction

These dates are illustrative, not a recommended timetable for every firm.

The purpose is to make progress measurable.

If a milestone is missed, the owner should know what remains unresolved, who needs to act, and whether the transition date must change.

What if the intended successor changes their mind?

A succession plan should not depend entirely on one person remaining available.

An employee who initially expresses interest in ownership may later decide against it. A partner may lack the financing needed for a buyout. A proposed merger may not proceed.

Owners should identify an alternative path before these situations arise.

That might involve evaluating other internal candidates, considering an external sale, or exploring a merger.

NCI’s article, Do You Have an Exit Strategy?, covers broader questions about buyer selection, payment risk, and the owner’s role in a sale.

The important point is that a change in circumstances should trigger a review of the plan rather than leave the firm without direction.

Who should be responsible for keeping the plan moving?

Assign one person to coordinate the succession process.

In a multi-partner firm, this could be a managing partner or another designated leader. In a solo practice, the owner may need to coordinate directly with legal, tax, and financial advisers.

The coordinator should maintain a record of:

• Decisions that have been made
• Tasks awaiting completion
• People responsible for those tasks
• Upcoming deadlines
• Issues requiring professional advice

Ownership agreements, buy-sell provisions, valuation methods, and financing arrangements should be reviewed by appropriately qualified professionals.

A written action record also makes it easier to resume planning after a busy tax season or an unexpected delay.

How often should a CPA firm review its succession plan?

An annual review is a practical starting point, with additional reviews when important circumstances change.

For example, a review may be needed when:

• An owner changes their intended retirement date.
• A prospective successor leaves the firm.
• A partner’s ownership interest changes.
• Financing or purchase terms become uncertain.
• An unexpected illness or departure affects leadership.

During each review, check whether the named successor remains willing and able to proceed and whether the timeline is still realistic.

A plan that was workable several years ago may no longer fit the firm’s circumstances.

How do you prepare for an unexpected ownership transition?

A retirement plan addresses an anticipated departure. Firms also need arrangements for events that cannot be scheduled.

For example, what happens if a sole owner becomes seriously ill during tax season?

The firm should identify who has authority to make operational decisions, how client work will continue, and where essential business records can be accessed securely.

Appropriate arrangements may include emergency management authority, continuity procedures, and provisions in ownership or estate-planning documents.

These measures require professional legal and regulatory review. Naming a successor in an informal document does not automatically give that person the authority to own or operate a CPA firm.

When should you involve a potential buyer?

If an internal succession is uncertain, owners can begin exploring external options before they are ready to sell.

Early discussions can help clarify buyer expectations, potential transaction structures, and the information needed to evaluate a practice.

This does not require committing to a sale immediately.

NCI’s practice sale preparation article explains other issues that can affect a firm’s readiness for the market.

By keeping those broader sale-preparation topics separate, owners can concentrate here on the decisions and deadlines needed to move their succession plan forward.

Put your succession plan into action

Succession planning for CPA firms becomes more useful when owners move beyond general intentions and establish clear next steps.

A named successor, agreed responsibilities, workable financial arrangements, and scheduled reviews can help reduce uncertainty. The plan should also provide alternatives if the original arrangement changes.

At New Clients, Inc., we help accounting practice owners explore their ownership-transition and sale options.

If you’re considering retirement or preparing for a future ownership change, learn more about our succession planning services and contact us to discuss your plans.

FAQs

What is the first step in executing a CPA firm succession plan?

Review the existing agreement and identify decisions that remain unresolved. Confirm the intended successor, establish responsibilities, and assign dates for the next actions.

Does a CPA firm need a backup succession plan?

A contingency arrangement is advisable, particularly when the transition depends on one successor. It can help the firm respond if that person becomes unavailable or declines ownership.

Who should oversee succession planning?

A designated owner or partner should coordinate progress, with input from relevant legal, financial, and professional advisers.

Can a succession plan change after it is signed?

Yes, although changes to binding agreements may require formal amendments and the consent of the relevant parties. Review the plan when ownership, staffing, or retirement circumstances change.

How do you know whether a succession plan is ready to execute?

Check whether the parties have agreed on the transition, the necessary funding and legal arrangements are workable, and the remaining tasks have clear owners and deadlines.