BV Successorship Challenges in the Small-Market CPA Firm?

At the same time, it was hard to let go of loyal, long-term audit/tax clients and the income safety net they represent. Although the BV practice never grew to full-time status, it brought in enough money to make it worth hanging onto. For the small-market firm with a Partner facing retirement, sustaining that BV revenue stream will be a challenge that deserves attention.

Who’s Next?

What we have seen is that if the BV practice leader does not operate full-time in the profession, it can easily be that no one else further down in the hierarchy does either. In fact, it’s more often the case that BV staff hours have been drawn from audit or tax people who are similarly intrigued by the unusual nature of business valuation work, and enjoy the change in their routine. Yet after several years, it’s unlikely those staffers have accumulated more than four to five thousand hours of BV/LS experience. That can still leave them some ways from being a qualified successor.

What’s Next?

But when the drive to keep that BV revenue is strong enough, discussions turn to hiring a full-time BV professional who, ostensibly, could bring in even more work. It’s true that a “take over and build” story can be attractive to qualified professionals. It’s the investment needed to make it all work that might end up being the biggest stumbling block.

Compensation is the biggest piece of that investment. The cost of the ‘heir apparent’ who would be the best fit can sometimes bring on sticker-shock. Hiring audit and tax personnel means competing at localized compensation levels. Hiring a full-time BV professional as a successor can mean competing with comp levels that are national in scope.

Another element of that investment is the marketing effort inherent in the “build” part of “take over and build”. At the very least, this will require a clear plan to hand off client contacts and referral sources. Charge hour expectations may need to reflect increased business development activity. Sooner or later actual dollars may come into the picture.

What Else?

If it doesn’t work to promote from within or to hire from outside, options are limited. There might be a nearby sole practitioner who would serve those clients in exchange for a percentage of revenue over a multi-year period. Like it or not, there’s always the option to simply phase out valuation as a service line.

BV successorship in the small-market CPA firm requires an eyes-open decision. If your firm faces this challenge, contact us for a confidential conversation about your options.