Do You Have a Succession Plan for Your Accounting Practice?

I wrote recently about the tendency in this profession to dismiss senior staff as “not partnership material.” That article was about mindset. This one is about arithmetic — because whatever you think of your team, the maths of the Australian accounting workforce is now running against you, and has been for some time.

There is a hole in the middle of almost every firm I walk into. Not at graduate level, where most firms are still managing to recruit — with some difficulty, but managing. Not at partner level, where the principals are largely still in place. The hole is in the supervisor-to-manager tier. It is the layer that reviews work, holds client relationships day to day, mentors juniors, and — critically — becomes your successors.

That layer is thinning across the board, and it is thinning at a pace that is now starting to affect firm values, transaction outcomes, and the viability of succession planning for Australian accounting firms.

For the best part of a decade, outsourcing and offshoring have been the default response to margin pressure. I understand the appeal — I have watched firms use it to manage capacity, smooth out peaks, and hold salary costs in check. It made sense at the time. For many firms, in narrow applications, it still does.

But there has been a quieter, structural consequence that very few practices costed into the decision. Every piece of compliance work that goes offshore is a piece of work that an Australian junior or intermediate accountant does not do. And the review, coaching and judgement development that used to happen on that work — the slow, unglamorous process by which graduates turn into supervisors and supervisors turn into managers — simply stops happening locally.

Compounding matters, the original commercial case has weakened. Offshore costs have risen, the Australian dollar has moved against firms, and the capability gap between onshore and offshore work has narrowed in some areas and widened in others. The savings are no longer what they were — but the hollowed-out development pathway remains.

The assumption underpinning a lot of current hiring strategy is that if a firm needs a supervisor or a manager, it will simply go to the market and buy one. That assumption is breaking down.

The pipeline of new accountants coming into the profession has fallen off a cliff. Mid-career attrition is up — not just out of individual firms, but out of the profession entirely. People are leaving for industry roles, for advisory roles, for roles outside finance altogether. The regulatory burden is heavier than it has ever been, the workload expectations are relentless, and the career proposition of a traditional accounting practice has not evolved at the same pace as the alternatives competing for that talent.

The practical effect is that the pool of experienced Australian accountants in the supervisor-to-manager band is shrinking — and the firms still trying to hire laterally out of it are paying ever higher premiums for ever fewer people. That is not a cyclical correction. That is a contracting market.

Most practitioners think of succession planning as a conversation that happens when retirement is within sight. It isn’t. Succession planning starts the moment you hire someone with the potential to one day sit in your chair — and it fails the moment that person is not being actively developed toward it.

If you have no one at manager level who could step up to partner, and no one at supervisor level who could step up to manager, you do not have a succession plan. You have a recruitment problem dressed up as one. And in the current market, that is an expensive and high-risk position to be in, whether you are planning to transition internally, sell externally, or merge.

From a valuation perspective, buyers are now explicitly asking the question: who else here can run this? A firm with a deep, capable second tier commands a meaningfully different multiple to a firm where the principal is still the only person the clients will talk to. I have written elsewhere about the premium the market pays for a firm that operates as a system rather than as a personality — and the discount it applies to firms that don’t. The manager layer is where that system either exists or doesn’t.

The firms that will come through the next five to ten years strongest are the ones already treating training and internal development as a core line of strategic investment — not a line item to be cut when margins tighten.

Practically, that means having named people whom you are actively mentoring toward senior responsibility, with a clear view of the pathway and honest conversations about it. It means giving intermediate staff the complex, judgement-heavy work that actually develops capability, rather than reflexively sending it offshore or keeping it on the principal’s desk. It means treating your existing people as the most valuable asset on your balance sheet — because in a shrinking market, that is exactly what they are.

None of this is sentimental. It is commercial. A firm that has built a genuine second tier is more valuable, more resilient, more saleable, and — for the principals — simply more enjoyable to run. A firm that hasn’t is carrying key-person risk, valuation risk, and succession risk simultaneously, in a market where all three are getting more expensive.