Succession Planning- Part Two

In Part One we looked at the reasons behind wanting to exit your practice. In this second feature we will assume you want to go ahead and the objective here is to ‘drill down’ into the detail in order to help you achieve your goals. This article is all about planning and the practical issues you may need to address.

Overview checklist

  • How do I know what I need to look at. Key areas-lock up (WIP/Debtors/cash).
  • How do I find the time to address what needs to be done.
  • Know your clients and where your fees and profit come from. How do I easily get this information.
  • What makes my practice special-how to be objective.
  • Identify unattractive ‘bad’ clients.
  • How dependent is the business on me and why this matters.



  • Start with knowing your existing gross margin and identify which clients return higher margins and which are the lower contributors
  • Pricing- is your pricing ‘right.’ • Review and clear out old and irrecoverable Work in Progress which may be ‘enhancing’ what you think your current gross margin is.
  • Where partners spend time on compliance work, ensure their time is booked and reflected in a true gross margin measurement.
  • Production systems- do you have any and how do you monitor them?
  • Budgets for all jobs-essential.
  • Planning on all jobs-essential.
  • Allow for reasonable training time.
  • Manage over-runs in real time. Talk to client at earliest opportunity where job is taking longer than budgeted and agree extra fee.
  • Learn from mistakes so they don’t recur- re; pricing/budgets/over-runs. • Invest training time and monitor results - this improves staff retention and increases efficiency and margin in the long run. • Use a work planner to drive efficient production systems.
  • Perform a ‘time and motion’ study with individual staff members to agree available chargeable time and work production rate.
  • The above ‘magic 13’ steps will guarantee a rapid increase in gross margin and profitability

Succession Planning - Part One

Key questions to ask yourself before planning your succession and exit strategy from your practice

  • Be sure of the reasons you want to sell your practice. Are you being driven by emotional factors due to current stress, workload, long hours, staff issues, difficult trading period etc.?
  • Options available to you- external sale/merger or internal plan to bring on existing team member to buy you our over a period of time or recruit new potential partner?
  • Realistic timeframe and have you the time needed to devote to the process?
  • Set a realistic ‘price’ and know the amount you need to retire/exit in conjunction with personal financial and future plans.
  • Examine your existing business as if you were a buyer. Identify the weaknesses and draw up a plan on how to eliminate these.

Dealing with late payers

• Revenue is vanity....margin is is king. (Unknown)
• Profit is an illusion, cash flow is fact. (Unknown)
• Profits are an opinion, cash is a fact. (Unknown)

The above quotations were given to me some years ago by different clients in businesses who were small business owners. These businesses had suffered hugely due to late payers and both businesses nearly went into insolvency. Thanks to the right kind of action taken at the right time, both businesses survived. I want to share some examples from their experiences which will help you deal with late payers in your own business.


how to get the most out of client meetings

How often do you have a client meeting where the following happens ?

  • The client is late or sometimes doesn't turn up at all
  • You are running late and leave the client waiting for a while before you are ready to start the meeting.
  • When it does start it goes on for too long
  • Much of the time is spent trawling through audit and account queries and trying to finalise accounts
  • You are apprehensive about having to talk to the client about fees and debtors and often avoid or 'forget' to !
  • You rarely generate any extra work from the meeting and see it as 'something that has to be done.'
  • There is no real format to the meeting and you end up spending a fair bit of time chatting about nothing in particular.
  • You end the meeting not really knowing if the client is happy or not.
  • Once the client has left you kick yourself for 'forgetting' to talk about things that you had planned to but didn't get round to it or feel comfortable with mentioning.
  • You then don't get around to writing up your notes from the meeting to give to staff or send anything to the client.
  • You don't follow anything up with the client after the meeting and think 'well that's that then for another year!'

Ring any bells with you? 


Practical tips on managing your cash flow and getting clients to pay

There is one major issue that all practitioners seem to have at the moment and are asking for help with. This is cash flow. We all know that 'cash is King' and the lifeblood of all businesses, yet many practitioners are finding it a challenge at the moment and are having problems with clients paying for work done.


How and when will I retire?

Now that summer holidays are upon us and many practitioners are struggling to manage just 2 weeks away from the office, many are also saying they can never see the time when they can permanently extract themselves form the business.

I am not attempting to go through the specific logistics of a sale here as there is enough written on that subject. What I want to set out here is a help sheet on how to ensure practitioners are planning ahead and preparing for succession in general. My experience has shown that the main criticism of any 'buyer' is that the outgoing partner had not spent time in planning for their exit and the practice is therefore worth less and is also less attractive to any buyer. Why sell yourself short when you have spent a lifetime in building your practice ?

If you were planning to sell your home you would both clean, tidy and do a bit of DIY to show it in its best light- so why not do the same when thinking of disposing of your own business ?


How to recruit and retain the right staff

OK- you have by now read this series of articles and have a business plan, a marketing plan, improved your gross margin, managed your own time and feel life should be good ! Why then can't you find or retain the right people to work in your firm ? They broke the mould when they made you and the younger generation just aren't made of the same stuff as you ! If any of that strikes a chord with you then read on.


How to win new clients

Many smaller firms of practitioners ( up to 4 partners and 20 employees) talk about marketing and needing to win new business but often think they are too small to have a marketing plan.They hold the belief that they can't afford to fund a marketing campaign like the larger players and therefore approach the whole concept of marketing in a haphazard way. No wonder then why results seem to be poor and difficult to measure !


Erosion of Gross Profit in a recession

Practitioners are reporting increasing pressure on how to maintain or improve their gross profit margin in challenging times when clients are demanding higher levels of services and often are reluctant to pay their bills.

How often have you asked yourself 'Why am I working so many hours but have so little cash and am not making enough money?'

The more successful accountancy firms adopt the following strategies which have proved to work in increasing gross profits and of course make a direct impact on their bottom line and cashflow. Most of these strategies are basic housekeeping and best practice - all of which are very easy to implement and are what I call 'quick wins.'


How to plan for the New Year - What do you want to achieve?

Whilst the rest of the world celebrates New Year at midnight on 31st December, I know many practitioners who defer their real celebrations until 31st January and then immediately take off on holiday to recover ! Whatever date you celebrate a new start to another year in business I wish you the best of success and good fortune in achieving your goals in 2011.

I think this is the best time of year to reflect on where you are now compared to 12 months ago and where you want to be in 12 months time. Have your plans changed or did you even have a plan to begin with ? Many practitioners I know have asked that I summarise a helpful 'top tips sheet' to help them review and set a new business plan. Without such a plan you are less likely to be able to achieve what you want,work out the 'how to 'element and measure your progress ongoing.


How to use the tax return season as an opportunity to increase fees and client service levels

Less than 3 weeks to Christmas and how many tax returns have you still to complete ? Finding it difficult to track down clients for missing information and dread to think how you are going to complete the outstanding workload in the time available ? Clients seem to be increasingly grumpy ?

Read on if any of the above strikes a chord and see what you can apply in your own practice that may bring some welcome relief !


How to manage your time in tax return season and keep control of your sanity!

Well.....Summer is now a distant memory and thoughts are turning to Christmas already. This means that panic for many practitioners is beginning to creep in and I hear cries of 'I can't possibly think about business strategy or business planning until the 31st January has passed !'

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