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Strategic timeline for a retiring CPA firm partner

What you need to do to be ready

Gary Adamson, CPA | December/January 2018-19 Footnote

Baby boomer retirements continue at a fever pace in our profession, and the demographics suggest that we are not quite halfway through the process. Time is not our friend; many firms are not starting the planning process early enough for success.

While plans for partner transition can fill the entirety of this magazine, here's a brief and visual overview of the milestones your succession plan should reach as you look at retirement.

Four to five years out

Address these foundational questions

  1. Make sure you and the firm have a partner succession plan in place. This is not typically addressed in your operating agreement.  
  2. Are the financial aspects understood and the firm agreements up to date? The structure of the buyout is important, and many firms have not updated their agreements or approach for many years.
  3. Know the anticipated retirement date. Some firms are using a mandatory retirement age so the firm can plan for partner retirements and client transitions.
  4. Assess your bench. Do you have future leaders coming up in the firm? Finding lateral hires to replace you late in the game is seldom the answer.  

Two to three years out

Develop the plan

  1. Stratify your clients into four groups:
    1. Whales (large relationships critical to the firm)
    2. Large business accounts
    3. Small business accounts
    4. Standalone individual accounts
  2. Design a client-transition plan for each group understanding that the whales and large business accounts will require significant duplication of effort (shadowing) at the partner and manager level.
  3. Begin establishing multiple touch points (relationships) in the firm with your large business accounts and whales.
  4. In addition to the client-transition plan, also establish plans for:
    1. Transitioning your technical or industry knowledge.
    2. Getting the work done -- replacing the hours. This is an opportunity to examine opportunities to leverage the work differently.
    3. Filling any voids left in firm leadership. Don't forget things like rainmaking, people development and other significant contributions to the firm.
  5. Plans are in writing with dates, expected milestones and defined success factors.

Two years (minimum) to your retirement

Execute the plan

  1. The plan is set in motion working toward the final goal of transitioning all client relationships and firm responsibilities by the retirement date.  
  2. Shadowing on the whales and large business accounts begins.
  3. The team approach to serving your clients with multiple firm contacts is in full swing and the retiring partner pushes others out in front.
  4. The firm (usually the managing partner) drives the transition process and meets with the retiring partner at least quarterly.
  5. Internal and external announcements are coordinated, and clients understand that there is a transition process underway.
  6. The firm maintains the level of the retiring partner's compensation through the transition process.  

Retirement date

Congratulations! You have arrived!

  1. It may seem counterintuitive, but if you have done it well, you have successfully "worked yourself out of a job."
  2. Is there a spot for you with the firm post-transition? The answer in many firms is yes, with the following points:
    1. It is not continuing to manage client relationships.
    2. It is usually to perform specific tasks, such as help with tax season review or new business development.
    3. It is paid on a per diem basis (not salaried).
    4. It is renewed annually at the discretion of the firm.

Gary L. Adamson, CPA is the president of Adamson Advisory, "The Partner Advisor for CPA Firms." You may reach him at 765-488-0691 or gadamson@adamsonllc.com.