Succession could be defined as the process by which the current owner/s of a firm transition and handover ownership to new owner/s. When I say handover I don’t mean for free! The usual situation will be a sale of equity to new owners. Those owners could be inside the firm already, or they could be external third parties. Sometimes it might be on a stepped basis over a number of years until the existing owners are out of the firm, or it could be in a single transaction.

Triggers for succession

In my experience some of the things that prompt succession inside firms are:

  • Illness or health concerns (self or family)
  • Death or divorce
  • An offer you can’t refuse
  • It’s just time
  • A birthday!
  • An opportunity to do something else
  • Relocation
  • Lost your mojo / you no longer love it
  • The market is ripe for a sale
  • It’s not working for you
  • You lost your certification
  • Financial issues 
  • Impending premises lease renewal

Some of these are more positive than others and in an ideal world succession will occur as part of a well thought through and executed plan. For many firms this is about long term planning to bring people through the ranks of your firm to become the new owners. Succession can also occur by way of a sale to a third party or a merger with another firm, but my focus in this article is on internal succession.

Making internal succession attractive

If you want your successors to come from within your firm here are a few ideas for you:

  • Make it clear to your team that you want people to progress to become owners.
  • Lay out what is expected of people to become an owner and support them to do these things
  • Identify potential candidates early on and nurture them – don’t make it a secret that you believe they have the potential to progress to be an owner.
  • Be a role model such that people in your firm really want your job!
  • Run a great firm with a clear vision and direction communicated to the team, and preferably that they have helped you build.

Be a role model

All of these are important but I want to dwell on the role model point. This is so important. As an accounting firm coach, mentor and consultant I get to talk to a lot of people inside accounting firms. It is not unusual for me to hear or observe that the younger team members have no ambition to become an owner because they see how the current owners live their life and pretty quickly conclude they don’t want that. That is often because in some firms the owners are working extremely long hours, regularly look stressed and don’t appear to be enjoying what they are doing. Ouch!

My tip here is to remember you are always in stage in front of your team. If you really are stressed and working extremely long hours and not enjoying it, then do something about it! (I’ll be happy to chat if you would like some support to do that.)  

Make it clear what is expected

I also want to mention laying out what is expected to become an owner. Many years ago I assisted a firm with the process of developing new owners. We went through a process to identify what the expectations of a “partner” were and how people coming through the ranks would be able to demonstrate they were ready to make the shift to become a partner. 

The standards were high and there were a few jokes from existing partners that maybe they would not have made it if the criteria applied to them many years ago! There was also concern from one along the lines of “but if we tell people what is required they might actually do it”! Can you see the issue here?! We had very clearly articulated what was required to become a partner and set the bar high, so of course we would want people to succeed!

The corporate model and non-director shareholders

Historically many firms had the attitude that you could only be an equity holder once you reached the position of “partner”. That is no longer the case and I’m a huge fan of firms having non-director shareholders who met certain criteria. That will vary from firm to firm but usually requires a minimum length of service and performance. It’s a great way to encourage more of an owner mentality as well as reducing the risk of that person leaving the firm. In most instances each non-director shareholder will have a small equity percentage, leaving the directors still very much in control! If you’d like to explore this more, I’ll be pleased to chat.

Looking outside

In some firms it maybe necessary and appropriate to look at lateral hires at a senior level. For example it might be a manager or senior manager in another firm that is not providing opportunity for progression. Other things being equal, my view is that it is preferable to grow your own. It is a great story for the firm, helps with culture and there is generally less risk of people being put out by others parachuted into the firm and leap frogging them.

In some firms it may also be that succession can only be achieved by way of sale to an outside party, typically another firm. That’s a discussion for next time, but if you are keen to sell I’d suggest you chat with Vivienne Quinn, Chris Clifford or John McCulloch at Quinn + Associates. They are Australia’s most experienced brokers for the sale of accounting firms. Practices For Sale (

Shareholder/Equity holder agreement

A robust and well thought through agreement is a vital part of facilitating succession. You can see an article I wrote on this here. I am still occasionally disappointed to bump into firms that don’t have a well crafted shareholder agreement, or even one at all!