Bill Reeb Series on Succession Planning

Source: Texas Society of CPAs, Public Practice

A firm goes through phases, or modes, as Bill Reeb calls them. Done right, it eventually enters a phase that permits continuation.

• Survival—In the early phases the firm is in a survival mode.
• Safety Net—After the practice has achieved a high likelihood of survival, it enters the safety net phase, where the owners can build a nest egg for the future.
• Success—The next phase is the success phase, where the firm tries to build an organization that is a good place to work.
• Continuation—In this phase owners focus on creating an organization that can survive without them.

But many firms are built around the personal skills of the founders. The firms can’t survive without them. The only exit strategy for a firm in this phase or mode is to sell or merge.

The problem for these firms is not that they don’t have any leaders to assume command, but that the founders have handicapped these leaders with inappropriate systems and structures.

These systems were created to accommodate the founders, rather than organization roles. And they fail when the founders are removed from the system. Therefore, in the continuation phase, systems of governing, operating, voting, accountability, and compensation should be modified to allow interchangeability of people. In Reeb’s next column, he will incorporate the foregoing principles into a case study.

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From Texas Society of CPAs, Public Practice, August 2008 (www.tscpa.org)

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