Most succession plans start with the wrong focus. Owners start with the buyout price. They should start with the operating model and profitability of the firm.
I recently sat down with a father-and-son firm. Close to $1 million in revenue, 2 partners, a 55/45 ownership split. The father wants out of tax work in about 3 years. The son doesn't want to hold the entire tax bag. Good firm, loyal clients, nobody in crisis per se.
That isn't a succession plan. That's key-person risk with a retirement date.
Would you want to buy your firm? Even heavier, would you want your son or daughter to take over your firm?
They're weighing 3 paths: the son buys his father out, they hire a senior tax person, or they sell the whole firm together (this firm is not ready for an external buyer).
All 3 depend on the same thing: how is the tax department going to function when the father retires?
A buyout in a firm this size is almost always a multi-year earn-out tied to client retention (or should be. Please note you should NOT pay a fixed price for a firm. The practice brokers like to push it. Pay attention to their interests). If clients stay because of the firm, the earn-out holds. If they stay because of one person, the earn out and firm value erodes every year he steps back. The good news here is that most of these are firm clients, not partner clients. The less fortunate news is that the review work still lives in one head.
Building the right operating model and value creation comes before succession. Every time.
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One option on the table was keeping an ownership stake as an investment while stepping away. In a $1 million firm, that doesn't work. There's no layer of management to carry it. Absentee ownership in a firm this size means someone else does the work while you keep the risk.
The firm needs a senior tax person at $120,000–150,000. At $103 an hour, that hire is hard to justify. Salary alone on a $135,000 hire needs about 1,300 billable hours to cover itself. At $250, it needs about 540.
Many firms think a senior tax person is an answer to their operating model challenges. The reality is most of this thinking doesn’t pencil out. Put another way, many firms hire the senior tax person yet ultimately they are trading dollars. Paying someone to do work where the revenue (managed or billable) doesn’t cover the costs of the person. This happens in $500K up to $6MM firms and beyond.
The replacement isn't a hiring problem. It's a pricing problem.
Worried about losing clients? Across all 2026 Renew submissions to our annual benchmark assessment, the average price increase was 11.5%, and 6.2% of clients left as a result. The clients most likely to leave are the ones a buyer would discount anyway. The Renew Model Firm target for clients under $1,000 is 0%.
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