CPA Leadership Report

Expanding Your Knowledge While Conserving Your Time

Vol. 11 No. 5, May 2013

CPA Leadership Report is the monthly review of the most important management and leadership

articles in the accounting press. It includes electronic links to publishers’ websites, where you

can find the original complete articles. Our editors review more than 35 publications every

month.

Members of CPA Leadership Institute can access the reviews below. Nonmembers can become

familiar with CPA Leadership Report by reading the articles marked with an *.

Click here to learn about the comprehensive benefits of membership and the extraordinary value

of our Professional program level, which allows you to attend all our webinars at no cost.

Practice Management

*Evaluating Your Managing Partner

People evaluating the managing partner should be limited to those in a position to offer informed

input.

CPA Trendlines

Five Steps for Boosting Profitability

To boost your firm’s profitability, profile your business, scale your practice, enforce engagement

restrictions, benchmark your referrals, and manage your metrics.

CPA Practice Management Forum

The Best Model for Long-Term Growth

Is your firm set up for optimal growth and longevity?

AICPA CPA Insider

Improving Profits: Ideas That Work

Four ways to increase your firm’s profitability.

The Marc Rosenberg Blog

Compensation Best Practices

August Aquila discusses best practices for designing compensation systems in CPA firms.

Partner Insights

Office Romance 101

How should your firm manage the potential fallout of office relationships?

Public Practice

Profiles in Leadership

An interview with George Forsythe, managing partner of Wells, Coleman & Company in

Richmond, VA.

ConvergenceCoaching, LLC Inspired Ideas

Going Global

International business opportunities for CPAs and strategies for getting your foot in the door.

Accounting Today

Goal Setting: Lessons from IKEA

Marc Rosenberg explains the IKEA Effect and the difference it could make for your team.

The Marc Rosenberg Blog

Tech Trends for CPA Firms

Three experts weigh in on devices and security measures.

Journal of Accountancy

Boost Profits by Embracing Change

CPA firms are notorious for being slow to change, which can take a toll on profitability.

RedZone, Play of the Month

Is Your Firm on Mission?

Five questions to refocus your efforts.

Solutions for CPA Firm Leaders

Leverage Today’s Technology

Are you using available technology to make your firm more efficient and successful?

Journal of Accountancy

“Update” Your Communication Skills

Are you willing to make a change to communicate better?

Solutions for CPA Firm Leaders

Succession Planning and M&A

*Laying a Foundation for Effective Succession Planning – Continued

Bill Reeb discusses client transition – the “single most abused part of the succession process.”

Public Practice

What’s Your Firm Worth?

Everyone wants to know “what’s the multiple?” But it’s not just about the multiple; it’s about the

overall deal structure and terms.

The Managing Partner Advisor

Succession Misconceptions

The most common obstacle to succession in CPA firms is “the belief that accounting firms must

follow a one-size-fits-all approach.”

The CPA Journal

Client Services

*The Climate is Right for Cloud-Based Accounting Services

A step-by-step “roadmap” for developing a high-value CAS business.

Journal of Accountancy

Niche Services

CPAs Without Borders

Most businesses are involved with cross-border transactions, which inevitably have international

tax implications.

Accounting Today

Marketing

Want to Engage More Clients? Hold Something Back

One simple tip for navigating the conversation with a potential client.

CPA Trendlines

Practice Management

Evaluating Your Managing Partner

Source: CPA Trendlines

The following includes excerpts, reproduced with permission, from an article by Marc

Rosenberg. Rosenberg, CPA and author of CPA Firm Management and Governance, offers

guidance on conducting an effective performance evaluation of the CEO. The article includes a

sample Managing Partner Evaluation Form.

The process for conducting a performance evaluation of the managing partner is really an

upward evaluation. Like all upward evaluations, evaluation of the managing partner should be

limited to those in a position to offer informed input.

At firms of fewer than 10 to 15 partners, all the partners will probably want to participate. But

once a firm gets beyond 10 to 15 partners, an increasing number of partners may not be in a

position to respond to the evaluation factors listed on the form. Firms with management or

executive committees may wish to limit the evaluation to the partners on those committees.

Once you have decided who will be allowed to participate in the evaluation, each partner should

complete an evaluation form. Then, someone should tabulate the forms and summarize the

results. The evaluations should be done on a semi-anonymous basis. Partners’ names should be

on the forms so that the coordinator of the review process can go back to people for clarification

and amplification of responses. But the managing partner should not have access to who said

what.

There should be some sort of filtering of negative comments coming from poor-performing

partners. Partners who consistently fail to perform in certain areas (staff relations, collecting

receivables, turning in timesheets, etc.) will more than likely feel that they are in the managing

partner’s “doghouse” and may be unfairly hostile to the managing partner in his/her evaluation.

The process should be concluded with a meeting between the managing partner and a small

group of people (no more than three) charged with delivering the results and engaging the

managing partner in a discussion about what his or her goals should be for the next 12 months.

For the original article, read “21 Questions for Managing the Managing Partner.”

[http://goo.gl/JhOJz]

From CPA Trendlines, April 3, 2013, http://cpatrendlines.com.

Five Steps for Boosting Profitability

Source: CPA Practice Management Forum

According to consultant Ira Rosenbloom, CPA firms can boost their profitability by following

these five steps:

1. Profile your business. Define your firm’s “model client” based on services you’re able to

provide or would like to provide, type of client (e.g., closely held, global, niche-based), sales

volume, fees, and other parameters. Once you’ve established a profile of your ideal client, you’ll

be in a position to equip your firm with the people and technology you need to service those

clients and to tailor your business development efforts.

2. Scale your practice. Expanding client services can lead to greater client loyalty and

satisfaction and greater profits for your firm. Establish practical expansion goals, such as 50

percent of your clients using 50 percent of your services.

3. Enforce engagement restrictions. Larger engagements should be budgeted, and the firm

should have a lockout when a client is behind in payment beyond a firm-set standard.

4. Benchmark your referrals. As you build your referral network, evaluate each referral

source’s potential, establish annual targets for each referral source – in terms of number or dollar

value of referrals – and monitor achievement of those targets.

5. Manage your metrics. Focus on key performance indicators, including traditional metrics –

billing, collections, and realization – as well as on less traditional metrics, such as productivity

per hour, and effective hourly charge and collection rates.

For the complete article, read “Raising the Value of Your Practice.” [ http://bit.ly/12o04rs ]

From CPA Practice Management Forum, Vol. 9, No. 3, April 2013, p. 5.

The Best Model for Long-Term Growth

Source: AICPA CPA Insider

In this article, Bill Reeb looks at two ways to build a CPA firm: The “superstar” model and the

“operator” model. According to Reeb, both models can be successful. He explains that the

superstar model, which depends on the strengths of individuals, often helps a firm become a

viable business. But the operator model – which depends on systems and well-defined roles –

offers greater long-term growth and a better foundation for succession.

Reeb lists the basic principles of the operator model:

Developing leadership that can successfully function within the existing structure so that

the firm’s success will continue.

Creating a viable and enduring chain of command with clearly understood and adhered-to

roles and responsibilities. This allows a structure that supports new people filling

important positions functioning within a range of known flexibilities and limitations.

Operating like a firm rather than like a group of individual owners. The firm controls who

serves the clients, what services are offered, and what processes and procedures are

followed – not the individual CPAs managing the relationships.

Transitioning of clients occurs any time the firm decides a client could be better served

by other resources or in order to balance the distribution of demand among resources.

Developing systems to reward desired behavior and discourage undesired behavior.

Developing a staffing model that leverages realization and utilization, while balancing the

need for business development, technical competence, project management, client

service, and the management of client relationships.

For the complete article, read “Superstars vs. operators.” [http://goo.gl/nT2JK]

From AICPA CPA Insider, April 8, 2013, www.CPA2biz.com.

Improving Profits: Ideas That Work

Source: The Marc Rosenberg Blog

The following includes excerpts, reproduced with permission, from a blog entry by Marc

Rosenberg.

If your firm is not as profitable as you’d like, there are no easy ways to turn things around. There

are few quick fixes. The following ideas embrace concepts that you’re likely already familiar

with. Properly applied, they work. Some work better than others, but they do work.

Generate more revenue by focusing on mergers and marketing. The number one way to

increase profits in virtually every environment and economic condition is to generate more

revenue. The makeup of an accounting firm is such that increased revenues fall almost totally to

the bottom line because most firms can handle a lot more business with very little change to their

staffing and overhead structure.

Keep the bar high for promotions to equity partner. This may not be the most sophisticated

or enlightening tactic, but it has a huge impact on partner earnings: raising the bar on who is

admitted as equity partner and keeping it high. Driving firm profitability and growth is the

number one definition of an equity partner. Many valuable managers lack the ability to truly

drive the firm; firms should make these people non-equity instead of equity partners.

Personal visits by the MP to the firm’s biggest clients. Hard data consistently shows that most

partners are reluctant to ask their clients for more business or referrals to their best friends. But

the MP can and will do this in a heartbeat and, hopefully, walk away with additional work.

Specialization. Specialization enables firms to charge higher rates and makes marketing easier

and less costly because when the firm or one of its partners is “famous” for special expertise,

word travels quickly.

For the complete post, read “Boosting Your CPA Firm’s Profits: 4 Great Ideas.”

[http://goo.gl/GWmoy]

From The Marc Rosenberg Blog, March 19, 2013, http://blog.rosenbergassoc.com.

Compensation Best Practices

Source: Partner Insights

August Aquila discusses best practices for designing a compensation system. They include:

Construct the plan to help the firm enhance its ability to service clients; achieve its

strategic goals; and attract, reward, and retain the right people.

Establish base pay that’s competitive in the local/regional/national marketplace.

Ensure that a meaningful portion of the partner’s total compensation is at risk.

Ensure that performance bonuses recognize and reward character as well as competence.

Evaluate partners based on customized goals.

Incorporate both independent and interdependent goals into performance bonuses. Too

often, pay-for-performance plans pit one partner against another.

Performance bonus goals should focus on both current production and building future

capacity.

Set mutually agreed upon goals at the beginning of the year, tailored to the individual’s

strength, with clearly defined targets for success.

Include a discretionary/subjective component in the compensation system.

Ensure fairness. It’s critical for partners to feel that the plan is fair and that it is fairly

administered.

For the complete article, read “What Makes a Good Compensation Plan?” [http://goo.gl/yvchK]

From Partner Insights, Aquila Global Advisors, LLC, April 2013,

http://www.aquilaadvisors.com.

Office Romance 101

Source: Public Practice

In this article, Peter Fontaine cites statistics from Vault.com’s 2013 Office Romance

Survey, which revealed that 56 percent of office workers have had a relationship with a

coworker at some point in their careers. While only 36 percent of those surveyed in the

accounting field said the same about having had an office relationship, Fontaine

encourages firms to recognize office romances as a reality for which they need to be

prepared.

He offers several ideas for firms developing an office relationship policy:

1. Relationships between supervisors and subordinates should be strongly

discouraged. The fallout can be very negative, ranging from a loss of team morale

to firings and resignations.

2. If supervisors and subordinates choose to risk a relationship, supervisors should

be encouraged to disclose their relationship early on to HR. It builds trust with the

employer and allows everyone involved to anticipate potential issues.

3. HR should be prepared to have a calm reaction to the news of a

supervisor/subordinate relationship. Overreacting will not encourage disclosure.

4. Senior executives should be prepared to be held to the company standard, setting

an example for the entire firm.

5. Behaviors in the workplace that disrupt work or create an uncomfortable

atmosphere (such as public displays of affection or sexual banter) should be

stopped.

6. Employees who identify a work relationship should be able to report the

relationship confidentially. At the same time, employees involved in the

relationship should be given the benefit of the doubt.

Fontaine’s advice to employees:

1. If you are open to an office relationship, avoid entering a relationship with

someone in your immediate work surroundings.

2. Think through your motivations for entering into a workplace relationship.

Consider carefully the risks to your career.

For the complete article, read “Office Relationships. Love Your Policies and Training.”

[http://bit.ly/YeVXzX]

From Public Practice, Texas Society of CPAs, February 2013, http://www.tscpa.org.

Profiles in Leadership

Source: ConvergenceCoaching, LLC Inspired Ideas

The following includes excerpts, reproduced with permission, from a blog entry by Michelle

Baca. In it, she interviews George Forsythe, managing partner of Wells, Coleman & Company in

Richmond, VA. Here are some of the highlights:

What do you think the single most important leadership attribute or characteristic is and

why? Self-accountability. I think that people appreciate leaders who do what they say, when they

say, to the best of their abilities. I believe that self-accountability only builds trust and respect

among your team. Lack of self-accountability often quickly destroys one’s leadership capacity.

How do you develop leadership in others? Like a parent who wants a better life for his

children, invest heavily in education and then cut the apron strings to see how they adapt,

improvise, and overcome. Certainly this is easier said than done because none of us wants to

witness a loved one fail. However, life’s biggest lessons are learned from our biggest failures.

What advice do you have for those looking to step into a leadership position in their firms

or businesses? Never compromise your integrity. Be willing to stand up for what you believe,

especially when it doesn’t favor you politically or financially. And, develop a passion for

reading. You can spend your life trying to self-teach or you can streamline the process by

reading from what others have learned.

For the complete blog entry, read “Leadership Spotlight: George Forsythe, Wells Coleman &

Company, LLP.” [http://goo.gl/LL5UK]

From ConvergenceCoaching, LLC Inspired Ideas, March 13, 2013,

http://blog.convergencecoaching.com.

Going Global

Source: Accounting Today

In this article, Danielle Lee discusses international business opportunities for CPAs and

strategies for getting your foot in the door. According to consultant Gale Crosley, international is

the one niche “no firm should ignore.”

To get started, firms should review their client base, create a spreadsheet listing clients with

international dealings by country and industry, and identify a “short list” of countries that offer

the greatest potential. Starting with existing clients with relatively simple international issues is a

good way to learn and test the international waters.

Other strategies include tapping the resources of local chambers of commerce or economic

development councils, consulting with colleagues doing business in the countries you’re

interested in, building a network of contacts with international expertise, and joining

international associations of CPA firms.

It’s also important to take advantage of spontaneous connections – through social networking or

other activities – with international players.

For the complete article, read “Booming Beyond Borders – For international success, you must

be sophisticated . . . and spontaneous.” [http://goo.gl/zwOmV]

From Accounting Today, April 1, 2013, SourceMedia Inc., One State Street Plaza, 27th Floor,

New York, NY 10004, 800-221-1809.

Goal Setting: Lessons From IKEA

Source: The Marc Rosenberg Blog

The following includes excerpts, reproduced with permission, from a blog entry by Marc

Rosenberg.

I heard an NPR piece recently entitled “The IKEA Effect.” I was expecting something about

IKEA’s growth or expansion, or perhaps a commentary on its business model. Instead, I heard a

clever way to describe how people develop more commitment to goals.

“When people buy furniture at IKEA, they are forced to assemble it themselves. As a result,

people report a high degree of satisfaction with their IKEA furniture, largely because of the

greater sense of ownership from the labor required to assemble the furniture,” writes Scott

Belsky for the online site 99u: Insights on Making Ideas Happen.

The IKEA Effect is not just a whimsical thought expressed on a rarely read blog that was

converted to a radio piece. My research found a scholarly article on the IKEA Effect, which

appeared in a 2011 issue of Harvard Business Review, by Michael Norton, Daniel Mochon and

Dan Arierly, all university professors.

To management devotees such as myself, the takeaway from the IKEA Effect is that people will

value a project or a goal much more if given the opportunity to create it.

CPA firms struggle with goal setting. There are several reasons for this: (1) Not enough time

because production often takes priority, (2) Partners lack the skills to literally write a goal

properly (measurable, specific, and relevant) and (3) Little or no follow-up on the progress of

goals.

Adding to the goal-setting challenges listed above is a huge mistake committed by many firms

and their overbearing managing partners: “Telling” the partners what their goals should be

instead of inviting them to create their own goals.

For the complete post, read “How the ‘IKEA Effect’ Impacts CPA Firms.”

[http://goo.gl/1VQKL]

From The Marc Rosenberg Blog, April 3, 2013, http://blog.rosenbergassoc.com.

Tech Trends for CPA Firms

Source: Journal of Accountancy

In this interview, technology experts discuss recent trends that affect CPA firms. The featured

experts are David Cieslak (Arxis Technology), Randy Johnston (K2 Enterprises, Network

Management Group), and Rick Richardson (Richardson Media and Technologies).

Here are some of the highlights:

Most exciting trend?

Johnston: Mobility-enabled platforms. Smartphones and tablets that are new to the market and

affecting everyone in the workplace.

Cieslak: Mobile devices and how they increase the use of the cloud.

Richardson: The idea of “bring your own device” (BYOD) and its impact on how CPA teams

work with their IT people.

Which devices will be used long term and which will have the greatest impact on the

accounting world?

Cieslak: Accountants are utilizing desktops with up to three monitors, but also using multiple

mobile options for time spent away from their desks.

Richardson: The desktop will still be used in the near future, but traditional laptops may be

pushed out by Ultrabooks and tablets. Larger firms will eventually differentiate themselves with

customized apps for mobile devices.

What is the biggest threat to security? How can firms protect themselves?

Cieslak: Malware is getting better and better at breaking through traditional security measures.

Spear phishing is often how malware gets to a desktop. The cloud is becoming a safer option for

storing data. Cloud vendors often offer safety and backup measures that internal IT departments

cannot.

How can we protect ourselves from targeted social engineering attacks (spear phishing)?

Johnston: Don’t click through messages you receive that you are at all unsure about.

Cieslak: Update your operating systems from Windows XP to Windows 7 or 8.

Vendors for safer file-sharing that CPAs should know about?

Johnston: Ziptr and SnapCrowd.

Cieslak: LeapFILE

Richardson: Evernote

For the complete article, read “Tech talk: What CPAs need to know.” [http://goo.gl/X8oa3]

From Journal of Accountancy, American Institute of Certified Public Accountants, April 2013,

http://www.journalofaccountancy.com/Issues/2013/Apr.

Boost Profits by Embracing Change

Source: RedZone, Play of the Month

The following includes excerpts, reproduced with permission, from an article by Accountants

Advisory Group.

The core issues of profitability are rarely dealt with properly because they can be difficult to

change due to firm politics or culture or both. The following are some examples of core

profitability problems:

Top-heavy firms. An inverted pyramid, or top-heavy organizational structure, is the

leading cause of profitability issues. These types of structures are formed over time, are

difficult to fix, and are a significant reason for lack of organic growth.

Leadership. To sustain increased profitability, firms need strong leadership. Profitability

ultimately depends on how well the firm manages its relationship with and between the

marketplace it deals in, its clients, and its partners and staff.

Staff. Too often, professional staff are overlooked from a career development

perspective, and regarded as producers of units of production (factory mentality), rather

than as assets to be developed to attain sustainable profitability.

CPA firms are notorious at being slow to change, which can take a toll on profitability. Even

when managed in a professional manner, change is difficult to deal with and accept, but it’s

necessary to continuously increase profitability.

For the complete article, read “Profitability at the Core.” [http://goo.gl/Naei9]

From RedZone, Play of the Month, Accountants Advisory Group, April 2013,

http://www.accountantsadvisory.com.

Is Your Firm on Mission?

Source: Solutions for CPA Firm Leaders

The following includes excerpts, reproduced with permission, from an article by Rita Keller.

An article by Warren Berger caught my eye recently. The title is “Forget the Mission Statement.

What’s Your Mission Question?”

Mission questions are questions that zero in on the mission and higher purpose of a company.

These questions can provide a reality check on whether or not a business is staying true to what it

stands for and aims to achieve. Berger derived his questions after talking to several high-profile

CEOs and leading business thinkers.

1. Why are we here in the first place?

Over time, firms can lose sight of what they first set out to do. Were you part of your firm in the

“early years?” Has the excitement and fun disappeared?

2. What does the world need most that we are uniquely able to provide?

This is a great one for CPAs to ask themselves. After all, you are serving people.

3. What are we willing to sacrifice?

I find many partners are not willing to sacrifice personal comfort and compensation for the good

of the “whole” (firm).

4. What matters more than money?

When I survey partners and managers from all size firms prior to a retreat, they tell me, “The

partners suck all the money out of the firm and don’t leave any for investing in the future.”

5. Are we all on this mission together?

This is the most important question partners can ask each other in 2013.

As you plan the agenda for this year’s management retreat, eliminate anything to do with the

daily operations and don’t “revisit” the mission statement.

Focus on the big picture. Discuss, explore, and debate the five mission questions, especially

number five.

For the complete article, read, “Another Retreat? Don’t Revisit the Mission Statement.”

[http://goo.gl/iWUYQ]

From Solutions for CPA Firm Leaders, the newsletter of Rita Keller, http://www.ritakeller.com.

Leverage Today’s Technology

Source: Journal of Accountancy

In this article, Journal of Accountancy Senior Editor Chris Baysden discusses smart

technology moves for CPA firms. These ideas were presented at a recent AICPA

Advanced Personal Financial Planning Conference by Andrew Gluck, CEO and president

of Advisor Products.

Gluck’s tech tips are summarized below:

Make sure your firm’s software and applications are integrated. Vendors and

testimonials from other customers can be of help in this effort.

Provide technology training for staff. Utilize available training tools from

vendors.

Put backup systems in place. Keep your backups updated and test your backup

system a couple of times a year.

Maximize your website and its potential to reach new customers. That may

require hiring a professional to design your site and manage content.

Make sure you can be found in Web searches. Use key words on your site and

register your company on services like Google Places.

Use virtual meeting options (GoToMeeting and Skype) to save on travel and hotel

costs.

Use social media archive tools, which can help you meet SEC record-keeping

requirements to track your firm’s advertising efforts.

For the complete article, read “Smart tech tips.” [http://goo.gl/9YSSj]

From Journal of Accountancy, American Institute of Certified Public Accountants, April

2013, http://www.journalofaccountancy.com/Issues/2013/Jan.

“Update” Your Communication Skills

Source: Solutions for CPA Firm Leaders

The following includes excerpts, reproduced with permission, from an article by Rita

Keller.

Communicating thoroughly, effectively, and frequently is a key part of success. Yet, it is

an area where CPAs often struggle.

This month, I want to simply address one aspect of communication inside a CPA firm. It

involves the managing partner, the head of audit, the head of tax, the firm administrator,

technology director and maybe even mentors in mentoring meetings with younger team

members, giving an “update.”

How often in your firm has the MP or FA given an update to the partner group and rattled

on and on, touching on this and mentioning that and rambling on for way too long? How

often has a division leader given his or her update in the same manner? How often, as a

mentor, have you “carried the conversation?” As managing partner, during the annual

state of the firm event or annual full-firm retreat, have you droned on and on, getting the

same reaction as Charlie Brown’s teacher?

Noted thought leader and blogger Seth Godin stresses, “Communication is a path, not an

event.”

What if at the next opportunity you have to give an update to other partners or team

members you simply opened the conversation with 60 seconds of dialogue and then

suggested, “Let’s talk.”

In this world of oversaturated communications it has become very difficult to “just talk.”

Once you begin making this offer (and don’t give up when people are hesitant to open

up), a culture of openness and collaboration will develop.

For the complete article, read “What I Am Hearing ‘Out There.’” [http://goo.gl/61kmK]

From Solutions for CPA Firm Leaders, the newsletter of Rita Keller, president of Keller

Advisors, LLC, http://www.ritakeller.com.

Succession Planning and M&A

Laying a Foundation for Effective Succession Planning – Continued

Source: Public Practice

In Part 3 of this ongoing series, Bill Reeb discusses client transition – the “single most abused

part of the succession process.” The problem, Reeb explains, is that the retiring partners and the

remaining partners are “motivated to do the wrong things.” Retiring partners have an incentive to

not transition their clients to the firm: It forces the firm to retain them after the mandatory sale of

ownership date (MSO) to service those clients, essentially allowing them to “resell” those clients

to the firm down the road.

At the same time, the remaining partners, who want to keep their income up and their workload

down, have an incentive to allow retiring partners to continue doing the same work. And they’re

reluctant to pay retiring partners for their client transitioning efforts. This, Reeb asserts, is “an

economically terrible choice.” The best uses of retiring partners’ time, beginning two to three

years before the MSO or early retirement date, include:

Doing more technical work behind the scenes,

Working on their client transition plans,

Introducing others in the firm to their personal contacts,

Selling new business,

Training others,

Serving as firm ambassadors,

Sitting on local company boards.

Under this approach, retiring partners may be overpaid a bit during their last couple of years. But

Reeb believes that the economic benefits to the firm far outweigh any concerns about retiring

partners not earning their pay. It ensures that retiring partners “do what is most important to the

firm, which is to turn over their clients and take a step back in their visibility to those clients.” If

they don’t, Reeb warns, the firm might make a little more money during retiring partners’ final

years, but “you will likely lose many multiples of that amount in the following years to pay for

your sins of being unwilling to step up and take on your new leadership roles.”

The remainder of the article outlines a detailed transition process, which includes individual

transition plans for each retiring partner, assignment of new partners or managers to take over

client relationships, and action plans that detail the turnover process.

For the complete article, read “Managing Succession Fundamentals – Part 3.”

[http://bit.ly/11YjZ1r]

From Public Practice, Texas Society of CPAs, April 2013, www.tscpa.org.

What’s Your Firm Worth?

Source: The Managing Partner Advisor

The following is a complete reprint, reproduced with permission, of a blog entry by Gary

Adamson

Tax Season 2013 is over and the M&A frenzy will pick back up again where it left off. So, what

is your practice worth? What can you expect whether you are a buyer or seller? One thing is for

sure – Baby Boomers are selling at a rate that the profession has never seen before. It is still a

seller’s market, for now. But the demographics and the thousands of practices that will soon be

for sale suggest that may change over the next few years.

We are often asked by our clients about the market and what firms are selling for. Everyone

wants to know “what’s the multiple?” But, it’s not just about the multiple; it’s about the overall

deal structure and terms. The multiple is only one piece of the puzzle. The important components

that go together to make up and influence the structure are:

1. Size of the practice

2. Profitability of the practice

3. Location

4. Down payment

5. Term (number of years) of the payments

6. Length of time before the purchase price is fixed

7. Extent and quality of client transition

8. Multiple of revenue being paid

For more information and a discussion of the deal components outlined above, click here.

[http://goo.gl/YXp9p]

For the original post, read “What is Your Practice Worth in the 2013 M&A Market?”

[http://goo.gl/c2unz]

From The Managing Partner Advisor, the blog of Gary Adamson, CEO of Adamson Advisory,

April 17, 2013, http://adamsonadvisory.com/blog.

Succession Misconceptions

Source: The CPA Journal

Author Lisa Tierney argues that the most common obstacle to succession in CPA firms is “the

belief that accounting firms must follow a one-size-fits-all approach.” For example, many firms

operate under the misconception that their next managing partner should be:

The firm’s best business developer,

Age 50 or older,

A professional CPA,

An active partner servicing his own book of business, and

One of the firm’s current professionals.

This view can be limiting, however. How can a managing partner devote time to running the firm

if he or she is busy selling products or handling important clients? What if the firm doesn’t have

the luxury of time to identify the next MP early in the succession-planning process and develop

his or her leadership skills?

In some cases, it may be appropriate – and advantageous – to look outside the firm, to promising

professionals at top-heavy firms or even experienced firm administrators.

For the complete article, read “The Top Five Limiting Beliefs About Succession Planning.”

[http://goo.gl/8Fpn6].

From The CPA Journal, A Publication of the New York State Society of CPAs, April

2013, http://www.cpajournal.com.

Client Services

The Climate is Right for Cloud-Based Accounting Services

Source: Journal of Accountancy

Traditionally, client accounting services were viewed as commodities that were much less

profitable than tax and audit services. But the cloud is changing all that. A combination of

paperless technology, cloud-based connectivity that removes geographic barriers, and a trend

away from generalization and toward specialization, has set the stage for the growth of client

accounting service (CAS) practices.

Cloud-powered CAS isn’t right for every firm. It depends on your clients and your firm’s

culture. Also, firms that audit public companies may not be able to offer it. But under the right

circumstances, it can generate a steady stream of work and high profit margins.

One of the keys to making CAS work is specialization in a particular industry or business

segment (so long as the industry or segment can provide enough business for the firm to

survive). Access to industry expertise is one of the biggest benefits to clients, allowing the CPA

firm to act as an outsourced accounting department or virtual CFO. Other benefits include lower

costs, more time to devote to core business, and real-time access to key performance indicators.

Cloud-powered CAS also benefits a CPA firm’s staff, making it easier to work remotely. And

automation of the financial reporting and data transfer functions increases efficiency and reduces

errors.

The article provides a step-by-step “roadmap” for developing a high-value CAS business.

For the complete article, read “From ‘write-up’ to right profitable.” [http://goo.gl/OayPU]

From Journal of Accountancy, American Institute of Certified Public Accountants, April 2013,

http://www.journalofaccountancy.com/Issues/2013/Apr.

Niche Services

CPAs Without Borders

Source: Accounting Today

In today’s global economy, most businesses are involved with cross-border transactions, and

these transactions inevitably have international tax implications. In this article, Roger Russell

discusses several international tax issues that practitioners need to be familiar with, including:

Tax reform. With the exception of the U.S. and Japan, the worldwide trend has been to

reduce corporate income tax rates and increase “indirect cash rates,” such as valued-

added taxes (VATs). The U.S. continues to tax corporations on their worldwide income,

while most countries have adopted territorial systems, which tax revenue earned within

the jurisdiction.

Transparency. Taxing authorities around the world are moving toward greater

transparency and information sharing. Examples of this include the Foreign Account Tax

Compliance Act (FATCA) and the Report of Foreign Bank and Financial Accounts

(FBAR).

Transfer pricing. Taxing authorities are scrutinizing prices related affiliates pay for

intercompany sales of goods and services, making it critical for companies to document

transfer pricing using multiple methods.

According to Guy Sanschagrin, managing director of WTP Advisors in Minneapolis, to be

competitive the U.S. should develop “a tax structure that is competitive to the rest of the world,”

which, Sanschagrin argues, “would probably collect more tax revenue.”

For the complete article, read “Finding Your Way in the Wide World of Tax.”

[http://goo.gl/YibtG]

From Accounting Today, April 1, 2013, SourceMedia Inc., One State Street Plaza, 27th Floor,

New York, NY 10004, 800-221-1809.

Marketing

Want to Engage More Clients? Hold Something Back

Source: CPA Trendlines

The following is a complete reprint, reproduced with permission, of an article by Ed

Mendlowitz.

Question: I usually give away too much info at a meeting to get a new client. We simply

answer too many of their questions during the initial meeting. We don’t know how much

info to give away so the possible new client will get hooked and not take the information

and run to somebody else. Usually the somebody else is cheaper. How do I find the right

balance?

Comment and response: My partner Frank always complained to me that I did the same

thing.

I don’t think that I gave away too much info. But I may have given the impression that I

was an “expert” in everything, which no one can be. That lessened my importance as a

specialist who could handle their issues, reducing my and my firm’s value.

After time, I held back by saying that their question was something that my partners or

someone else from my firm was expert in and would handle for them, when [never say

“if”] we are engaged.

For the original article, read “How Not to Give Too Much Away for Free When Trying to

Land a New Client.” [http://goo.gl/q9ZZd]

From CPA Trendlines, March 26, 2013, http://cpatrendlines.com.