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.

Practicalities- how to solve the above potential issues

  • The age old adage holds true- ‘cash really is King.’ Print off a detailed report of work in progress and aged debtors. Set aside time to rigorously look at both by client and decide what you are going to bill as well as how you are going to eliminate slow payers. This will involve having to talk to each client to agree how they will settle old debts as well as agreeing how and when to bill out previously unpaid time and get that paid too. At the same time you need to talk about putting the client on a fixed fee agreement to avoid similar problems arising ongoing. The best starting point is for those clients who you are about to meet (put it on the agenda for your meeting so you don’t ‘duck out’!). Also ensure any job you are about to plan or start isn’t an opportunity missed to attend to this housekeeping issue. Next look at the larger clients and work your way down the client list. Phone calls work well. Most clients will welcome the transparency and certainty in managing their own cash flow with regard your fees. Once you start the process you will see an immediate positive impact on cash flow and this will motivate your further. Make sure you tell your staff what your new policy is.
  • ‘I know the theory but simply don’t have the time to deal with this!’ is a common claim by practitioners. The solution is to make the time by seeing it as an important an urgent exercise. Set aside just 30 minutes a day to start the process. A systematic and consistent approach will mean you contact up to an additional 10 clients a week in addition to those clients who you have meetings scheduled with or contact for planning the start of jobs etc. Engage your senior staff in this process too as they can deal with smaller clients once they have ‘shadowed’ you talking to a client and see how you handle the process. The vast majority of firms have addressed this process for 90% of their client base within the first month. Small amounts of time booked out in your diary for ‘practice management’ ongoing is the key to success.
  • Do you really know your client mix and who generates what level of profit? Print a report by client showing fees earned in the last 3 years. Strip out exceptional items. Look at who is on a fixed fee and at what level. Complete a ‘windows of opportunity’ spreadsheet by client. Highlight any clients ‘pregnant’ with gain in terms of extra services that can be provided. Analyse by client what the Gross Profit margin is earned on each type of service. This is basic key financial management information that any prospective partner or buyer would expect you to be looking at every month as part of managing and monitoring your own business. No doubt it will highlight some facts that will surprise you too!
  • The majority of practitioners believe they provide excellent client service. But shouldn’t this be an industry given? No client expects to receive anything less surely! Client service alone isn’t enough to set you apart. Technical competence, meeting deadlines, regular client contact are all the norm too from a client’s perspective. The phrase ‘proactive’ is also used too freely without really knowing what it means in practice. Take a step back, ask your staff and clients ‘what is it that makes us special as a firm?’ Collate the answers and see what it tells you. Again, this exercise will highlight some unexpected results and guide you on what you need to do.
  • This is your golden opportunity to ‘grade’ your clients and identify which are the ‘bad’ ones. Slow payers, poor records, rude, always late in responding, never need additional services, risky business sectors, high incidence of HMRC problems or enquiries, never appreciative of what you do, argues about fees….we all know which clients fall into this category. You need to highlight them as they won’t be attractive to a third party either. See which clients you can ‘manage and move up a grade’ and which really need to be ‘sacked’ in order to improve your margins and free up your time which will give you a better return.
  • Many smaller practices are overly dependent on the owner who is often involved in doing the work of a technician as opposed to that of a true partner. Be honest with yourself. What would be the cost of getting someone to do the compliance technical work you do? What is the true profit impact of you just doing what you should be doing as owner’ practice management, new business development etc. A business that is overly dependent on one person will not attract a higher valuation. Look at what you can delegate or systematise as this will yield a far greater value on succession


Some hard truths here to look at as part of the essential planning and practicalities of a succession plan. Time spent on the practicalities listed above will guarantee a much less stressful and more profitable succession plan for any practitioner. In Part Three we will move on to the detail of the succession transition period itself and what to expect.

April 2015 Copyright - Finola McManus Practice Perfect

Helping accountancy firms to become more successful


Home | About | Latest News/Blog | Services | Case Studies | Contact Information | Privacy Policy | Terms and Conditions | Site Map

Copyright Practice Perfect 2015. All rights reserved. This website was designed and built by