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
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

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.
READ MORE →

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
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

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.
READ MORE →

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
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

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.
READ MORE →

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
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

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.
READ MORE →

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
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

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.
READ MORE →

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)
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

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.
READ MORE →

How Partners Fail

Midsection of businessman moving out with cardboard box from officeAnd why: The metrics every CPA needs to know.

By Domenick J. Esposito
8 Steps to Great

“Status quo, you know, is Latin for the mess we’re in.”

– Ronald Reagan

You have heard it many times before. Worse yet, you are living it today.

MORE ON STRATEGIC PLANNING: Ineffective Management Is Hazardous to Your Firm’s Health | Why Do We Accept Poor New Business Results? | The Link Between Strategy and Winning on Value | Focus On an Enhanced Client Experience | 22 Things Leaders Must Do | 21 Questions to Help Unlock Accelerated Growth | M&A Candidates: Valuations and Vetting
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Today, many small and midsized CPA firms are being challenged by slow organic growth coupled with:

  • An unprecedented pace of technological change
  • Very intense margin pressure
  • Too many competitors
  • A shortage of qualified talent (particularly in the tax area)

READ MORE →

Ineffective Management Is Hazardous to Your Firm’s Health

Red warning sign9 warning signs, plus 4 things a managing partner should NOT be.

By Domenick J. Esposito
8 Steps to Great

Hard to believe but every year there are a number of small and midsized CPA firms that either “die on the vine,” break up or merge up as “damaged goods” if a well-run firm is willing to take them on.

MORE ON STRATEGIC PLANNING: Why Do We Accept Poor New Business Results? | 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 | AI Likely to Accelerate Merger Mania
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Why is it that so many firms continue to spiral into a slow death? It’s because they are aware of the danger signals but little, if anything, is done about them or because they are not paying attention to the warning signs including the following:
READ MORE →

Why Do We Accept Poor New Business Results?

5 critical steps to turn things around.

By Domenick J. Esposito
8 Steps to Great

The question to ask is why do so many firms accept poor performance from so many of their partners relative to growth and generating revenue?

MORE ON STRATEGIC PLANNING: Is It Time to Manage Your Receivables Like a Real Business? | 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)
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

There isn’t a firm in existence that does not depend on constant growth to be successful and to generate enough profit to pay its staff and partners well.  Yet, so many firms accept the old bell-shaped curve argument that they are winning if just 20 percent of their partners are good at generating business.
READ MORE →

Is It Time to Manage Your Receivables Like a Real Business?

Consequences: Are there any?

By Domenick J. Esposito
8 Steps to Great

It never ceases to amaze me how lax many small and midsized CPA firms are when it comes to managing their work-in-process and accounts receivable and optimizing their cash flows.

MORE ON STRATEGIC PLANNING: Profitability Requires Discipline | The Link Between Strategy and Winning on Value | Focus On an Enhanced Client Experience | Solve the Partner Comp Problem | 6 Rocks in the Path to Growth | Use Compensation to Shape Partner Behavior | The Importance of M&A Culture Due Diligence
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Sloppy billing and collecting policies often result in lost billing opportunities (i.e., if you don’t bill it timely, clients forget the value you provided and resist receiving a bill 90 days after the work was performed) and for a need to have a relatively large line of credit. Sloppy policies also result in year-end fire drills with clients when partners “beg” clients for cash before the end of the firm’s fiscal year end.
READ MORE →

Profitability Requires Discipline

19 basic principles to improve operations ... but don't treat them like "flavor of the month."

By Domenick J. Esposito
8 Steps to Great

We all know that improving profitability on a sustained basis generally is a long-term play that requires significant planning, discipline, accountability, implementation and patience.

MORE ON STRATEGIC PLANNING: The Link Between Strategy and Winning on Value | Mine Vs. Yours Vs. Ours | 22 Things Leaders Must Do | 21 Questions to Help Unlock Accelerated Growth | Quality Work, Quality Service Not the Same Thing
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Unfortunately, the senior partners at many small and mid-sized CPA firms do not possess all of these attributes and therefore are unable to make significant strides in their bottom-line distributions to their partners. While it’s an uncomfortable scenario, it’s reality and almost understandable as many small and midsized CPA firms are thinly managed and do not have the leadership that is necessary to change the inevitable path of merging up.
READ MORE →

The Link Between Strategy and Winning on Value

One is a tool, not an end itself.

By Domenick J. Esposito
8 Steps to Great

There is a wide chasm between talking about value and making your firm a value-based-firm (“VBF”). The first step in transforming your firm from just another accounting firm to a VBF is to develop the strategic framework that will consistently deliver value to your clients.

MORE ON STRATEGIC PLANNING: Mine Vs. Yours Vs. Ours | 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) | Does Your Firm Need an Independent Executive Committee Member? | 10 Ways to Link Compensation and Strategy
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

There have been tons of articles written about strategy, its importance and multiple “how-to” models. In many articles, the discussion focuses on creating that “killer” strategy that will propel your firm to stardom and unlimited profits.
READ MORE →

Mine Vs. Yours Vs. Ours

Businessman tightly holding briefcase with dollar sign on it15 ways to take an entrepreneurial approach instead.

By Domenick J. Esposito
8 Steps to Great

It is a very prevalent view that midsized law firms are not particularly well led and well managed.

MORE ON STRATEGIC PLANNING: Pitching Vs. Pursuing | Focus On an Enhanced Client Experience | New Year’s Resolution: Solve the Partner Comp Problem | 6 Rocks in the Path to Growth | Use Compensation to Shape Partner Behavior | The Importance of M&A Culture Due Diligence | Are You Attracting the New Breed of Equity Partners?
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Many of their partners operate as silos and refer to clients as “my clients” and my book of business.” Sure, they share space and other overheads but they do not institutionalize clients for the long-term benefit of the firm.
READ MORE →