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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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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