Ready for succession?

Nearly half of sole practitioners and partners of small and medium-sized firms say they will retire within the next 10 years and an additional 25% expect to retire within 15 years. Despite this reality, few owners have a retirement plan in place.

A staggering 99% of sole practitioners have no succession plan and only 37% have a business continuity plan to ensure their practice will survive should they become unable to work. Partners of small and medium-sized firms are only slightly more prepared: 5% have a formal succession plan, with 31% indicating they have addressed succession in their partnership agreement.

While many firm owners have not created succession plans, some have considered likely exit strategies. About a third (34%) of sole practitioners expect to sell the business at retirement, 22% will merge with another practice prior to retirement and 19% don’t know how they will exit the practice.

For firms with two or three partners, 71% expect to sell their business upon retirement — most (38%) will sell to other partners in the firm, 14% to nonpartners in the firm and 19% to an external buyer. A further 14% don’t know how they will exit their business. For firms with four or more partners, 79% expect to sell their business at retirement — 67% to other partners in the firm, 7% to nonpartners in the firm and 5% to an external buyer.

John Tabone is CICA's manager of innovation