Why Your Clients Should “Never Do Succession Planning”

by Edward Mendlowitz, CPA, partner, Withum | November 25, 2019

Many CPAs and advisors offer succession planning services to their clients. A problem is that most of our clients that should have some plans do not want to spend the fees necessary to have any sort of a plan; but if they still own the business when they die, they will leave a massive mess for their family and loyal employees that assisted in helping them get where they were. That’s where the CPAs and advisors they did not listen to really make big fees.

The problem for people like me is that it is triage, salvage and reduce-the-problems work instead of creative wealth building for the owner, his or her family and their loyal employees. We make good money, but it doesn’t provide the level of satisfaction we like to get when performing our highly skilled services to prevent problems and help assure a smooth transition.

It is what it is. We cannot spend our clients’ money and certainly cannot tell them they will be screwing their family and longtime employees and also causing huge fees that could have easily been avoided by a little effort and forethought. So, you can tell our clients if you like leaving a legacy of confusion, anger, contention and high professional fees, do not do any succession planning. And I regretfully thank you in advance on behalf of all of the CPAs, lawyers and valuation specialists for the income stream you will be leaving behind.

If your clients spend a few minutes thinking about it, they will rush to get some sort of plan in place and in most situations, any plan is far better than no plan.

Here are some ways in which CPAs and advisors can assist their clients:

  • Determine what they want to do, can do or are willing to do. In my experience, many strong-minded and strong-willed entrepreneurs have trouble crystallizing their thoughts when forced to confront their retirement or mortality and an informed experienced advisor can help with this.
  • Discuss, in general terms after reviewing the business’ financial data, how the business could be valued based on different types of buyers and how the owner could identify value drivers and the best potential buyers. Discuss with indications of the value under various circumstances.
  • Provide an understanding of the process when someone dies or becomes permanently disabled without setting up a continuation plan. When there is no plan it becomes costly and time-consuming for the survivors, and creates contention in the family and actually has loved ones not thinking good thoughts about how you left them a mess to deal with.
  • Discuss ways to accomplish an eventual transfer to employees if that’s what they want, the transition process, whether a sale is something that should be considered or if a work-until-you-drop policy is the best way to proceed.

To help owners in the process I send them a bunch of speech handouts, articles, and a preliminary document request. I have been doing this a lot lately and have put these in a single file which I will email to those requesting it by emailing me at GoodiesFromEd@withum.com. Just put Succession Planning or SP as the Subject.

Edward  Mendlowitz

Edward Mendlowitz

Edward Mendlowitz, CPA, ABV, PFS, CFF, is a partner at Withum. He is a member of the NJCPA Forensic & Valuation Services Interest Group and can be reached at emendlowitz@withum.com.

Leave a comment