Trending: What I’m Seeing at CPA Firms This Year

Marc Rosenberg, CPA / Nov 26, 2018

Staff.  Firms are continuing to step up their efforts to be more liberal and staff-friendly with their staff policies.  More unlimited PTO polices including many variations of this, working remotely, staff setting their own hours, etc.  Unfortunately, I am not seeing any changes in the lip service most partners give to staff mentoring.  80% of firms never make it to the second generation – many reasons for this but a big one is that the quality of partner mentoring sucks.

Every new firm under $10M that I meet – not just most, but every firm – starts immediately talking about their biggest problem:  how hard it is to find qualified staff, retain them and develop them into leaders.

Mergers.  Some truly extraordinary shifts taking place in a merger market that has been frenetic for ten years now, fueled by the perfect storm of aging Boomers, short supply of staff and firms’ continuing weakness at mentoring and retaining their best and brightest.

  • 2018 is finally the year where the merger market has completed its shift from a sellers’ to a buyers’ market. There are so many sellers that buyers are rejecting more and more previously attractive merger candidates than ever before because they find even better ones. For more and more firms – even local firms – they aren’t as interested in adding clients and profits as they used to (buyers are still interested in this, but not like before).  Now, it’s cultural and strategic fit.  Firms are asking:  “How will this firm make us better and different?  What do they bring to us that we don’t now have?”
  • Mergers are getting harder to bring along. Everyone is busy.  Sellers continue to struggle with the enormity of the decision before them; they know they need to merge but they can’t pull the trigger.  Buyers are slower to respond because they are continually assessing new merger opportunities, even as they are in discussions with existing firms.
  • Wealth management is entering the picture more than ever before. Buyers tell me they are more interested in sellers’ wealth management practices than the CPA work.  More sellers who developed wealth management in the 2000s are reaching retirement age, making it more complicated – thought not impossible by any stretch – to sell their firm.

Strategic Planning and Goal Setting for Results addresses ►the three main phases of strategic planning, ►overall management philosophy of a CPA firm, ►steps to creating the strategic plan, ►the all-important vision statement, ►stimulating productive brainstorming sessions, ►best practices for goal setting programs, ►core values, ►keys to implementation, ►pitfalls of strategic planning, ►why strategic planning will fail without partner accountability 

Nearly obsolete partner retirement agreements.  So many trends we are seeing are offshoots of the aging Boomers.  It’s incredible how many partner agreements are poorly written and older than dirt.  Partner retirement agreements are so old that they border on being obsolete.  I get a morose chuckle every time I see a buyout agreement with a 90 day notice and absolutely no requirement for client transition by retiring partners.

The age that partners actually retire and the mandatory retirement ages written into partner agreements continues to inch upward.  67-70 is the new 65 – though many are still at 65.

So many firms at a critical juncture.  Especially vulnerable are first generation firms with a relatively small partner group who have been together for 20+ years.  They are in their late 50s and early 60s. They have utterly failed to develop future leaders throughout those 20 years.  This is not because they are bad people or lack intelligence.  It’s really hard to do succession planning.  Many partners simply refuse to face the obvious –their only exit strategy is an upward merger.  They call me in for help with succession planning.  They want to give one more shot to developing future leaders before they sell.  So they ask me to convene a “come to Jesus meeting” (quite an opportunity for a Jewish guy!) to put together, for once and for all, a game play for staying independent.  A very difficult task indeed.

Oh, one more thing: times are changing.  The coming disruption to CPA firms from the astonishing technology advances experts tell us are coming soon at a theatre near you: Traditional audit and tax compliance work going way down.  Exponential rise in the demand for consulting.  Changes in the labor force of CPA firms.  New governance structures.  Local CPA firms have been hearing about these changes for two years now and are anxiously awaiting their arrival, perplexed about what to do.  But we’re hearing more and more that the disruptions may be farther out than some pundits have been telling us.  Stay tuned!

But times are good.  Amidst all these trends, firms are thriving.  Revenue up.  Profits up. It’s great to be a CPA! So partners – tell your staff more often how good a gig they have!

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  1. Gary Adamson on November 27, 2018 at 10:08 am

    Marc, I think your comments are excellent and spot on. I see the same trends with my clients. The one thing that I would add is that although revenues and profits are up, I’m seeing a real squeeze on the bottom line. Organic revenue growth is pretty anemic at most firms while costs continue to rise at a faster pace.

  2. Bradford Lee Hall on November 27, 2018 at 2:58 pm

    Great article. I totally agree with everything addressed. Thank you!!

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