Worn out from tax season? Don’t sell, plan your succession

May 16, 2022 Oak Street Funding

Tax season is over, and our phones are ringing with CPAs telling us they are not going to go through another tax season, asking themselves, is it time to sell? This happens every year. While we typically see an uptick in acquisition activity throughout the summer, truth be told, as business resumes at a normal pace, most owners eventually abandon the idea of selling. Another option for CPAs is succession planning.

Typically, business owners have invested years — often, decades — of time and energy into developing and growing practices into successful businesses. Over the years, many CPA practice owners supported their clients’ plans for succession, yet often have not had time to think and plan that future for their business. 

When we get those calls from exhausted owners at this time of year, our team asks about their plans for succession and personal financial planning for long-term stability. The key question we ask is: As you counsel your clients about the importance of business transition planning, are you also creating a strategy for your own optimized exit? 

During those conversations, most clients say they prefer an internal succession plan. Owners say they are looking for someone on their team with leadership and business skills who could purchase the practice, creating a seamless transition for staff and clients. This takes thought and careful planning to ensure success in the short and long term. Here’s why.

A client in his early 60s bought out his partner through a combination of a loan and earn outs to become the sole owner. He was ready to lead, manage and grow the business. However, shortly after the acquisition, he suddenly passed away and he didn’t have a succession or continuity plan in place. Without an immediate plan, a licensed tax professional engaged as part of a continuity plan, and legal documentation, the practice was handled by his personal estate and unfortunately the entire practice dissolved. 

What's in a succession plan?

A succession plan is a written plan, or a contract, used when a business owner retires, or a partner decides to dissolve their practice. The planning part is a journey, not a one-time event. It allows the owner to retire or continue to be involved with the practice, possibly at a lesser or different capacity. It outlines who, what, when and how succession will happen.


The first step is to determine who will be the successor(s), and if that successor is internal or external. Perhaps a family member is also a CPA and would make a good successor. I recommend owners think through the qualities they want to see in the person who would take over the business. Maybe another CPA comes to mind. 

Don’t immediately share ideas. Instead, think through the steps involved and what a transition could look like in terms of timing, training, communicating, deal structure, client migration, staff engagement and finances. The person who can take your practice to the next iteration and continue to grow the firm without you does not have to have the same business skills you as the founder needed. When it comes time to draw up documents or understand how financial consideration for the sale can be funded, consult with legal and lending professionals as needed. 

When, what and how?

Three keys to a successful succession plan are timeline (when), payment (what) and communication (how). 

  • When will you retire? Create a timeline with succession steps involved. What are the steps involved to move the future owner into a leadership position? Does the future owner need development training in certain areas, for example? How would that happen?  The further in advance plans are made, the smoother the transition. 
  • What’s the structure of the sale? Work with a lender to determine the structure of the sale. After you obtain a valuation, consider how much upfront cash you would like at closing compared to how much you are willing to have structured as a note or earnout payment for several years.
  • How will you communicate? Consider how and when you would notify employees and clients of the transition, even if the transition is a decade away. Employees appreciate knowing a leader’s vision for their future.

As a final step, the new future owner should also put their succession plan into place. As Benjamin Franklin wrote, “In this world nothing can be said to be certain, except death and taxes.” Having a clear vision and plan for a business’ succession in both the short- and long-term creates business value, but more importantly peace of mind that the practice will endure through decade after decade of tax seasons.

About Oak Street Funding
Indianapolis-based Oak Street Funding, a First Financial Bank company, provides customized financial solutions for businesses in various industry sectors and third-party loan servicing for financial institutions. Oak Street Funding incorporates industry knowledge, easy-to-use technology and exceptional employees to deliver top-quality service and capital products to niche businesses nationwide. With in-house sales, underwriting, and servicing teams, and direct access to the CEO and executive team, Oak Street Funding is well-positioned to meet lending needs of borrowers in all stages of the business life cycle.

Media Contact:
Rae Hostetler
Hostetler Public Relations
Representing Oak Street Funding

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