Succession Planning For Accounting Firms
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Transcript of Succession Planning For Accounting Firms
Succession Planning For Accounting Firms
Joel SinkinAccounting Transition Advisors
Accounting Transition AdvisorsAbout the firm:• Merger and transition advisors exclusively serving the
accounting industry• Customized solutions• Over 950 transactions, over 18 years of experience• Represent the buyer or seller• Services include:
Buyer-seller introductions Merger and acquisition transaction structure Document preparation/review, valuation and due diligence Post-transaction business planning General consulting and coaching
If there are 50 things you need to think about in a transaction…….
……the smartest of us will think of only 35
Why is Activity So High?Competition
Staffing
Technology
Niche Development
Aging of the partners/staff
The economy
Three Ways to Grow
One client at a time
Develop marketable niches
Merge or acquire another firm
Starting the Transition ProcessWhen should we start?
How many more tax seasons doyou want to work?
Client “face time”
Investments including technology, leases, staff
Start succession process during establishment of new firm and partnership agreements are in draft
How Do You Find a Candidate? Advertising
Networking
Direct Mail
Outside consultant or broker
Internal search
Is Your Successor Ready? Do you know……….
……why the other firm wants to merge?
....... the staffing situation/excess capacity?
…… their physical space requirements?
…… current technology and equipment?
…… financial strength or issues?
Bigger is not always better!
How to Select a SuccessorSpecialties that you offer that they would need to understand
Size of successor, retention rates and excess capacity
Billing rates/ Professional credentials Location(s)
Culture
How to Select a SuccessorFinancial strength
Professional/staffing strength
Ethnic/language considerations
Longevity of partners
Employee track record
What is the Seller Thinking?
“I am irreplaceable”
“I am MASTER of my owndomain!”
“Clients NEED me”
“If I retire, I’ll die!”
Sales – Internal v. ExternalInternal Sales
•Almost always go for less•Often no retention period•Death, disability and penalty buyouts•Remaining partners making more•Non multiple formulas on gross are more common•Accounts Receivable & WIP
External sales are more of a “business” deal and go for high dollars
Sales – Internal v. ExternalThings to be wary of…………
•Multiple partners, leaving simultaneously
•Partners reducing time commitment, but not income or control
•Replace the role, not the body
•Cannot replace the administrator with a “Rainmaker”
•Must have excess capacity
•Partnership agreements (check them annually)
Attracting the Best Talent
WANTED: Smart, energetic, hardworking,client-focused, future thinking,flexible professionals to join our fabulous firm!
Pointers for Finding TalentYou can’t attract talent with empty offices
Quality of life issues are important
Reward the Rainmaker
Need staff to do the work
Leadership qualities
Sweat equity should count!
Baby boomer crisis looms ahead
MERGERS FOR SUCCESSION
•Two Stage Deals▫Concept is remain whole in compensation,
remain in control while commencing transition
▫Structure▫Case Study Example▫Built in practice continuation agreements
Do Practice Continuation Agreements work
MERGERS FOR SUCCESSION
•Have agreed upon time tables for the role reductions of the retiring partners
•Cull out sale•Have everything in place before you start:
▫Terms▫Transition plan▫The capacity to takeover the retiring
partners▫Space, staff, firm name
Do your homework!
History and background of the firm
Client retention rates
Billings vs. collections, billing rates
Compensation packages of all firm members
Employee manual, employee contracts
Furniture, equipment, assets and leases
Pricing, billing and collections
Profitability
Due Diligence
Due DiligenceClients
Who does the workWhere is the work completed?How many clients require face time?FeesIndustries servedServices for clients
Collections age analysis of A/R and cash flow (per month)
Focus on how you will run the firm,
not how it is currently managed
Due DiligenceFirm culture
Potential exposure issues
Quality control issues
Retention rate of employees
Work papers
Leases or other obligations
Other ThoughtsGeneral “chemistry” between the parties
Continuity of relationships will help retain clients
A good deal is a fair deal
Remember, it’s the package, not the individual variables
Staff merging
Other ThoughtsDocumentation
Restrictive covenants
Roles and responsibilities
Hold Harmless
Basic firm contact information
Arbitration for disputes
Divorce clauses, where appropriate
Accountability of both parties
The Transition…..
Client Communications
Roles for new staff members
Specialization
Other Thoughts
For more information
Please visit our website for resources includingfree reports, whitepapers and case studies.
Joel [email protected]
1-866-279-8550www.TransitionAdvisors.com