Accounting practice succession: planning sows the seeds for a successful transition

Succession planning may not be something anyone likes to think about but there are good reasons to do so. There will inevitably be a time when you need to leave your accounting practice.

Succession planning in family firms can be challenging but one small accounting practice in Canberra has managed to get the process right.

By Nina Hendy

Succession planning may not be something everyone in business likes to think about but there are good reasons to do so. There will inevitably be a time when you need to leave – whether to sell to start another venture or because of impending retirement.

When Canberra-based accountant John Chaloner CPA started planning succession for his small public practice firm, he was not at first sure whether he’d be selling out or if one of his three children might be interested in taking over the reins.

Chaloner established his practice in 1977, initially servicing clients mainly from a home of-fice.

“I [always] knew it was important to think through what might happen to the business in the future, but it’s difficult when you aren’t ready to leave for another decade or more,” Chaloner says.

Passing the baton

Canberra-based John Chaloner CPA and his daughter, Holly Marando CPA of Chaloner & AssociatesHis daughter, Holly Marando CPA, had already decided to undertake a Bachelor of Commerce (Accounting) degree, which gave Chaloner some hope that the firm he had worked so hard to build would eventually stay in the family. 

Indeed, upon graduating Marando did work briefly in the business before going on to forge a successful career at much larger professional services firms. It was invaluable experience. After a stint with Deloitte as a senior tax accountant, she moved into a managerial role at financial planning firm Dixon Advisory. She spent a little time in Brisbane interspersed with travel to Sydney, but in the main her career played out in her home town of Canberra.

Securing CPA [accreditation] was really important to me, so I studied for that over a three-year period while also working full-time,” Marando says.

“It was gruelling, but completely worth it because it opened up a lot of career opportuni-ties.”

Back to your roots

She decided to return to her father’s business when one of his accounting staff fell ill.

“I had learned a lot about best practice and knew I could make a huge impact on the busi-ness,” Marando says.

“It made sense for me to come back and it only took one conversation with him to convince me that the time was right to help him out.

“Initially, it was only going to be until a replacement could be found, but I enjoyed working with small businesses so much that I decided to stay. It was so rewarding to be able to help local small businesses with their financials, and I knew it was where I wanted to be.”

That was in 2007. In 2013, she took over the business, changing it from being a sole trader (her father had always traded under John B. Chaloner) to a limited company and rebranding as Chaloner & Associates.

Dotting the i's and crossing the t's

The duo knew that a clear succession plan would facilitate a smooth transition into the new ownership structure. While there were no issues with regards to trust, both father and daughter admit that selling the business was a learning curve.

They mapped out the roles each person in the business would play, with Marando assuming the management helm. Then, of course, there were financial responsibilities and payment terms as the business switched hands, all of which had to be incorporated into the succes-sion document.

“We wanted to be clear about where the boundaries were and how the business would function under a new ownership structure, so our clients weren’t impacted by the changes,” Marando explains.

The pair researched a fair market price for an accounting firm of its size and agreed on a sale three years ago. Both wanted to retain some flexibility in the agreement regarding di-rectorship terms, however salaries and how much Marando is obligated to pay for the business is set in stone.

Chaloner remains a director. He owns the building where the business operates, which Marando leases. Interestingly, neither believes that growing the business would be advan-tageous, saying their small team affords greater flexibility. 

Related: Succession planning – the pitfalls and solutions

While her father continues to focus on public practice clients, Marando works mostly with local small businesses, especially on BAS, tax and occasionally in a financial advisory role.

“We’re now at a point where we don’t have capacity to take on any more clients,” Marando notes.

“We get calls from [potential] new clients all the time, but we’ve made the decision that we don’t want to take on any additional staff, so we refer them on and focus on the clientele we have.

“The clients we’re servicing give me the ability to take on a business advisory role within their businesses, but also [retain] some work-life balance.”

Innovation through education

In recent years, Marando has overseen the implementation of a number of tools to take various aspects of the business online, conceding that for far too long it had remained paper-reliant. The business currently employs six people, including Marando and her father, and lodges more than 1200 tax returns for clients across various industries.

“When I started here, the business didn’t even offer EFTPOS to clients,” she reveals. “There were quite a few important changes implemented in that first year or two.”

Finally, although sentimentality and accounting often don’t mix, even to this day Marando provides professional services to some of the clients her father first brought into the busi-ness when she was just a child.

“It’s really exciting to be involved in a business my father has built from the ground up and to have the ability to bring my knowledge and experience into that business,” she says.

Read next: CPA Australia Professional Resource – growth and succession

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