succession & retirement

partners may balk at guaranteeing retirement obligations

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golden egg in nest with thousands of dollars on table.forget “one times fees” for goodwill.

by marc rosenberg
retirements & buyouts

one of the first and most critical decisions in creating a partner retirement plan is the overall valuation of the firm.

more rosenberg: what smaller firms must do to become firms of the future | when managing partners can’t | covid-19, adversity and innovation | is mandatory retirement a best practice? | merging in sellers: what you need to know | take yoda’s advice on strategic planning
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the value of a cpa firm has two components: read more →

partner aging strikes smaller firms the hardest

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older man and younger man in meetingas partners work longer, average partner incomes decline.

the aging in the partner ranks of the cpa profession is by far most prominent at  smaller firms, according to the most recent edition “the national map survey of cpa firm statistics.”

at firms with less than $2 million in fees, the percentage of partners over the age of 50 has risen to a startling 73.3 percent, up from 65.4 percent last year.

and at firms with fees of $2 million to $10 million, the number has risen to 66 percent from 65.3 percent. read more →

6 reasons cpa firms fail at succession planning

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plus: making the math work.

by marc rosenberg
retirements & buyouts

why are cpa firms deficient at succession planning?

it is abundantly clear that cpa firms have succession planning challenges. partners overwhelmingly prefer the exit strategy of passing on the firm to younger partners vs. merging out of existence. but history shows that the vast majority fail at moving their firms into the next generation. what holds them back?

the answer lies in the classic pogo cartoon line: “we’ve seen the enemy and the enemy is us.” read more →

6 factors in valuing total goodwill of a cpa firm

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cpa firm partner retirement artvaluing a cpa firm for partner retirement purposes is much different than a valuation for merger purposes.

by marc rosenberg
retirements & buyouts

profitable, attractive firms, generally under $2 million, sold in a market with many potential buyers, will often fetch 110 percent to 150 percent of fees.

if this is the case, why do cpa firms value goodwill for retirement purposes at no more than 100 percent of fees and usually, 80 or 90 percent of fees? here are six good reasons why:

read more →

when you’ve retired, how do you get your money?

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money falling from the sky; moneyon white9 factors that ensure retirement plans will pay off.

by marc rosenberg
retirements & buyouts

when a partner group crafts their firm’s partner retirement plan, they are hopeful that the plan will play an important role in their financial futures. they are guardedly optimistic that their buyouts will be realized.

but the path toward the retirement payday is a perilous one. many actions are necessary and a number of obstacles must be overcome for a firm’s partner retirement plan to pay off. read more →

what a cpa firm is worth

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calculatorlook at the revenue stream. goodwill is another story.

by marc rosenberg
retirements & buyouts

to illustrate a cpa firm’s value, let’s use an example of a plain-vanilla or average firm:

  • annual revenues: $6 million.
  • six partners with ages spread evenly between 45 and 62.
  • average partner income: $350,000.
  • ratio of professional staff to partner is 3.5.
  • firm is located in a city with a population in excess of 1m.
  • clients are all in common industries such as manufacturing, real estate, health care, etc. no niches or specialties.
  • services are all traditional annuity types such as accounting and tax.
  • the firm’s accrual basis capital, primarily wip and a/r, is $1.2m.

now, let’s compute the value.

read more →

‘show me the money!’ partners balk at retirement planning

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targeted retirement age as cpa ages
targeted retirement age as cpa ages

developing successful strategies for changing expectations.

by marc rosenberg
cpa firm retirements & buyouts

the concept of retirement for cpas is rather amusing.

younger partners (say, under 40) insist with unshakable confidence that the oldest they will ever work is 50 or 55. they have other things to do with their lives (own another business, do charity work, pursue hobbies, etc.) besides working at a cpa firm and they want to pursue these interests while still young.

older partners (say, over 55) see themselves working indefinitely, with 65 being the earliest age that they will even consider retiring. read more →

do cpa firm mergers really work?

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6 metrics to measure success. procrastinators’ 3 myths. and 5 steps you can’t skip.

by marc rosenberg
cpa firm mergers

as a generation of aging baby boomer partners marches towards retirement, thousands of firms are seeking the only exit strategy available to them – merge into another firm. thus has a voracious appetite for mergers been created at all size levels, particularly:

  • sellers who are sole practitioners (remember, 30,000 of the u.s.’s 45,000 aicpa-member firms are solos and a huge percentage of those are at an advanced age) and multipartner firms billing under $2 milllion a year.
  • buyers with annual revenues of $3 milion and more.

do mergers work?

well, that’s what doing a merger successfully is all about – asking the “right” questions.
look at the reasons why the merger was done in the first place and see if those goals were met.

good examples of the “right” questions: read more →

6 reasons to keep partners from retiring

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aquila
aquila

and 4 ways to put them to good use.

by august j. aquila
creating the effective partnership

there may be some senior partners who want to spend their remaining years basking in the sun or playing golf. but, given the negative and low returns of the stock market the last few years, more senior partners will be concerned about their economic future and will want to stay involved in the profession. this can be a win-win situation for both parties or it can be a lose-lose.

senior partners have a wealth of knowledge that you don’t want to lose. for example, they possess: read more →

succession planning for cpas: just imagine

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ed mendlowitz cpa the practice doctor q and aquestion: i am 57 and have become very concerned about retiring and what i could get for my practice, how long i would have to stay and how the whole process works. i believe i’ve read all of your q&as but have never heard you speak on this subject. is there anything you can give me to read that sort of ties in everything?

response: for cpas in practice, succession planning takes on a meaning other than what it might seem. many of the cpas i know find it difficult to imagine themselves retiring, and therefore do little in the way of planning. for those who think they will work until they drop, stop reading now and go to the sudoku puzzle, because that will probably provide you with more gratification in the long run. read more →