Succession Planning For a Stress-Free Exit

Succession Planning For a Stress-Free Exit

By Magnus Yoshikawa, Director and Jadeja Partners

The accountant holds an important place in the succession planning of their clients. However, they frequently fall short in the planning of their own exit. This can often be due to “the accountant” not seeing the great value of their firm, no matter the size, as is seen by the motivated buyers currently in the market.


Protect thy practice – “it’s a goldmine!”

Asset maintaining strategies sometimes come up in conversation, although generally we have a tendency to procrastinate difficult decisions, especially those with any emotional attachments. This also is up against the fact many professionals lack the time to focus on themselves.

Looking at the natural cycle of accounting practices will inevitably lead us to consider the divestment stage. At a certain point or age, slowing down and enjoying the transition into retirement with family and close friends is a goal for anyone. As for most baby boomers, they want to manage it all the way to the end, and I might add, in style. But what about the journey there? What if there was some disruption?

1. Communicate: The most crucial step.Converse with business partners, key staff members, and most importantly your spouse and family members – they need to be aware and fully informed.

2. Plan: A simple strategy, even if it is just an envelope, only to be released in an emergency with clear instructions and directions that chart out the process. Include names and contact numbers, not forgetting the solicitor’s. Everyone should be aware of what to do, which will ensure smooth and seamless continuity. Review your plan yearly.

Note: if you only implement two of these steps, implement the first two.

3. Employment agreements: Keep staff and clients by implementing employment agreements with each and every staff member; don’t forget the restrictive covenants.

4. Buddy System: Set up a group of trusted accountants. Don’t forget they have their own business; keep in mind – can your ‘buddies’ maintain your practice as well as their own?

5. Insurance: Life,key man, and income protection insurance to help pay for maintaining the asset while one is incapacitated.

6. Valuation: Conduct a yearly internal valuation (rule-of-thumb, EBIT multiple, etc.) of the practice, clearly indicating each equity holder’s position.

7. Internal succession: Groom multiple candidates with the understanding that their desire to step up may change.

8. Divestment: Knowing your neighbours or interested parties, always weigh money vs. terms. Ask everyone for advice.

9. Buy-out Agreements: Implement a structured agreement with multiple scenarios, although keep it as simple as possible.

10. Ownership: Clearly document ownership to alleviate challenges internally or externally. Being a sole director of a company creates further hurdles.

11. Transfer of ownership: Time lag can push the borderlines of legality.

12. Data: Access procedures by trusted parties (internally or externally) to maintain continuity.

13. Passwords: Ever-secure systems make it harder when one is incapacitated. Keeping in mind that there might be multiple layers, one should focus on: software, ASIC (document retrieval and changes), ATO, and bank(s) (as they may lock the accounts).

14. Protect the family: Prepare a will, make a power of attorney and appoint an enduring guardian. Q. Where is the will? With No. 2.

15. Probate: Be aware of time lag and its disruptions.


As the average age of practitioners begins to increase, we find numerous parties coming to us in the last minutes for a quick divestment. Tragically, prices can plummet if divestment is sought during time of duress and not acted on immediately. Implementing a contingency plan can help protect your asset.


Getting your practice ready for sale

As you would expect, the better you plan and prepare for a practice sale, the better the price. Many of the following activities should be implemented well before going to the market. Some or all of these points would apply to the total sale of a practice, bringing in a partner, or a part sale – that is – sale of a parcel of fees.

Things to do:

1. Presentation of office – the offices should be clean, tidy, well lit and inviting;

2. Proper systems and procedures should be in place to give the purchaser confidence that professional procedures are adhered to and working in the practice;

3. Quality staff and stable workforce;

4. Tighten up on work in progress and debtors – a very critical issue in the sale of a practice;

5. Make sure the practice has a broad base of clients;

6. Have a secure lease on your premises, unless you are selling a relocatable parcel of fees;

7. Reduce dependence on principal personnel and/or partners of the practice;

8. Make sure your practice is profitable;

9. Client information with history – the more the better;

10. Profit and loss accounts for the last 3 years; if more than one entity, prepare consolidated accounts;

11. Create a business plan;

12. Create a marketing plan.


Develop a “Practice Profile”, which should include:

1. History of the practice:

2. Staff information and charge out rates;

3. Computer system hardware and software;

4. Statistics on the number of tax returns lodged, by type;

5. Number of clients by fee ranges;

6. Comments on the ages of clients and the length of time as clients;

7. Range of services provided by the practice;

8. Comments on any specialisations;

9. Notes about any major referrers of fees;

10. Copies of sample client engagement letters;

11. Pro-forma contract for sale of practice.



12. Be ready for due diligence and fully cooperate with the purchaser;

13. Have flexibility in negotiation – remember a valuation is not of itself a negotiation;

14. Proceed with confidence and a positive mental attitude;

15. Finally, consider short-term vendor finance for any shortfall: again, a small amount with some form of security.


Jadeja Partners | Dip Jadeja & Associates, founded by Mr. Dip Jadeja, has been servicing the Australian accounting industry for over twenty years. We have the skills, resources and people to help in every aspect of the succession planning process for accountants Australia-wide.

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