Who is Going to Take Over My Practice? July 11, 2011 Timothy I. Michel, CPA M ICHEL CONSULTING GROUP LLC Creating Practice Value

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.) ___


Practice Value

Position Number

CEO/Managing Partner ___

Service line or industry leader ___

Practice Partner ___

COO/Firm Administrator ___

Department head (HR, IT, Mktg.) ___


Practice Value

Leadership and management

Established relationships

Knowledge and expertise

Work ethic

Ability to deliver value




Practice Value


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


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




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


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


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 ___




Practice Value


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


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


Practice Value


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


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




Practice Value

Require individual written transition plans, detailing ***

Specific successors

Transition steps to be completed

Assignments and timelines


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


Practice Value


Practice Value


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


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 ___


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


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


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


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


Practice Value


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


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 ___


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 ___


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


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


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


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




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


Practice Value

Documents

Who is Going to Take Over My Practice? July 11, 2011 Timothy I. Michel, CPA M ICHEL CONSULTING GROUP LLC Creating Practice Value