How to Establish a Succession Planning for an Accounting Firm through Key Staff Acquisition
With the average age of public accounting practitioners in Australia being well over 50, the questions that practitioners are having to contemplate is, ‘how exactly will they succession manage their practice and who will buy their practice?’.
In fact, a study by CPA Australia shows that many public accountants have already asked themselves this question with around 42% of CPA members planning for a ‘succession event for the practice in the next five years’.
- Sale of a Fee parcel
- Outright sale of the firm
- Sale to existing partners
- Internal succession
- Introducing new partners
- Orderly winding up
In fact, the CPA Australia recommends that accounting practices should be planning for the ultimate sale of their firm – irrespective of whether the firm expects to be in practice for 3 or 33 years. There are many areas to consider when developing a succession plan for your practice, but we are going to focus on those relating to Human Resources and Staffing.
The profitability of your firm and ultimately the capital value in a sale will be linked to work management efficiency. The more productive and effective your accountants are the more profitable your practice will be. The CPA Australia suggests that a major reasons for poor work efficiency in accounting practices is due to a lack of the right staff mix.
They go onto suggest that the ideal staff mix for a practice would include the following staff in the following ratios: Partners X 1 , Managers X 1 , Intermediates and seniors X 2 or more, Graduates X 2 , Bookkeepers and support staff X 1 or more. This gives you a partner/staff ratio of at least 1;7, which is what the CPA suggests is the ideal level to enable ‘good staff leverage’ and to enable your practice to drive profitability into the upper quartiles.
So, one of the key things you should do as a public accounting firm principal looking to effectively plan and manage the succession of their firm, is to review the staff mix as it could be preventing your firm from achieving maximum profitability.
If you do discover that your staff mix is off kilter then ideal then you should look to address these problems during your next round of recruitment. However, considering the talent scarcity in Australia, particularly in the areas of finance, it is both ours and the CPA’s recommendation that CPA practitioners should always be on the lookout for good quality staff. This is because it can help your business if you hire scarce senior staff at the point they hit the market place. This policy will also compel your practice to adopt a growth mentality which should lead to greater profitability and increase the sale and succession value of your practice.