7 retirement tips for small firm CPAs

Douglas H. Chaffins, CPA, had earmarked 70 as the age when he thought he would retire, but he didn’t think he’d actually want to retire when it came time. He figured he might continue to dabble in the accounting work that had shaped the 40-plus years he ran his Marietta, Ga., firm. Then, he noticed he was becoming increasingly impatient with client demands and fatigued by the bouts of intense work that can be part and parcel of running a small tax practice.

For him, that was the sign it was time to step away.

Approaching retirement can be challenging for CPAs in public practice. Many questions need addressing, especially for owners of small firms: When is the right time to exit the profession? What if there’s no heir apparent? How do I tell clients and how do I transition them? How do I feel about easing into the background professionally?

Here are seven tips on how to prepare from CPAs like Chaffins, who have transitioned their firms and moved on to the next chapter in their lives:

FIND THE RIGHT TIME

There’s no set formula or age for the correct time to retire. Financial and health considerations play a role, of course, but being mentally ready to leave behind the intellectual engagement, professional relationships, and your identity as an accountant is a good indicator you’re ready for retirement.

“You will know when it is time to retire,” Chaffins said. “When I was 50, I swore I would never retire.” This past May, he finalized the sale of his firm and retired at 69.

He suggested CPAs take consistent stock in how they feel about their work life and trust their gut.

GET OUTSIDE OPINIONS

Considering the financial knowledge and expertise in the profession, CPAs can have blinders on planning for their own retirement, said Pamela Ladd, CPA/PFS, senior manager of personal financial planning at the AICPA.

“Sometimes when we are involved in our plans, we can’t see it objectively,” said Ladd, who suggested running your retirement plans and financial strategies by another professional to ensure you take advantage of financial opportunities and account for risks.

Outsourcing this labor can help you relax with the reassurance that you have a trusted professional who has made sure you’re well positioned in retirement, she said.

For accountants who adopt a conservative approach to spending their savings, it may take some prodding before they start to enjoy the fruits of decades of labor, said Bill Pirolli, CPA/CFF/PFS, CGMA, a retired partner from the Rhode Island-based firm DiSanto, Priest & Co., and a past AICPA board chair.

“Prepare early, be realistic with your spending, and then just go and enjoy it,” he said.

BE FLEXIBLE IN YOUR EXIT

The retirement paths for small firm practitioners differ from their counterparts at larger firms or in corporate finance, said DeAnn Hill, CPA/PFS, CGMA. “That does not mean that firm is worth less or you don’t have any choices. It just may take a different conversation to get to where you want to be in retirement.”

Hill owned a small firm in Kansas and sold it as part of her staggered retirement plan.

For Chaffins, the process of leaving and selling his firm wasn’t as linear as he had hoped. He had hired younger CPAs, hoping they would want to take over the 10-person firm he’d built, but that didn’t pan out. Then, he entered a merger several years ago but realized it was not a fit for either his staff or his clients. He ended up dissolving the arrangement.

Then, he heard from other CPAs about Poe Group Advisors, which sells CPA firms, and through them, he connected with a buyer that meshed well with him, his staff, and his clients.

“It’s been a very good move for me, and, I believe, my clients,” Chaffins said. The new owner “has been responsive and dedicated to a smooth transition of our client base and staff.”

MAKE A SUCCESSION PLAN

If you’re in a leadership position or own a firm, you should have a detailed plan of what selling or closing your firm looks like or how you will hand off responsibilities. And it’s important to be transparent — your colleagues, business partners, and clients need to know what’s next, Ladd said.

When the sale of his firm was finalized, Chaffins said he took time to meet with each member of his staff to talk about the coming change and give them a loyalty bonus.

Having those discussions helped put his staff at ease, Chaffins said, adding that he had similar discussions with clients he had worked with over the years.

CONSIDER A STAGGERED EXIT

CPAs who are hesitant about retiring can slowly ease their way out of the firm (see “The Long Goodbye,” JofA, Aug. 1, 2013). Ladd suggested considering a path where you cut down hours, step away from pieces of your work portfolio (such as tax work), or leave open the option to come back during summers or tax-deadline busy seasons. “It doesn’t have to be an all-or-none situation,” she said. “You can work less hours a week, and your firm is always grateful to have you.”

Hill sold her firm and crafted a three-year exit plan. She’s in the final year of her exit plan and serving only major client groups while working remotely.

“I knew I could not just disengage on Day 1,” Hill said. “This has been a great way to ‘unwind’ [and] move on to the next chapter.”

TRANSITION CLIENTS

A few years before your planned retirement, begin transitioning clients to new practitioners in your office. Abrupt changes can be unsettling for clients, so Ladd suggests starting with joint meetings one to two years before your expected exit, so the client and whoever is taking over have time to get to know each other. Taking these steps and easing the workload onto the new person will go a long way in making the client feel taken care of when you do leave.

Pirolli said he gave two years’ notice, and clients were transitioned to other staff while he checked in with key clients to make sure they were comfortable with the new structure.

His clients approved of the new arrangement and applauded his move into retirement — a reaction Pirolli believes is more common than not in similar scenarios. “Your clients actually really like you and want you to enjoy your life,” he said.

MAKE YOURSELF IRRELEVANT

CPAs accustomed to making all the big and small decisions for their firm can find it challenging to hand over decision-making powers to their staff before they go into retirement. It’s hard to step back when you are used to being indispensable, but doing so will make the transition easier on you and your colleagues.

“Be sure they are running the firm and you’re there to help out as needed,” Ladd said.

If you take a staggered approach toward retirement, be prepared to stay silent when new leadership makes decisions you disagree with. It’s important to let the new leaders ease into their roles. Avoid intervening to a degree that makes the situation uncomfortable. “It’s a transition for you both, and you both want it to end up in a good place,” Ladd said. “Roll with it and have respect for the other point of view.”

During this process, it’s important to not panic or feel rejected and instead realize how intentional you have been in your career to create efficiencies and empower others to do the work.

“You have to get comfortable with the fact that some days, you will not have a lot to do,” Pirolli said. “It is why you worked all those years in the first place.”

For Pirolli, making room for future leaders in his firm had long been part of his vision. He had a target retirement age and found it a smooth transition when he stepped away from his practice during a year when he was also serving as the AICPA chair.

“I never saw it as a challenge, but rather an incredible opportunity,” Pirolli said. “I have always been proactive pushing my work down and mentoring the next generation of leaders, so letting go was a normal part of how I practiced.”

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About the author

Sarah Ovaska is a freelance writer in North Carolina. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.

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