Why do some accountants avoid addressing succession planning?
There are a lot of accounting industry participants who at some stage in their careers have either experienced or know a someone who has experienced, the good old dangling of the “Partnership” carrot. “You’ll be Partner... one day!”.
So why is it that so many Sole Practitioners fail to deliver on their promise to transfer some or all business ownership to their loyal Senior Managers?
In my experience there are only two major factors at play here – financial & psychological.
Financial
Most of the accounting industry stats are made up (in my humble opinion). So, the stat I make up is that 65% or more of the AUS accounting industry consist of Sole Practitioners generating well less than $1 million in revenue with an average say around $500 - $600k.
Thus the industry is made up of micro businesses, generally run pretty poorly and not profitably from a ‘business’ point of view – in that profit really is just the owners wages and not particularly good ones.
Thus, when it comes to considering the sharing of what is generally a small pie, it’s human nature to say NO.
It has surprised me along the way, through activities such as www.mergetoretire.com, just how poorly prepared some accountants can be when it comes to actually being financially able to retire. This can also affect their willingness to bring a team member into an equity position.
Psychological
Two parts to this – ego and mortality.
I’ve been building relationships with AUS accounting practitioners since the late 1990s, either selling too or through their firms and I can tell you that it has never ceased to surprise me when it comes to ego – they sure do have them!
As such ego plays a big part in not wanting to either share the limelight or indeed pass the baton on.
Ego also rears its non-attractive head in relation to financial aspects mentioned above, in that the business owner doesn’t really want to share the poor performance data with the up and comer, although that person has likely already done the math and worked that out.
I’ve noticed that Succession Planning is often avoided because it brings up so much psychologically, including one’s mortality. I’ve seen practitioners, normally men, quickly project from the discussion around appointing a Junior Partner to death. Seriously, I have. The psychology piece here extends to avoiding the hard discussions also, both personally and business wise. The issue is often family related. Changes to shareholders agreements could lead to required changes to wills which could lead to a need for hard conversations around the family dinner table. I understand why people avoid such, but I’m sure accountants advise their clients to do exactly what they put off.
Psychologically practitioners are often simply not able to let go. There is an identity crises – "If I’m not the figurehead of this firm, the go to person for loyal clientele whom I believe think I’m a genius, then who will I be". Further to this point, not letting go is tied to the mortality stresses. In addition, many practitioners have failed to fill their precious time with things other than work and suffer a lack of outside interest. The firm is safe place and somewhere to be and the work has become a hobby, something to do.
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