It's really pretty simple. Without a practice continuation plan, a month after you suffer a disability, illness or worse, die, the value of the practice you spent a career building will have plummeted. And two, three, four months later (if you're still around) you might be ready to hop back in the saddle, but your clients will be gone.

You're getting older and the profession has seen a dramatic reduction of CPA candidates over the last 20 years. This reduced pool of likely buyers means less demand for your firm should it come time to sell. It's not going to be easy to pass on your practice, so why haven't you developed and implemented a practice continuation or succession plan?


Practice continuation and succession planning forces us to confront our mortality; to take a cold, objective look at how we do our jobs; and possibly worse, change the way we do things.

Also, you're running as fast as you can just trying to get your client's work out the door, so why would you use your most valuable resources--time and energy--planning for an event that is so uncertain in nature.

On top of those barriers is the most frightening of all--to implement a practice continuation or succession plan we have to get out of our offices and network.

But remember that a key element in selling your practice is its value. When you enhance the value of your practice for a potential future buyer, you enhance its present value to you.


You can't go it alone. There is no lack of information available about how to structure plans, including two excellent California CPA articles: "Succession Planning For Family-owned Businesses," (September 2001) by William M. Weintraub Esq. and Valerie B. Schultz; and "Passing the Baton," (August 2001) by Andrew M. Katzenstein Esq. and David P. Schwartz Esq.

The AICPA offers practice continuation agreements and CalCPA's Los Angeles Chapter developed a practice continuation plan model. However, there is no record of anyone ever using it.

Why? Well, even a well-developed plan like the one designed by the LA Chapter is just a model. Such plans must be modified to meet the unique needs of each practice. And as important as the legal documents are, you need to build relationships to make the plan work.


Two doctors, Dr. A and Dr. B, were about the same age, had similar practices and wanted to retire. Both wanted to bring in a young doctor to take over their respective practices.

Dr. A started looking 10 years before his retirement and had two false starts before he found a young doctor who had the commitment, work ethic and money to take over the practice. He sold his practice for $480,000 and the right to work two days a week for the next 10 years.

Dr. B, however, started about 18 months before his retirement, couldn't find a buyer and watched his practice's value--a value that he spent more than 30 years building--dissipate in a few months.

Now take the example of two CPAs, Bill and Sonia, who each found themselves in sudden need of practice continuation plans.

Bill was an established sole practitioner CPA with a successful practice, well-known and well thought of in his community. But he didn't have a practice continuation plan--a concern he didn't address until it was too late.

Bill began searching for a buyer for his firm after he was diagnosed with a terminal illness. With his condition deteriorating quickly (less than six months), he was unable to provide service to his clients or find a successor. Eventually, the clients drifted away and a large firm swooped in and picked over what was left of the practice.

Sonia is a CPA who had a successful career as an assistant controller cut short when she suffered a disabling accident shortly after moving to California. After the accident, she launched her own practice so she could work from home. When she did, though, she knew she had to plan for the worst--which arrived.

Sonia was hospitalized on an emergency basis during a month that had a major filing deadline, but because she was prepared, she saved her practice.

She began her practice continuation planning by simply networking with a local CalCPA discussion group in her area.

"That was the start of my California networking," she says. "The group provided the opportunity to meet colleagues and other business professionals."

After about one year, she became active in the Los Angeles Chapter and served as a director and vice president.

Her involvement and networking allowed Sonia to form an alliance with two fellow CPAs--they would help each other should an emergency arise.

Sure enough, one did.

"I was hospitalized on an emergency basis for one month last summer through Aug. 15," Sonia says. "Due to pre-planning my practice was taken care of. I shudder to think what would have happened if there had been no plan."

But just having a plan is not enough. A carefully prepared roadmap needs to be in place so everyone knows what to do in emergencies, Sonia says. The key players--including your spouse, significant other and estate attorney--need to know one another and understand their respectively roles.


CalCPA Chair Nancy Wheeler-Chandler believes it would be great if CalCPA could provide proactive practice continuation and succession planning assistance to our members and their clients. Do you agree?

There are two main elements to this program that is being proposed by a subcommittee of CalCPA's Estate Planning Committee:

* Providing service to the clients until the owner recovers or a successor can be found; and

* Developing a mechanism for CalCPA to act as honest broker between buyer and seller.

The Peer Review model can probably be modified to train and certify practice continuation team members. CalCPA would maintain a database of these members.

A practitioner or survivor could use this database to assemble practice continuation team members whose types of practice would allow the team to jump in during emergencies and keep the practice alive until it could be sold or the owner recovered.

The California CPA Education Foundation is receptive to offering courses for the certification of the practice continuation teams. However, it's up to us to develop the courses, become instructors and demonstrate that sufficient interest exists to cover the program's costs.

CalCPA can maintain a database of practices, act as an honest broker, establish practice valuation standards and assist buyers and sellers with due diligence investigations.

This is an ambitious project that would use many resources. It cannot be undertaken without significant support from CalCPA members.

In fact, action--not talk or magazine articles--is the only thing that will see it through to completion.

The task ahead of us is daunting but not indomitable. The only element that is missing is your participation.

After all, it's good for your clients, your family, your profession and, of course, you.

Jerry Sample, CPA, is a senior manager with William G. Robinson Accountancy Corp. in San Francisco. He specializes in integrating estate, financial and tax planning with business consulting. A member of CalCPA's Personal Financial Planning and Estate Planning committees, Sample can be reached at (415) 398-8141. Committee members can answer estate planning questions at www.calcpaweb.orgjestate.

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