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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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 DustThe Six Ingredients for Firm ValueFour Ways to Add $100,000 in New Business Fees Every Year | Eight Steps to Small Firm SurvivalNo Partner Candidates? Whose Fault Is That?Prune Your Firm: ‘Rightsize’ Managers and PartnersHow Partners FailIneffective Management Is Hazardous to Your Firm’s HealthProfitability 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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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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6 Ingredients for Firm Value

Man preparing bread for bakingShould you merge? What can you offer your people?

By Domenick J. Esposito
8 Steps to Great

I am often asked two questions by small and midsized CPA firms:

  • How do we create significant firm value?
  • If we can get there, should we sell or stay independent?

MORE ON STRATEGIC PLANNING: 4 Ways to Add $100,000 in New Business Fees Every Year | 8 Steps to Small Firm Survival | 10 Roles of an Executive Committee | Why Do We Accept Poor New Business Results? | The Link Between Strategy and Winning on Value
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The answers to these questions, of course, depend on a firm’s particular facts and circumstances and one size does not fit all. Nevertheless, I am happy to share my perspective based on best practices.
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4 Ways to Add $100,000 in New Business Fees Every Year

Green road sign reading "New Business Just Ahead"Help others to help you.

By Domenick J. Esposito
8 Steps to Great

All partners and partner candidates in small and midsized CPA firms are very aware that they need to originate new business each and every year. Some are very successful at this aspect of the business; others not so much.

MORE ON STRATEGIC PLANNING: 8 Steps to Small Firm Survival | Don’t Have Partner Candidates? Whose Fault Is That? | How Partners Fail | Is It Time to Manage Your Receivables Like a Real Business? | Mine Vs. Yours Vs. Ours
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Many of those who are not very successful at originating new business haven’t developed the necessary skills to be effective at it. As a result, it isn’t an awful lot of fun.
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8 Steps to Small Firm Survival

Hand holding a pile of dirt with a plant growing from itGo big or go deep: Here’s how.

By Domenick J. Esposito
8 Steps to Great

There are approximately 14,000 multi-partner CPA firms in the U.S. and yet, according to Accounting Today’s 2018 Top 100 Firms survey, only 100 firms had annual revenues of at least $40 million; the median revenue was approximately $86 million.

MORE ON STRATEGIC PLANNING: Don’t Have Partner Candidates? Whose Fault Is That? | How Partners Fail | Is It Time to Manage Your Receivables Like a Real Business? | Mine Vs. Yours Vs. Ours | 22 Things Leaders Must Do | 21 Questions to Help Unlock Accelerated Growth | M&A Candidates: Valuations and Vetting
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The statistics are staggering. We have many small CPA firms in this country serving the mid-market and, regardless of size, in this emerging economy many firms are finding it difficult to organically grow their audit/tax practices at an acceptable rate (say 6 percent to 8 percent per annum). Without healthy profitable growth on the top and bottom lines, any firm will struggle and ultimately die.
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No Partner Candidates? Whose Fault Is That?

Magnifying glass over pin in a haystack8 competencies to develop.

By Domenick J. Esposito
8 Steps to Great

As I travel across the country working with small and midsized CPA firms, one of the most common concerns expressed by managing partners and other senior partners at these firms is, “We don’t have a sufficient number of partner candidates who can help perpetuate the firm into the next generation.”

MORE ON STRATEGIC PLANNING: Prune Your Firm: ‘Rightsize’ Managers and Partners | 10 Roles of an Executive Committee | Why Do We Accept Poor New Business Results? | The Link Between Strategy and Winning on Value | The Top 11 Reasons CPA Firm Mergers Fail
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When I ask the question, “What are you doing to develop the next generation?” I usually hear a lot of lip service and superficial things that, in most cases, don’t add up to a hill of beans.
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Prune Your Firm: ‘Rightsize’ Managers and Partners

Apple surrounded by tape measureBenchmarks for measuring your firm, plus 5 ways that firms get upside down.

By Domenick J. Esposito
8 Steps to Great

Is rightsizing partners and managers that difficult? The simple answer is no!

MORE ON STRATEGIC PLANNING: 10 Roles of an Executive Committee | How Partners Fail | Is It Time to Manage Your Receivables Like a Real Business? | Mine Vs. Yours Vs. Ours | 22 Things Leaders Must Do | 21 Questions to Help Unlock Accelerated Growth | M&A Candidates: Valuations and Vetting
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While I acknowledge that it is not easy to rightsize your small or midsized CPA firm, I believe that many firm leaders can do (must do) a much better job when it comes to outplacing unproductive partners and managers.
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10 Roles of an Executive Committee

People seated in board room in near silhouettePlus who should serve and for how long.

By Domenick J. Esposito
8 Steps to Great

Every small and midsized CPA firm requires an executive committee that serves as the key corporate governance mechanism within a firm.

MORE ON STRATEGIC PLANNING: How Partners Fail | Ineffective Management Is Hazardous to Your Firm’s Health | Profitability Requires Discipline | Pitching Vs. Pursuing | The Top 11 Reasons CPA Firm Mergers Fail | Growth: The Difference between the Disruptor and the Disrupted? | M&A: Sometimes Bigger Is Better | What a Value Proposition Truly Is (and Isn’t)
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Said simply, an effective executive committee keeps its nose in but its hands out. In other words, an effective executive committee has the responsibility to be the check and balance over a firm’s operations but isn’t responsible for running the day-to-day activities. That is the responsibility of the firm’s CEO and the firm’s operating or management committee.
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