Securing the Future: Building a Succession Plan for Your Firm

• Volume 1
  • Introduction
    • Superstar Model Versus Operator Model
    • Planning Is the First Step
      • When to Create the Plan
      • Time Frame for the Plan
      • Monitor the Plan
      • Purpose of the Plan
    • How To Use This Book
    • Note to Sole Proprietors
    • Conclusion
  • Chapter 1: The Environment and Strategy: Managing Resources, Maximizing Reward
    • Legislative Forces
    • Demographic Forces
      • Age Trends
      • Gender Trends
      • Retirement Trends
      • Consolidation Trends
    • Marketplace Forces
      • Trend 1. An Uncertain Market
      • Trend 2. Reshaping Services
      • Trend 3. Milking the Cash Cow
    • CPA Firm Practice Forces
      • Issue 1. Foundation and Consistency
      • Issue 2. Management, Staffing, and Operations
      • Issue 3. Growth
      • Issue 4. Succession Strategies
    • Survey Results
      • Growth and Changes in Revenue
      • Operations
      • Succession
    • Conclusion
  • Chapter 2: Structure and Leadership: Establishing a Foundation and Consistency
    • Enabler 1. Decision-Making Authority
      • The Problem
      • The Solution
    • Enabler 2. Standard Operating Procedures Foundation
    • Enablers and Synergy
    • Enablers and Firm Size
      • Enablers and Up to $2-Million Firms
      • Enablers and $2-Million to $8-Million Firms
      • Enablers and Firms of $8-Million and More
    • Enablers and Their Properties in CPA Firms
      • Decision-Making Authority—Voting Control Properties
      • Decision-Making Authority—Organization Infrastructure Properties
      • SOP Foundation Properties
    • Codifying Policies
      • Benefits of Separating Policies and Owner Agreements
      • What Policies Should Be in the SOP Manual
    • Implementing Organizational Structures
      • Step 1. Choose a strategy for your firm.
      • Step 2. Choose who you want to manage the firm and give them the authority to do it.
      • Step 3. Choose the style of governance
      • A Final Word on Implementing Organizational Structures
    • Leadership
      • Dysfunction and the Peter Principle
      • Dysfunction and Organizational Infrastructure
      • Dysfunctional Behavior Traits
      • A Final Word about Leadership
    • Conclusion
  • Chapter 3: Management and Operations: Extending the Life and Culture of the Firm
    • Today’s Workforce and Firm Culture
      • The Generation Gap
      • Motivating Staff
    • The Upside-Down Pyramid
      • The Problems
      • The Solution or Reversing the Pyramid
    • Accountability
      • Element 1. Align wages and benefits
      • Element 2. Offer a challenging job
      • Element 3. Communicate clear expectations
      • Element 4. Give objective performance measurements
      • Element 5. Support learning on the job
      • Element 6. Provide adequate training
      • Element 7. Reward overachievement
      • A Final Word on Accountability
    • Roles and Responsibilities of Managers
      • Types of Managers
      • Part-Time Versus Full-Time Managers
    • Staff Reporting Models
      • Types of Staff Reporting Models
      • Reporting Responsibility
      • Project Responsibility
    • SOP Programs That Support Employee Performance
      • Performance Review System
      • Pay-for-Performance Compensation System
      • Business Development Program
      • Leadership Development Program
      • Motivation and Rewards Program
      • Partner-in-Training Program
      • Career Professional (or Career Manager) Program
      • Owner Evaluation and/or 360 Feedback Program
      • Intern Program
      • Employee Orientation Program
      • Mentoring and Coaching Program
    • Compensation Systems
      • The Problems
      • Current Criteria
      • The Solution
    • Build a Pay-for-Performance System
      • Step 1. Identify personal billing production
      • Step 2. Adjust to reflect the reality of the firm
      • Step 3(a). Establish performance targets for staff
      • Step 3(b). Establish performance targets for managers
      • Step 3(c). Establish performance targets for owners
      • Step 4. Conduct performance evaluations
      • A Final Word About Pay-for-Performance Systems
    • Conclusion
  • Chapter 4: Growth and Transition: Increasing the Value of the Firm
    • Why Marketing is Important to an SOP Foundation
      • Reason 1. Marketing is an ongoing SOP process
      • Reason 2. Marketing is the least understood SOP strategy
      • Reason 3. Marketing can generate owner conflict
    • Size of Firm Commentary
    • Growth
      • Idea 1. Client relationships take time
      • Idea 2. Mergers and acquisitions are costly
      • Idea 3. Superstar models are limiting
      • Idea 4. Firmwide marketing SOP foundations succeed
    • Business Development
      • Referral Marketing
      • Niche Marketing
      • New Services Selection
      • Fortress Approach Versus Empire Approach Growth Strategies
      • Passive Marketing Versus Active Marketing
    • Business Development Plan
      • Step 1. Create an up-to-date database
      • Step 2. Classify clients
      • Step 3. Develop an active marketing strategy
      • Step 4. Develop a passive marketing strategy
    • Transition
      • Serving Transition
      • Firm Value Transition
    • Conclusion
  • Chapter 5: Succession Strategies: Passing the Torch
    • CPA Firm Succession Stories
      • Story 1 Two Senior Partners
      • Story 2. A Sole Practitioner
      • Story 3. A Father-and-Son Firm
      • Story 4 Four Owners—Two Seniors and Two New
      • Story 5 Seven Owners
    • Merger and Acquisition Plans
      • Typical Acquisitions of CPA Firms
      • Typical Mergers of CPA Firms
      • What Sellers Look For
      • How Sellers Identify Purchasers
    • Retirement Plans
      • Retirement Plan Goals
      • Retirement Plan Updating
      • Retirement Plan Potential Disconnects
      • Retirement Plan Maximum Age Requirement
      • Retirement Plan Test on Value
    • Succession Plans
      • Succession Plan Steps
      • Succession Plan as a Catalyst
      • Succession Plan Transitions
      • Succession Plan Agreement Issues
      • Additional Succession Plan Issues
      • Succession Plan Potential Pitfalls
    • Conclusion
      • Identifying the Firm Strategy
      • Implementation
      • A  Final Word
• Volume 2
  • Chapter 1: Succession Introduction
    • Introduction
    • Orderly Succession Planning
    • Crisis Succession Planning
    • Identifying Future Leaders—Choosing Successors for Key Positions
    • Why CPAs Don’t Develop Successors
    • Getting Started in Succession Planning
      • Develop Your Own Management Skills
      • Manage the Performance of Your Subordinates
      • Develop the Management Skills of Your Subordinates
    • Developing Your Team
    • Start Now
    • Appendix A: Partner Roles and Responsibilities
    • Appendix B: Technical Versus Supervisor Managers
    • Appendix C: Effective Operating Models for Running a CPA Firm

  • Chapter 2: Drivers of Change for the CPA Profession
    • Introduction
    • Demographic Driving Forces
      • Age Trends
      • Gender Trends
      • Retirement Trends
      • Some Predictions for CPA Firms
    • Legislative, Regulatory, and Complexity Driving Forces
    • Technology Driving Forces
    • Marketplace Driving Forces
    • Forces Summary
    • Succession Management Survey Results

  • Chapter 3: Positioning Your Firm for Succession and Retirement Outline
    • Introduction
    • Cleaning Up Operations—Information Systems and Performance Metrics
    • Performance Metrics
      • Comments on Each Metric
      • More on Performance Metrics
    • Strategies for Improvement
      • Overall Firm Strategy and Vision
      • Business Model
      • Management and Governance
      • Standardized Procedures
      • Improving the Bottom Line
    • Appendix A: Defining Protocol For Implementing Performance Standards
    • Appendix B: Sample Client Evaluation
    • Appendix C: Closing Your Door to Bad Clients

  • Chapter 4: Selling Your CPA Practice
    • Introduction
    • Steps in Selling or Merging a Practice
      • Identify Likely Candidates with Whom to Merge or to buy Your Practice
      • Contact Potential Buyers and Discuss the Potential Sale
      • For Prospective Buyers Interested in Pursuing Discussions
      • If Further Discussions Are Warranted at This Point, Provide More Detail
      • Continue Discussions Through to Closure
      • Keeping the Matter Confidential So That It Doesn’t Get Out
      • Announce the Change to Your Employees, Clients, and Referral Sources
      • Be Available to Help With Transitioning the Practice
    • A Final Note on Selling Your Practice
    • Appendix A: Using the Transfer of an Accounting Practice Checklist
    • Appendix B: Sample Mutual Confidentiality Agreement
    • Appendix C: Sample Staff Listing
    • Appendix D: Sample Practice Summary for a Firm that is Being Sold
    • Appendix E: Sample Letter Notifying Client of Change in Firms
    • Appendix F: Sample Letter Notifying Clients of Change in Firms (Not Seeking Appointments or Meetings With New CPA Firms)
    • Appendix G: How Not to Notify Clients
    • Appendix H: Steps to Consider in Selling Your Practice

  • Chapter 5: Merging Your CPA Practice Either Upstream or Downstream
    • Introduction
    • Steps in Merging a Practice
    • What do the Partners Say They Are Looking for From the Merger?
    • Why Mergee Firms Might Be Looking for an Upstream Merger
      • We Can Get More For Our Retirement Benefit From a Merger
      • We Don’t Believe That the Remaining Partners Have the Leadership Ability
      • We Don’t Believe That the Firm Will Stay Together After We Leave
      • We Have Some Partners Who Refuse to be Held Accountable
      • We are Short on Talent, Either at the Junior Partner Level or the Next Tier Down
      • Our Financial Results Are Not Particularly Shiny
      • We Have a Specialty Niche and Talent Pool That Requires a Bigger Client Base than We Can Access
      • Our Business Processes and Practices Are Somewhat Out of Date
    • Why Mergor Firms Might Be Looking for a Downstream Merger
      • We Can Acquire More Market Share More Effectively by Merging
      • We’d Like to Add Some New Services, or the Mergee Firm Would Be Able to Help Us with a Specialty Niche
      • We Need to Prop Up a Marginal Office or Expand Geographically, So We’ll Acquire a Practice Nearby
      • We Are Short on Talented People, So We’re Acquiring This Firm
      • We Have Too Many Partners Around the Same Age, and We Don’t Think Our Junior Partners Have the Leadership Ability for the Firm to Continue over the Long Run
      • We Have Some Partners Who Refuse to Be Held Accountable
    • Contact Potential Merger Candidates and Discuss a Potential Merger
      • Finding a Potential CPA Firm Candidate
      • Initial Contact and Discussion
      • The Rejection
      • Subsequent Discussions
      • Conducting Simultaneous Discussions With Prospects
      • Timing
      • For Prospective Merger Candidates Interested in Pursuing Discussions
      • Prepare a Nondisclosure Agreement for Prospective Merger Candidates to Sign
      • Provide Prospective Merger Candidates With a High Level Summary of Practice Statistics (and Obtain Similar Information From Them)
      • If Further Discussions Are Warranted, Provide and Obtain More Detail
      • Continue Discussions Through to Closure
    • Merger Negotiation and Documents
      • Due Diligence That The Shared Information is Correct
      • The Opt Out Clause
      • Who Is Going to Be a Partner?
      • Who Gets New Clients During the One Year Probationary Period if Demerger Occurs?
      • Handling of Clients and Staff Who Choose to Stay With the Other Firm if Demerger Occurs
      • Employment Agreements to Be Executed if Continuation is Selected After The One Year Probationary Period is Over
      • Organizational Structure of the Merged Firm
      • Roles and Responsibilities of the Mergee Partners
      • Type of Work to be Performed by the Mergee Partners
      • Ownership Interest of the Mergee Partners
      • Voting Rights of the Mergee Partners
      • Implications of Excessive Capital Contributions
      • Termination Process and the Rights of the Mergee Partners
      • Voluntary Withdrawal and the Rights of the Mergee Partners
      • Termination Process of the Mergee Clients
      • Minimum Vesting Hurdles for Firm Retirement Benefits
      • How an Upstream Merger or Sale of the Mergor Firm Affects the Mergee Partners and Any Outstanding Requirements to Fulfill at That Time
      • Initial Salaries or Compensation Versus Falling Into the Standard Partner Compensation Plan
      • Handling of the Fixed Assets, Such as Work in Process, Receivables, and Payables of the Mergee Firm
      • Handling of the Office Lease or Owned Building of the Mergee Firm
      • Required Capital Contribution and Timing, if Required Mergee Partners’ Access to Draws
      • Rights of the Mergee Partners With Respect to Perks, Such as Business Entertainment Expenses, Automobiles, Clubs, and So On
      • Selection of the Managing Partner
      • Rights of the Retired Partners of the Mergee Firm if They Still Want to Work
      • Tax Obligations Not Paid at the Time of Merger and How Those Will be Handled Postmerger
      • Vacation, Sick, and Paid Time Off Benefits for the Mergee Partners and Staff
    • Keeping the Matter Confidential So That It Doesn’t Get Out
    • Announce the Change to Your Employees, Clients and Referral Sources
      • Employees
      • Clients
    • Actively Participate in the Merger Integration Between the Two Practices
    • The Bottom Line About Merging
    • Appendix A: Client Letter From the Mergor
    • Appendix B: Client Letter From the Mergee
    • Appendix C: Sample Press Release

  • Chapter 6: Sole Proprietor Who Wants to Work Until He or She Turns Off the Lights and Walks Away
    • Introduction
    • Potential Financial Benefits of the Turns Out the Lights Strategy
    • Getting From Here to There—Solo Practitioner
      • Acting as the General Contractor for Your Clients
      • Staying Current With Technology
      • Staying Current with Charge Rates and Fees
      • Disability Coverage
      • Practice Continuation Agreement
    • Getting From Here to There—Sole Proprietor with Professional Staff
      • Staffing and Facility Requirements
    • Conclusion

  • Chapter 7: We Need to Develop New Leaders for a Successful Transition
    • Introduction
    • Operational Modes
      • Cingoranelli and Reeb Case Study
    • The Chasm Between “Successâ€? and “Continuationâ€?
    • How These Modes Integrate With the EWYK and “Building a Villageâ€? Models of Operation
    • The Basics of Successful Transition to New Leadership
    • Governance Issues You Must Address
      • The Problem With Most Entrepreneurial Firms
      • Organizational Heirarchy
      • Proper Vetting of Ideas, Meeting Management, and Voting
    • Roles and Responsibilities of Owners
    • Holding Owners Accountable
    • SOPs to Provide the Infrastructure for the Business
    • Dealing with Books of Business, Including Transitioning With Retiring Owners
      • Balancing Books of Business
      • Other Books of Business Issues
    • Transferring and Shifting Ownership Interests
      • General Patterns We See In Ownership Interests
      • Who Should Control the Ownership Equity of Your Firm?
      • Who Should Become Owners in Your Firm?
      • Career Paths for Prospective Owners
    • Developing Your Partners’ Management and Decision-Making Skills
    • What You Can Start Doing Now to Develop Your People
    • Cleaning House
    • Conclusion
    • Appendix A: Shareholder-In-Training Program Checklist
    • Appendix B: What You Can Start Doing Now to Develop Your People

  • Chapter 8: We Need to Formalize Transition, Roles and Responsibilities for Our Retiring Partners
    • Introduction
    • Partner Awareness of Natural Retirement Anxiety
    • Mandatory Retirement or Mandatory Sale of Ownership
    • Transitioning of Clients
      • Process for Improper Client Transition
    • Potential Roles of Retired Partners
      • Compensation of Retired Partners
    • Personal Liability of Remaining Owners for Retired Owners’ Full Payout
      • Specific Recourse or Cures Should a Retired Owner Not be Paid in Full
    • Ability of the Retired Owners to Block Mergers or Total Sale of the Business Unless the Retirement Obligation is Paid in Full Prior to the Transaction
    • Ability of the Retired Owners to Block the Sale of a Line of Business Unless the Retirement Obligation is Paid in Full Prior to the Transaction
    • Insurance Coverage of the Outstanding Retirement Obligations
    • Partially Funded Retirement Plans
    • Acts That Can Trigger a Reduction or Discontinuation of Benefits
    • Acts That Can Trigger a Change of Ownership
    • Conclusion
    • Appendix A: Sample Partner Transition Plan

  • Chapter 9: What is the Value of My Firm?
    • Introduction
    • The Three Most Common Methods for Valuing an Ownership Interest
    • External Value
      • Typical Acquisitions of CPA Firms
      • Typical Mergers of CPA Firms
    • Internal Value
      • Why Your Remaining Partners May Want to Discount Your Buyout
      • Valuation of Interests for Internal Buyouts
    • Which Method Should We Use at our Firm?
    • Some Issues Common to All Three Methods of Valuation
      • Use of Averages
      • Dealing With Outstanding Debt
      • Capital Accounts
      • Vesting
      • Other Reductions in Price
    • Other Acts Affecting Firm Value or Retirement Value
      • Misconduct or Illegal Activities
      • Lack of Performance
      • Death and Disability
    • Being Fair About the Retirement Policies and Compensation Policies
    • Conclusion

  • Appendix 1: PCPS 2008 Succession Survey Results: Sole Proprietor Firms
  • Appendix 2: PCPS 2008 Succession Survey Results: Multi-Owner Firms
  • Appendix 3: PCPS Survey Questions

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