The Tax Professional’s 5-Step Guide to Succession Planning

Western CPE Staff

Beginning Client succession planning

Succession planning for your client is more complicated than simply choosing a successor. Institutional knowledge, client relationships, and technical expertise are all important characteristics of their unique business expertise — expertise that needs to be passed down and implemented for a smooth transition at any organizational level. Whether you’re planning your own transition or advising clients, understanding the full scope of succession planning is critical for maintaining a business’s success and ensuring that the business’s legacy endures. It’s also worth distinguishing succession planning from simple backup planning. Backup planning identifies who could temporarily cover a role; succession planning grooms the person who will take it over for the long haul. Here are five steps to follow when creating a successful succession plan.

Step 1: Build a Solid Foundation with Assessment

Everyone likes a good SWOT analysis. That’s why the cornerstone of effective succession planning begins with a thorough evaluation of the state of the business and an eye toward a future of foreseeable challenges. Rushing this first step could result in core business needs being neglected or overlooked during a transition.

Don’t assume the most critical roles at an organization are the executive ones. A single technical specialist, a long-tenured client relationship manager, or a key regulatory contact may be far more difficult to replace than a senior title. Help your client think about which positions, if suddenly vacated, would create immediate disruption to revenue, client service, or compliance. Once you determine those roles:

Define the hallmarks of the services that set the company apart — specialized expertise, industry knowledge, and unique problem-solving approaches.
Document mission-critical internal and external relationships, including regulatory contacts and professional partnerships maintained through any transition.
Map the qualities a successor would need — technical excellence, leadership potential, adaptability, emotional intelligence, and a commitment to professional growth.

Step 2: Develop Your Talent

With a solid foundation, clients can develop their respective talent pool. The right people should be set up for success, though the right person isn’t always a single predetermined successor. Forecasting precisely who will fill which role years from now is imprecise.

A more flexible approach is to identify a group of high-potential employees and rotate them through assignments that broaden their experience. When an opening appears, draw the strongest candidate from that group based on what they’ve demonstrated. Look at what it takes to maintain client relationships, team leadership, and strategic planning when developing future leadership.

Not every candidate needs to be a generalist. Some of your client’s most valuable people excel in a deep specialty — a senior tax technician, a lead developer, a top relationship partner — and forcing them onto a general management track can drive them out. A parallel track that grows their specialty while preparing them to lead within it retains the talent your client cannot afford to lose.

Practical development tactics include:

Building internal training materials focused on practical application, case studies, and graduated client-engagement responsibility.
Establishing mentoring relationships with clear objectives and milestone reviews.
Offering lateral moves and cross-training so future leaders gain perspective across departments.
Setting performance metrics that allow for regular feedback opportunities.

Having multiple prospects creates backup capacity for critical roles and builds an operational support network.

Step 3: Passing Down Knowledge

Company departures often come with brain-draining effects, and no business can thrive with that kind of headache. Save your client the headache by taking steps to preserve company knowledge, so that critical information doesn’t leave when they or a mission-critical employee departs.

Pairing current position holders with potential successors will facilitate the transference of company knowledge. You can further this by assigning clear objectives to these mentorships, holding regular meetings, and defining what knowledge is to be passed down. Successors should work alongside current role holders. Experienced professionals carry a wealth of transferable insight for younger team members, and hands-on learning encourages smooth client relationship transitions with face-to-face introductions and rapport built over time.

Process documentation can be an important asset. Think about technical approaches, client preferences, and relationship histories. When an employee departs, those aspects of a person’s work go with them. Documentation resolves this issue easily. Encourage the creation of case studies from complex situations your client has faced to be used as a problem-solving templates. History repeats itself, and having a library of solutions provides successors with a vault of knowledge to pull from.

Step 4: Implementation

Effective succession planning is nothing without implementation. Taking the theory of business succession planning and turning it into action requires careful execution and commitment from all levels of the organization. Company succession planning should be both structured enough to stand during a transition and flexible enough to adapt to surprises.

Creating a timeline for successor progress with specific dates for key transitions, training completion, and relationship handoffs will provide clients with a tangible progression tracker. Communicating the succession plan clearly to all stakeholders, including staff and key business partners, is essential. Transparency is trust. Regular reviews by client leadership can play a big role in ensuring the plan is on track.

But beware: succession planning in business comes with challenges. That’s not a bad thing. Challenges are just opportunities in disguise, and reassuring your clients on that front will go a long way in maintaining their trust. Develop contingency plans for key position holders and critical client relationships. Address concerns promptly to maintain a strong relationship.

Step 5: Oversee and adjust

Succession planning is a living process that requires a watchful eye and a mind to adjust parameters when necessary. Regular evaluation and adjustment are excellent tactics for keeping client succession planning functional and form-fitting to current and future needs.

What separates an aspirational plan from a working one is measurement. Encourage your client to track a handful of clear indicators:

Employee replacement cost. Total replacement costs — advertising, recruiter fees, training, lost productivity, and overtime — divided by the number of replacement hires.
Employee turnover rate. Departed employees over the measurement period divided by average headcount. A baseline makes it easier to spot when something is wrong in a department or under a particular manager.
Percentage of critical positions filled internally. When a critical seat opens and an outside hire is required, that’s a signal the development pipeline isn’t deep enough yet.

Be vigilant and prepare for change with quarterly progress reviews, assessing both individual development and overall plan effectiveness. Collect feedback from all participants, including mentors and successors. Use it to refine their approach to new challenges. Lastly, encourage updates to the succession plan annually to reflect changes in client strategy and market conditions. Keep the plan aligned with their evolving needs.

A Living Process

The living process of succession planning focuses on the strengths of a client’s business while preparing them for future challenges. Clients should start early, stay committed, and remain flexible. Their skills and knowledge are the foundations for leading into the future by enshrining their expertise in the next generation of leadership. Investment in succession planning today builds the foundation for a business’s continued success tomorrow.