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Is HR Ready for Your Firm to Grow?

Your efforts have implications. Don’t assume everyone is as prepared as you are.

By Domenick J. Esposito
8 Steps to Great

“If you pick the right people and give them the opportunity to spread their wings – and put compensation as a carrier behind it – you don’t have to manage them … This whole game of business revolves around one thing: You build the best team, you win.” – Jack Welch, former CEO of General Electric

Now that you are equipped with a strategic plan that is realistic and focused on implementation and accountability, and you have a sound governance and economic model, let’s chat about what else it takes to build a mid-market sustainable brand.

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It begins by recognizing that all partners are not created equal. You need a combination of
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PRO Member Exclusive

You Probably Have Too Many Partners

man sitting at desk, staring off thinking

Average collected rates are only part of the equation.

By Domenick J. Esposito
8 Steps to Great

More often than not, CPA firms support too many partners relative to the firm’s revenue, profitability and its anticipated growth rate. That usually means, too, that the partners are doing a lot of work that could or should be done by staff.

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Look at the average revenue per partner for the mid-market sustainable brands and you will see that the trend is to get more done with fewer partners, more staff and more effective use of technology.
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PRO Member Exclusive

Ten Ways to Solve an Upside-Down Staffing Pyramid

senior businessman with five colleagues

And six undesirable outcomes if you don’t.

By Domenick J. Esposito
8 Steps to Great

There is no question that the most profitable CPA firms (i.e., those with the highest average partner earnings) have figured out that leverage and a well-managed partner/staff pyramid is one of the key ingredients for success.

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Why is it then that so many firms today are struggling with just the opposite – an upside-down partner/staff pyramid where there are

  • too many partners and managers,
  • too few staff and
  • too little use of technology?

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PRO Member Exclusive

Why Firm Governance and Economics Matter

Three critical components of success.

By Domenick J. Esposito
8 Steps to Great

“Growth is never by mere chance; it is the result of forces working together.” – James Cash Penney, founder, JCPenney

Your firm is a business and the vehicle for generating wealth for you and your partners. You need to operate it with strict governance processes, a system of accountability and a firm economic foundation.

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Balance sheets, usually funded by partner capital and a line of credit for seasonal working capital needs, need to be strong to protect your CPA firm from the loss of a senior partner, loss of a marquee client or just an overall poor economy that results in tepid growth for clients and therefore a reduced appetite for professional services.
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LEADERSHIP

Your Strategic Plan Requires Specific Tactics

Overhead view of five people in a meeting

Accountability is crucial.

By Domenick J. Esposito
8 Steps to Great

Once you know where you want to go and when you want to get there, the next step requires you to develop the tactics or steps on how you and your partners are going to get there.

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Let’s take an example. Assume, for purposes of illustration, that your strategic plan and your firmwide balanced scorecard indicate that you will elect a new CEO in the next year or two.
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PRO Member Exclusive

Get Partners to Commit to a Balanced Scorecard

hands pointing toward business documents on desk

Don’t waste your strategic planning.

By Domenick J. Esposito
8 Steps to Great

When an initial draft of the strategic plan has been agreed to by your initial strategy think tank, the next step requires you to expand the process to all the partners. This can be a very painful process, but it is a healthy one that must take place. It creates buy-in and will clarify who is on the bus and who isn’t.

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Lots of good things happen in this phase of the strategic plan.  A number of your partners, who may be questioning if this firm is the firm that they want to be part of as they build their careers, will begin to see that your merely good firm is trying to transform itself into a mid-market sustainable brand.
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LEADERSHIP

How to Compete Against Any Size Accounting Firm

Yes, you can “run with the big dogs.”

By Domenick J. Esposito
8 Steps to Great

Even these days – or, especially these days – there is room in the CPA firm market to build a powerful mid-market sustainable brand and, yes, potentially the category killer.

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The opportunity is there for the taking.

But you need to focus on what matters if you want to “run with the big dogs.”

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FEATURED

Will New Taxes Push You to Cash Out?

It might be time to implement Plan B.

By Domenick J. Esposito
8 Steps to Great

The new administration faces global uncertainties. Biden officials have set the stage for higher corporate and individual tax increases.

MORE from DOM ESPOSITO:  Keep Your Firm from Biting the Dust | The Six Ingredients for Firm Value | Four Ways to Add $100,000 in New Business Fees Every Year | Eight Steps to Small Firm Survival | No Partner Candidates? Whose Fault Is That? | Prune Your Firm: ‘Rightsize’ Managers and Partners | How Partners Fail | Ineffective Management Is Hazardous to Your Firm’s Health | Profitability Requires Discipline |

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At the same time, if your midsized CPA firm has not at least started to move away from a general “compliance shop” to either:

  • a specialized niche firm that has established a brand in the marketplace that transcends size and locations, or
  • a professional services firm that provides advisory/consulting, accounting, tax and assurance services to marquee clients in specialized industries,

its worth or valuation in the marketplace continues to diminish from the historical one times revenue payable upon individual partner retirements over 10 to 12 years.

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FEATURED

Why So Many M&As Fall Short

Three office workers glaring at cameraPLUS: The 3 prongs of culture and why they matter.

By Domenick J. Esposito
8 Steps to Great

Principally because of the “post COVID-19 blues” and anticipated difficulty in growing organically at an acceptable rate and because of the ever-increasing number of baby boomer retirements, there is a sense that small and mid-sized firms will continue to merge at a healthy pace.

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To illustrate, in just the past few weeks, we learned that Anders CPAs + Advisors picked up Cummings, Ristau & Associates (both of St. Louis), Adams, Brown, Beran & Ball Chtd (Great Bend, Kansas) added Jonesboro, Arkansas office of EGP PLLC and Hancock Askew & Co. (Georgia and Flordia) acquired CAPA (Miami). These are noteworthy transactions and we believe that there are more to come.
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CHARTS & GRAPHS

Retired CPA Partners Face Pay Cuts from Covid

Facing the fallout from the Covid crisis, 10 percent of small and midsized firms are already trimming compensation for retired partners.

Firms target annual net profit caps, early retirement provisions, and mandatory retirement ages.

By Domenick Esposito

With profits likely to take a short-term hit, retired partners at many CPA firms are facing cuts to their payouts, according to our straw poll of 30 leading firms.

MORE from DOM ESPOSITO:  Keep Your Firm from Biting the Dust | The Six Ingredients for Firm Value | Four Ways to Add $100,000 in New Business Fees Every Year | Eight Steps to Small Firm Survival | No Partner Candidates? Whose Fault Is That? | Prune Your Firm: ‘Rightsize’ Managers and Partners | How Partners Fail | Ineffective Management Is Hazardous to Your Firm’s Health | Profitability Requires Discipline |

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Coronavirus crisis updates: Start here for a guide to all our coverage.

With Covid-19 hurting revenues and bottom lines, firms of all sizes are reconfiguring their staff loads and renegotiating their space requirements.

But we haven’t heard much about what firms are doing about their obligations for deferred compensation partner retirement plans. Until now.

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CHECKLIST

Keep Your Firm from Biting the Dust

"Sorry WE'RE CLOSED" sign hanging in windowCHECKLIST: The 12 key objectives and 23 day-to-day responsibilities of successful managing partners.

By Domenick J. Esposito
8 Steps to Great

While there are lots of reasons why small and midsized CPA firms don’t realize their full potential – and, in some situations, fail or bite the dust – we have found that the downward spiral of a firm usually starts with the managing partner.

MORE ON STRATEGIC PLANNING: 6 Ingredients for Firm Value | 4 Ways to Add $100,000 in New Business Fees Every Year | Prune Your Firm: ‘Rightsize’ Managers and Partners | Ineffective Management Is Hazardous to Your Firm’s Health | Profitability Requires Discipline | Pitching Vs. Pursuing
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The managing partner is the heart and soul of any CPA firm – the shepherd, orchestra leader, or quarterback, if you prefer, of the partner group – who didn’t fully understand the key objectives and day-to-day responsibilities of his or her role, and therefore, failed to operate on all cylinders.

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