SUCCESSION & RETIREMENT

Business Owners Face One of Three Exits

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Businessman putting a card with text "Don't resist change, embrace it" in suit pocketExpect to sell your practice? Not if you resist change.

By Frank Stitely
The Relentless CPA

In talking to firms from around the country, I realized there are three types of firms out there:

  1. Firms and practitioners that are sliding into retirement, whether they know it or not
  2. Firms that see the need for change, but don’t know where to start
  3. Firms that see a clear path to the future through better practice management

MORE: Don’t Let Clients Dictate Tax Workflow | Make Fewer Mistakes, Increase Revenue and Capacity | How Small Firms Can Win the Talent Wars | Easy Ways to Avoid ‘Done But’ Tax Returns | Six Ways to Create a Millennial-Friendly Firm | Do You Know Your Turnaround Time?
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Since publishing my first book and launching my firm’s workflow and collaboration application, I have talked to practitioners from firms of all types and sizes. My CPA firm pursued a few acquisition opportunities. During the process, I learned there are a lot of practitioners who are either incapable of adapting to our profession’s 21st-century changes or unwilling to adapt. That’s okay, if you are making an informed choice to retire and don’t care about realizing much in value by selling your firm.

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OUTLOOK 2023: Grow Your Own Partners

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A little at a time still gets you there.

By Kristen Rampe
The Rosenberg MAP Survey: National Study of CPA Firm Statistics

Retiring will continue to be difficult for many partners of small firms. Even if on paper they’ve done their job of bringing in new partners, many of their successors already have a full book of business and can’t absorb all of the outgoing partner’s client bases.

MORE: OUTLOOK 2023: Authenticity Comes to the Workplace | Private Equity Pumps Up Paychecks | Look Who’s Making Money Now | Compensation Gets Creative | The Office Is Over | Accounting Firms Face Up to Private Equity
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Not to mention that many newer-generation partners have no appetite for the long-hours lifestyle of baby boomers. It’s not uncommon to need two new partners to replace a founder who’s been working 3,200+ hours per year. Few want that job.
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Five Ways to Put Success into Succession Planning

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A robust mentoring program can be critical.

Three climbers helping each other up a hill

By Bill Penczak

Legendary General Electric CEO Jack Welch is reported to have lamented the choice he’d made in his successor, choosing someone based on their personality and ability to navigate the politics of the position instead of someone who could successfully lead the company into a brighter future. Welch was correct. Today, GE is a shell of its former self because of its leadership choice.

MORE: O.D. Lanier: Stepping Into Advisory | Secret to Success? A Growth and Abundance Mindset | Future Firm Growth Requires a Mindshift |The Great Resignation: Five Reasons Accountants Are Quitting | Five Global CPA Leaders: Four Survival Strategies | Planning for Success in 2021 | Do You Have the Guts to Beat the Covid Crisis?
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Welch’s one gaping failure as an otherwise stellar executive started me thinking about the current state of baby boomer-led and owned CPA firms, and how many of them are likely to commit the succession errors of GE. Or worse, do nothing at all in terms of creating and sustaining a CPA firm into its next iteration.

As firms are giddy with the prospect of a new year and with COVID in our rear-view mirrors, here are five considerations for generational succession of a middle market firm:

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Donny Shimamoto: Future Firm Growth Requires a Mindshift

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We can’t keep going the way we’re going.

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The Disruptors
With Liz Farr for CPA Trendlines

Donny Shimamoto, CPA.CITP, CGMA, says that one of the COVID pandemic’s benefits is accelerating technology adoption.

MORE: Jennifer Wilson: Empower Young Workers to Build the Firm Everyone Loves | Mike Whitmire: Re-Think Your Hiring and Training Practices | Hector Garcia: Success Strategies of a Quickbooks YouTube Superstar | Blake Oliver: Why Tax Work Yearns To Be Free| Private Equity Explodes in U.K. | Brannon Poe: The Status Quo Must Go  | Accounting Nerds, Unlock Your Super Powers  | Disruptor: Jason Statts Shakes Up the Status Quo | Think Small to Think Big with Matt Wilkinson | When Financial Statements Go Extinct with Corey Schmidt | Can Geraldine Carter Save Accountants from Themselves? | Re-Inventing Accounting with Tyler Anderson

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With the ongoing talent crunch, technology is one of the ways firms can get the work done with fewer people, as firm owners seek to create a sustainable balance “because we can’t keep going the way that we’re going.”

PRO Members always get all the top takeaways, details on the guest, and the full transcript.

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Who Wants to Be Partner? Not Enough

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Anybody? Anybody? Bueller? Please?

By CPA Trendlines Research

As if the general and long-term shortage of accountants isn’t bad enough, now we’re seeing a widespread reluctance to take the final step in an accounting career, the step into partnership.

MORE: OUTLOOK 2023: Compensation Gets Creative | What New Leaders Want in Ownership | Getting Partners to Accept a New Pricing Philosophy | Survey Results: Partners Rejoice on Surging Fee Growth | Headcounts Grow 5%; Pay Rates Surge at 7% Pace | Fourteen Rules for Lateral Partner Hires

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This is serious. According to the 2022 Rosenberg Survey, a quarter of all partners are over the age of 60 and either near or past many mandatory retirement ages. Many have sold their equity yet continue to work just to help their own firms grapple with personnel shortages.

But nobody works forever.

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What New Leaders Want in Ownership

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Is your firm ready to pass the baton?

By Terrence E. Putney

Buying into a firm as a new owner involves great opportunity, but also significant risk. It is reasonable for ownership candidates to evaluate the potential for professional and financial rewards before taking such a step. Therefore, firms must be willing to honestly assess the potential risks and benefits for candidates as they seek to attract new partner-owners who can contribute meaningfully to the firm’s continued success.

MORE: What’s the Why? | Learn How to Let Go and Let Someone Else Step Up | How to Close the Generation Gap | How to Encourage Firm Ownership | Each Generation Must Change
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Most of the firms we work with on succession planning start off with a strong preference to remain independent. They want to avoid having to sell or merge in order to address the need to pay off and replace retiring owners. The common reasons we hear cited are:
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Secret to Success? A Growth and Abundance Mindset

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Transformation Talks: Mike Maksymiw, CPA, CGMA, says the secret to success and transformation in accounting is to be willing to learn, believe there’s enough work for everyone…and allow yourself to be vulnerable.

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Transformation Talks
With Bill Penczak
Center for Accounting Transformation

Center for Accounting Transformation
Center for Accounting Transformation

After 16 years of working in firms, Mike Maksymiw, CPA, CGMA, was done.

He went to his employer with his concerns about wanting to do something else. Instead of encouragement to pursue another area in the firm, he was persuaded to remain on the partner track he was on. Maksymiw decided he’d rather move on.

MORE on Aprio: Why Tax Work Yearns To Be Free | The FinTechFlood: Accounting Will Never Be the Same | Top Issues for 2022: Talent, Time and Transformation | What’s in a (Firm) Name?

MORE: Five Lead Generation Mistakes to Avoid | Five Post-Tax Season Growth Ideas | Five Better Ways to Say No | Are You Solving Your Clients’ Problems? | Five Ways to Grow: Talent New Service Lines | Business Development and Sales Aren’t Scary
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“I didn’t have anywhere to go when I left. I just knew I needed to go,” he said. “So, after, you know, a couple pandemic busy seasons, learning about the Cares Act, being a national leader at the firm at that, like I was toast. So, my family and I just went to Hawaii stayed there for two weeks.”

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