Who is Going to Take Over My Practice? July 11, 2011 Timothy I. Michel, CPA M ICHEL CONSULTING GROUP...
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Transcript of Who is Going to Take Over My Practice? July 11, 2011 Timothy I. Michel, CPA M ICHEL CONSULTING GROUP...
Who is Going to Take Over My Practice?
July 11, 2011
Timothy I. Michel, CPA
MICHEL CONSULTING GROUP LLC
Creating Practice Value
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Position Number
CEO/Managing Partner ___
Service line or industry leader ___
Practice Partner ___
COO/Firm Administrator ___
Department head (HR, IT, Mktg.) ___
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Position Number
CEO/Managing Partner ___
Service line or industry leader ___
Practice Partner ___
COO/Firm Administrator ___
Department head (HR, IT, Mktg.) ___
Leadership and management
Established relationships
Knowledge and expertise
Work ethic
Ability to deliver value
MICHEL CONSULTING GROUP LLC
Creating Practice Value
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Long-term viability of the firm Loss of clients Loss of knowledge and expertise Loss of established relationships
Affordability of partner buy-outs
Providing ongoing leadership, management and business development
Growing the firm’s value
Retaining firm succession options
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Aging Baby-boomer partners and key department leaders
Leadership program is often lacking
Future partner candidates • Some have left public accounting• Many are not willing to make the commitment
Many firms have not addressed their issues
Result - M&A opportunities
Regarding multi-owner firms:
63% will have succession issues within 5 years
Only 35% have a succession plan in place
41% have a partner track program in place
MICHEL CONSULTING GROUP LLC
Creating Practice Value
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Year = 2003
Top 100 firm – average growth = 12%
About 25 shareholders, 10 offices, 200 people
Polled partner group re: retirement plans
Close to one-half retiring within 10 years
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Question – How do we create enough leaders to replace those who are retiring and provide for future growth?
• Determine the super-stars
• Rea NextGen program
• Manager and Senior workshops
• Coaching – mentoring – training emphasis – awards
• Addressed specific issues
• Create the Rea Academy
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Discuss the succession issues facing firms
Review approaches to address succession
Discuss structural, cultural and operational solutions
Does your firm have a formal written succession plan in place identifying specific upcoming retirements and plans to transition the clients, knowledge and relationships of the retirees?
Yes ___
No ___
MICHEL CONSULTING GROUP LLC
Creating Practice Value
MICHEL CONSULTING GROUP LLC Creating
Practice Value
First generation partners
Desire to pass on something of value
Book of business = security blanket
Trusted advisor relationships
A loss of status, position, value or worth
Like estate planning, it is easy to put off
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Easier to ignore than deal with
Our people are busy and committed
You can’t replace the person or the passion
Kickback from clients
“No one is ready or willing to step up”
The firm hasn’t addressed training
Perhaps not a priority to retiring partner
MICHEL CONSULTING GROUP LLC Creating
Practice Value
1. Poll partners and department heads
2. Create a firm succession timetable
3. Require individual transition plans
4. Prepare an overall firm plan
5. Provide for accountability
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Poll partners and department heads *** Desired retirement date Full or partial retirement Current roles and responsibilities Client relationships Specialized knowledge, expertise,
certifications Important relationships Potential successors and their state
of readiness Short-term contingency issues
Create a succession timetable ***
Paints a picture of the succession issue
Raises awareness among the partners
Place succession as a firm priority
MICHEL CONSULTING GROUP LLC
Creating Practice Value
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Require individual written transition plans, detailing ***
Specific successors
Transition steps to be completed
Assignments and timelines
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Prepare an overall written firm succession plan, including
The key-person retirement schedule
A firm impact report
The plan to mitigate risks related to specific retirements
A means of accountability
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Generally, my firm begins the formal transition process from a retiring partner/department head to his/her successor at the following time frame before retirement:
___ Not specific ___ 3 years
___ 1 year ___ 4 years
___ 2 years ___ 5 years
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Has your firm defined roles, responsibilities and attributes for positions of leadership (CEO/MP, COO, Services line and industry niche leaders, department heads, etc.)?
Yes ___
No ___
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Define the role based upon the firm’s needs
Create a profile of the position Determine the candidates Do personality profiling of
candidates Interview candidates & make
selection Transition
Clients Referral sources Key relationships Knowledge and expertise
MICHEL CONSULTING GROUP LLC Creating
Practice Value
My firm operating agreements require an equity owner to retire at:
___ Age 65
___ Social security normal retirement age
___ Not addressed in the agreement
___ Other
MICHEL CONSULTING GROUP LLC Creating
Practice Value
My firm operating agreements require an owner to give the following notice before retirement :
___ Not specific ___ 3 years
___ 1 year ___ 4 years
___ 2 years ___ 5 years
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Operating and owner agreement provisions
Require adequate notice
Consider death, disability, early and normal retirement, involuntary withdrawal
Covenant-not- to-compete clauses Clients Staff
Realistic and fair valuation methods
Require continual cooperation and goodwill
MICHEL CONSULTING GROUP LLC Creating
Practice Value
1. Create a partner development program Define desired partner attributes Define the core competencies needed Introduce attributes and competencies into
staff development Identify superstars Provide training, development and
coaching ***
2. Create a contract partner position Flexible plan defining their role, number of
hours and the determination of pay Always at the firm’s discretion
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Has your firm developed a formal program to allow retiring partners to continue with the firm as an employee or in a similar capacity on a reduced schedule?
Yes ___
No ___
MICHEL CONSULTING GROUP LLC Creating
Practice Value
Has your firm developed a formal leadership development program or partner development program, either in-house or in conjunction with outside programs?
Yes ___
No ___
MICHEL CONSULTING GROUP LLC Creating
Practice Value
3. Other partner items Utilize income-partner-in-training program Provide an easy partner buy-in and buy-out
4. Promote the right partner behavior Increase leverage Delegate challenging work Train and coach staff Share relationships with clients, business
referrals and distribution channels
MICHEL CONSULTING GROUP LLC Creating
Practice Value
5. Plug the 6-8 year exodus from the profession
Share the best parts of public accounting Relationships Clients Reward and recognition
Have open discussions about the opportunities
Involve them in firm matters Provide leadership, soft skill and BD training Offer an array of career opportunities Make it personal
MICHEL CONSULTING GROUP LLC Creating
Practice Value
6. Make the partner role more appealing Lose the “It sucks to be you” syndrome Get partners to behave better – be a role model Create a career path that is attractive Make it fun, interesting, challenging &
rewarding Inform staff about the partner world Inform staff that industry also has its demands Educate staff on the advantages
Personal achievement and growth Good money Making a difference in people’s lives – clients, staff,
and community
MICHEL CONSULTING GROUP LLC Creating
Practice Value
7. Joint partner/manager meetings – discuss issues and make them responsible for solutions
8. Tie transition steps to partner compensation
9. De-emphasize book-of-business model Promote – ‘Firm clients – firm resources’ Build a team to serve the clients Reward behavior through compensation
10. Create a firm structure and culture that promotes continual succession
MICHEL CONSULTING GROUP LLC
Creating Practice Value
MICHEL CONSULTING GROUP LLC Creating
Practice Value
11. Develop talented staff
Communicate the firm vision Provide challenging work Hold them accountable for
responsibilities Involve in decision making Timely performance feedback Provide advancement opportunities Training, coaching and mentoring Recognition and reward Make it fun