Top Ten Succession Planning Considerations and Issues for Professionals

Top Ten Succession Planning Considerations and Issues for Professionals

In deciding upon and implementing a succession plan for a professional practice or firm, there are many matters to consider and issues to address.  From my experience and practice, the following represent the top ten of such considerations and issues.

Number 10: Identify and confirm the participants in the plan

It is important to be able to identify who the key players in your succession plan will be and what roles they will undertake.  This process involves, among other things, confirming that the individuals who will be succeeding the professional have both the desire and ability to do so.  That is, are they willing to take on the responsibility of stepping into the shoes of the exiting professional and have the acumen necessary to carry out their respective roles?

Number 9:  Decide and agree upon the funding of the plan

Once the players are identified and confirmed as viable options in implementing the succession plan, the exiting professional needs to feel comfortable with the funding of the plan.  That is, who will be paying what to whom, how and when?  Will this be a one-time payout, a fixed amount installment plan, an amount tied to future revenues or profits, or some combination thereof?

Number 8:  Discuss the plan with the key players

Even after the plan is agreed upon, it should not be left to gather dust until its implementation.  Instead, the exiting professional should discuss the plan with the key players on a regular basis (e.g., quarterly, semi-annually, etc.) in order to (a) re-confirm the commitment of the successors to the plan and (b) reinforce to those key players the commitment of the exiting professional.

Number 7:  Determine the role of the exiting professional

Will the exiting professional exit the practice or firm entirely as of day one, or will his/her exit be phased over a period of months or years?  Will he/she remain an employee or consultant of the practice or the firm for some period of time?  If so, how will he/she be compensated?

Number 6:  Establish a process for the transition of the clients/patients and a narrative for the implementation of the plan

The exiting professional and his/her successors need to agree upon the method and timing of transitioning clients/patients/books of business to the successors who will be charged with managing those clients/patients/books of business after the departure of the exiting professional.  A narrative should also be developed in order to explain and publicize the reason for and benefits of the transition.

Number 5:  Agree upon the value of the interest to be acquired

It is extremely important that all participants in the plan understand as early as possible the exact value of the exiting professional’s interest in the practice/firm and how that value is established (e.g., agreed upon amount, formulaic calculation, appraisal, etc.).  Only when the exiting professional and his/her successors are comfortable with the valuation will the plan go forward and have any likelihood of success.

Number 4:  Understand the tax ramifications of the plan’s implementation

Depending on the exact structure of the plan, it will have varying tax ramifications for all concerned (i.e., the exiting professional, his/her successors and the practice/firm).  That is, will the payments received by the exiting professional be characterized as capital gains, ordinary income or something else?  Will the payments made by the successors be deductible to them or the practice/firm?  Many times the individuals involved in succession planning have preconceived notions about how the receipt or payment of monies will be treated for tax purposes. During the planning and development process, the exiting professional and his/her successors should discuss with an accountant and/or other financial advisor exactly how the payments made under the plan will be treated (i.e., what is the net amount of the payments received or made).

Number 3:  Allow for flexibility in the plan

As we are all aware, the only constant is change, and as with everything else, circumstances will likely change within the practice or firm, and/or with the exiting professional and/or his/her successors.  Therefore, the plan should be flexible enough to accommodate such changed circumstances.

Number 2:  Develop a plan

This is a close correlation to Number 3.  Professional practices do not necessarily need to develop the plan at the outset; but they should have a plan.  Specifically, it is more important to develop some type of plan, even if it is subsequently changed or scrapped altogether for another plan.  The mere existence of the plan will promote discussion in relation to the considerations and issues identified in Numbers 10-3, above.


While this may sound simple, it has been my experience that it is not.  It is far more convenient to carry on the business of the practice or the firm than it is to tackle the task of developing and implementing a succession plan for the practice or the firm.  However, the most successful plans are the ones that are established well in advance of the departure of the exiting professional(s) involved in the plan.  As a rule of thumb, this process should start three to five years ahead of the planned departure.


While there is no guarantee that any particular succession plan will be successful in all respects and for all concerned, two things are, in fact, certain:  (1) the absence of any succession plan invites chaos and (2) the consideration and resolution of the items identified, above will at least set the professional practice or firm on the right track to planning for and addressing the inevitable departure of professionals from the practice or firm.