2019: Shift to Consulting May Be Bumpy

Tech changes are coming. But stymie many.

By Gary Adamson
The Rosenberg MAP Survey

CPA firms are experiencing a squeeze in profitability. Revenues are rising but at an organic growth rate that is not close to where most firms were pre-recession.

MORE FROM THE MAP SURVEY: 2019: NextGen Realities | 2019: When CPAs Go Extinct | 2019: The Biggest Tech Changes Yet | 2019: Three New Trends to Watch | 2019: Client Service Moves to Fore | 2019: Shifts in Hiring & Office Space
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.


Will Staffing Challenges Change the Definition of Partner?

Businessman looking at question mark sketch on the wallRecruiting is only getting tougher.

By Gary Adamson
Rosenberg MAP Survey

Most of my clients experienced one of their best years in 2016.

MORE FROM THE MAP SURVEY: Be a Consultant or Be Left Behind | Succession Issues Stalling Some M&A | Technology Playing Center Stage in CPA Profession
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Profitability was at an all-time high and organic growth was better for most as compared with 2015.

What’s Your Why? And Why Should Anyone Care?

Businessman pole vaulting toward his goalUnderstanding the drivers of others in the firm will make succession planning easier.

By Gary Adamson
Bridging the Gap

The very human tendency to assume that others think as we do can lead to great misunderstanding.

MORE: 6 Tips for Fostering Leadership in Your Organization | 3 Ways to Keep Your Team Members Connected, Engaged and Energized | Growing, Developing Future Leaders Is a Two-Way Street | A Winning Culture Is an Intentional Culture
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

In truth, the things that drive individuals – what makes it all worth it – vary widely. Discovering what makes each team member tick and what he or she most desires and values is an important step toward creating a cohesive partnership and bridging the gap, not just between generations but among all members of the firm.

SURVEY FINDINGS: Talent Wars, M&A Frenzy Continue

Man and two women talking in officePlus a suggestion for renaming the MP.

By Gary Adamson
The Rosenberg MAP Survey

Organic growth continued to be slow and nowhere near pre-recession levels. In fact, this survey and others showed a lower 2015 growth rate than 2014.

MORE FROM THE SURVEY: Next-Gen Leaders Getting Restless | Mergers Keep Racing Forward  | Do You Have a Firm or a Co-op? | Accountability, Equity, Compensation Are Concerns | MAP Survey Top 10 Findings | CPA Firm Revenues Rise a Hefty 8%
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

The talent wars are back with a vengeance and firms are generally not finding success in hiring their way out of long-standing succession issues.

2016 Outlook: No End to Mergers in Sight

2016-ROUNDTABLE-OUTLOOK-FOR-ROSENBERG-MAP-COMMENTARY-VF-240x219A buyer's market is on the horizon.

They say "past results are no indication of future performance." Maybe. Maybe not. But if anyone should know, it's our panel of experts, their comments drawn from the new edition of The Rosenberg MAP Survey. These are their bullet points and comments, verbatim, looking back at the last 12 months and looking ahead to 2016. – Rick Telberg, CEO

By Gary Adamson
Adamson Advisory

Lessons from 2015:

Merger mania continued over the last year for several reasons:

  • continued slow post-recession organic growth,
  • thousands of baby boomers with no internal succession plans in place and
  • competition heating up for middle-market clients (the big firms want our biggest and best clients!).

MORE FROM THE ROSENBERG MAP SURVEY: Why Outsourcing Beats Unicorn Hunting | 2016 Battleground: Aging Leaders vs. Emerging Leaders | Private Clouds on the Rise | Firms Growing, Still Face Talent Challenges | Outlook 2016: Another Economic Storm Coming? | How Succession Issues Are Driving Desperation Mergers | Outlook 2016: Change Catches Up with Auditors | Strategic Plans Undermined by Out-of-Control Partners | Growth, Succession Plans Critical for Firms | Talent Wars Go from White Gloves to Boxing Gloves | Trend Outlook 2016: Change Agents Needed

Firms are improving profitability with per-partner income rising while the talent wars that we saw pre-recession are returning.

Today’s Top Trends in Deals and Valuations for CPA Firm Mergers and Sales

The eight most important facts in settling on a multiple.

With the merger-and-acquisitions frenzy showing no signs of slowing down, practice owners seem to be checking almost daily: What's my practice worth?

"One thing is for sure," says Gary Adamson, former CEO of Brady Ware, a top 200 firm, now providing advisory services for firms across the country, "Baby Boomers are selling at a rate that the profession has never seen before."

It's still a sellers' market, he says. But that could change soon, he says, citing "the demographics and the thousands of practices that will soon come onto the market."

In this report, Adamson addresses:

  • the question of valuing a practice
  • two basic types of deals
  • the value of a multiple
  • eight critical components to making a deal
  • the effect of size of practice on valuation
  • profitability
  • down payment
  • transitions READ MORE →

Partner Succession: It’s All About Client Transition and Retention

By Gary Adamson, CPA
Adamson Advisory

CPA firms are wrestling their way through partner retirements and the accompanying succession issues in numbers that the profession has never seen before. It’s the Baby Boomer Bubble, up close and personal.

Our succession planning should focus on replacing that retiring partner’s contribution on several fronts. Depending on the role of the retiring partner in the firm we will experience varying levels of pain surrounding things like replacing significant knowledge or technical expertise, back-filling a block of hours to get the work done and shoring up voids left in firm leadership. These are all significant issues and deserve a plan of their own.

But the biggie  is the transition of client relationships. READ MORE →

Why Solo CPAs Won’t Sell Out

And what to do about it if you want to buy their practice.

What is it about the sole practitioner that prevents them from doing something that seems to make so much sense? They need to do something soon about succession planning. What's stopping them?This former managing partner of a super-regional CPA firm has a suggestion for growth-minded firms shopping for soloists' books of business.

By Gary Adamson, CPA

The 2012 PCPS Succession Survey is out and provides us with data from almost 1,000 firms across the US on how they are dealing (or not) with succession. The survey also reveals a lot of information that we can use to help us navigate our firms through the Merger and Acquisition waters. There is no question that M & A is hot. Take a look at any industry publication. It is unusual if Accounting Today’s daily edition doesn’t report a sizable deal.

The survey asked the multi-owner firms (509 participants) whether they had been in active M&A discussions in the last 24 months and/or if they were planning to be active in the next 24 months. Forty-four percent said yes! This is where it starts to get interesting…..of those 224 active firms, 64% said that they were the buyer, 15% said that they were the seller and 21% said that they could be both. Think about that last number. We have more firms today than ever before opening their minds to a transaction that will solve their problem(s) and being willing to look at all options.

One of the most interesting tidbits from the survey was a question directed to the 432 responding sole practitioners (solo) about practice continuation agreements. In case you are not familiar with this type of agreement, it is a document that most consultants (including this one) have been recommending to their CPA firm clients for years. The idea is that the solo enters into an agreement with a larger friendly firm to “step in” and acquire the practice in the event of the solo’s death or disability. It avoids the fire sale and provides some order and planning to what will happen. Makes a lot of sense for both parties. Right?

Ninety-four percent of the solos said that they do not have a practice continuation agreement with another firm. That is actually up from 91% in the 2008 survey and is in spite of larger firms pushing the concept for years. Your initial reaction to the numbers might be that there is a big opportunity here and you should  contact all of the solos in your area and start getting these negotiated and in place. That would be the logical but incorrect answer. After many conversations and interviews with solos I can tell you there is something else going on.

The message here is that there is just something about the sole practitioner, perhaps that deep down independence that makes them want to practice as a solo in the first place, that gets in the way of executing something that seems to make so much sense. The apathy is even more interesting given the aging of the Baby Boomers and the need to do something, soon. Rather than fight it, my suggestion is that if you are a larger firm you probably should look to other options besides chasing practice continuation agreements.

One option to consider that is a relatively new approach is the concept of a two step deal. It works if the solo is nearing retirement and it might give you a new reason to talk. The basic notion is that in step one the solo and the larger firm cohabitate while the solo maintains quite a bit of the desired independence and continues to serve the clients. Step two is down the road in two or three years and is when the buyout really begins.

The survey did provide some guidance on deal multiples and terms from the perspective of those same sole practitioners. These are expectations, not necessarily what they have been offered. When asked “what value do you expect for your practice when you retire”, 48% answered 100% of billings, 10% said 110% of billings and 11% said 120% of billings. The category receiving the next highest number of votes was 150%+ at 8%. Good luck on that! Although beyond the scope of this article there are a lot of factors in any deal that influence the multiple including things like geography, projected profitability in the acquiring firm, up front cash, retention/guarantee clauses, payout periods and the overall size of the transaction.

The answers to a second question on the number of years over which they would expect to be paid out were a little more diverse. Three years or less won 36% of the votes, five years was the most popular with 43% and the rest were scattered. Experience tells us that for most deals under two million dollars, four to six years is fairly common and we see most multiples ranging from 1 to 1.25.

A final thought if you are reading this and thinking about getting in the M&A game. I have heard a lot of partners say that they don’t want to do a particular deal with this firm or that firm because they will be fixing someone else’s problems. I’ve got news for you. If you are the acquirer, you are always fixing someone else’s problems. Make sure that you fully understand what they are.

Gary Adamson is the President of Adamson Advisory, specializing in practice management consulting for CPA firms, at www.adamsonadvisory.com.

Valuing Your Practice for Partner Retirements

How to brace yourself for the "Baby Boomer Bubble."

By Gary Adamson, CPA

I think about the BBB a lot. No, this BBB is not the Better Business Bureau; it is the Baby Boomer Bubble. There is constant reference by the news media about the aging of the Baby Boomers but I for one did not know exactly what it meant. Until I Googled it.

RELATED: How to Create a No-Equity Partner Position in Your Firm | What a Coach Can Do for You – and Your Firm | How to Balance the Six Jobs of Managing Partner | Planning a Partner Retreat for Real Results | The Partner Compensation Checklist | How CPA Firms Make Money in Turbulent Times

What I found is not good news for the accounting profession. The BBB is 76 million of us born in the United States between 1946 and 1964 and we are fairly evenly spread through those 19 years. That means the oldest of this huge bubble are 4 million folks who turned 65 last year. And, we have another 18 years to go!  READ MORE →

How to Create a No-Equity Partner Position in Your Firm

It may be the answer to keeping talented people.

by Gary Adamson, CPA

Most firms are faced with the dilemma of keeping long term managers who are major contributors to the firm but for whatever reason are not ready to be equity partners (or who perhaps never will have what it takes to be equity partners).

Here is a seven-point outline of what the no-equity position looks like, how it differs from the normal equity partner spot and some considerations to implement it in your firm.


Seven Pearls of Wisdom for the New Managing Partner

A thankless job: Divide, conquer and delegate.

Most CPAs are thrust into the managing partner role with little or no training or coaching. Who teaches you to be an effective managing partner? How do you know if you're performing well?

Your partners won't tell you. If you're new to the job, do you just do it the same way as your predecessor? Is that the best approach for the firm? Who will mentor you?

Gary Adamason, longtime managing partner of Dayton, Ohio-based, BradyWare, has been there, done that, and come back with a few wise words:

More at CPA Trendlines: What a Coach Can Do for You  |  How to Balance the Six Jobs of Managing Partner  |  The Partner Compensation Checklist  |  How CPA Firms Make Money in Turbulent Times

There are not too many places to turn for help. Whether you are new or a veteran, here is an approach to organizing the job with a focus on dividing and conquering and delegating when necessary. READ MORE →

What a Coach Can Do for You – and Your Firm

Five tough questions and five good tips to take your firm and your personal effectiveness to the next level.

Gary Adamson, former managing partner of Brady Ware CPAs, has become a living legend in the profession for taking his firm from a small, local player to a regional contender. But he's the first to admit he didn't do it alone. Coaching helped. In fact, during his career at the firm, he used two business coaches.

More from Gary Adamson at CPA Trendlines: How to Balance the Six Jobs of Managing Partner  |  The Partner Compensation Checklist  |  How CPA Firms Make Money in Turbulent Times

He learned a lot, and now he's sharing what he learned with CPA Trendlines.


How to Balance the Six Jobs of Managing Partner

You run the job, or it runs you over.

by Gary Adamson
Adamson Advisory

Most of us are thrust into the managing partner role in our firms with little or no training or coaching. Who teaches you to be an effective MP? How do you know if you're performing well?

Your partners won't tell you.  If you're new to the job, do you just do it the same way as your predecessor? Is that the best approach for the firm? Who will mentor you?

As I can attest from experience in running my firm for over 20 years, it is a thankless job. I just took a deep breath and jumped in. The best feedback that most of us get is from other managing partners and from benchmarking ourselves against other firms. There are not too many places to turn for help.

Whether you are new at the job or a veteran, here is an approach to organizing the job into six buckets that will help you. It is how I approached the responsibilities and it lends itself to dividing and conquering with the ability to delegate some responsibilities.

Here are my six buckets: READ MORE →