Attraction is the Name of the Game: Keys to Prosperous and Preferred Succession

Transcription

1 Attraction is the Name of the Game: Keys to Prosperous and Preferred Succession Southeastern Accounting Show August 18, 2011 Heidi M. Brundage, CPA, SPHR Senior Technical Manager, PCPS Biography Heidi M. Brundage, CPA, SPHR Senior Technical Manager, PCPS Heidi is the Senior Technical Manager of the PCPS team at the AICPA. PCPS is a firm membership section of the AICPA that focuses on firm practice management and advocacy for public accounting firms. In her role as Senior Technical Manager, Heidi is responsible for serving as liaison to the PCPS Executive and Women s Initiatives Executive Committees, overseeing the development of new PCPS practice management resources and staying abreast of practice management and CPA technical issues in order to educate and address member needs. Heidi is a well-recognized speaker on the areas of practice management and CPA profession updates. She serves on the AICPA s Corporate Citizenship Task Force in the capacity of Project Manager for the Durham Public Schools' Business & Finance Academy. Prior to joining the AICPA, Heidi began her career as an auditor with Arthur Anderson and then moved into various HR and project management roles with Arthur Andersen and Ernst & Young. Heidi is an Accounting graduate of Miami University in Ohio. 2

2 Agenda We ll cover: Review of the 3 essential components of a client retention Why team retention is so important, even in today s economic climate Where to turn for guidance Attendees will walk away with: Solutions and resources to improve multiple aspects of your organization Call to action take care of yourself and retain PCPS CPA Firm Top Issues 4

3 2011 PCPS CPA Firm Top Issues 5 PCPS CPA Firm Top Issues Bottom Line Keeping with Tax and Standards, Growth, Fee Pressure, Succession and Human Capital related issues top the 2011 lists Slight shift in focus from client retention to client acquisition between 2009 and 2011 Human Capital no longer the top issue but still an issue temporary shift Firms with 5 Professionals and under are less focused on Succession, yet the most vulnerable 6

4 Succession Planning Types of Succession Strategies Position the firm for sale so the owner(s) can retire. Position the firm for merger with an eventual buyout of the original owner(s). Position the firm for internal transition to future leaders. Practice continuation with other firms. Turn out the lights at the end of the day. 8

5 PCPS Succession Planning Resource Center 9 How Do You Want to Get Out? Merge? Acquire? Develop leaders to buy you out? Sell outside of firm? Turn out the lights? 10

6 What s necessary for turning out the lights? 11 Continuity of Your Practice 12

7 Continuity Depends on the Strength of Your People and Clients Maintaining the best client base: Saves time by allowing you to focus on current clients, rather than searching for new clients Increases potential for referrals Makes your firm more attractive to potential buyers (both internal and external) If you have people: Hang on to the good ones turnover is expensive Develop or lose the bad ones they are costing you too much Encourage personal and professional advancement Continue to elevate skill set because of future partner and merger opportunities 13 Client Retention 14

8 Maintaining the Best Client Base Hang on the good ones replacement is expensive Develop or lost the bad ones they are costing you too much Encourage client development Continue to evaluate your clients, ascertain satisfaction and tell the ones you love that they are loved Advantages include: Saves time by allowing you to focus on current clients, rather than searching for new clients Increases potential for referrals Makes your firm more attractive to potential buyers (both internal and external) 15 3 Basic Steps to Successful Client Retention 1. Improve Client Service 2. Communicate and Connect with Your Clients 3. Work with Clients in Today s Economy 16

9 Step 1 IMPROVE CLIENT SERVICE 1. Improve Client Service: Five Star Client Service A. Connect With Clients B. Take the Order C. Deliver the Order D. Ascertain Client Satisfaction E. Offer Dessert F. Collect the Check G. Recovery Five Star Client Service content provided by the Rainmaker Consulting Group, a division of Five Star3, LLC. 18

10 Client Service Resource Center Tools Provided: Five Star Client Service model, by Rainmaker Consulting Client Advisory Boards Trusted Business Advisor Workshop Communication guidance (Social Media Toolkit in development) 19 Step 2 COMMUNICATE AND CONNECT WITH YOUR CLIENTS

11 2. Communicate and Connect with Your Clients, cont d Include timely and relevant information via: Newsletters On your website Social media presence, such as blogs or LinkedIn During lunch and learn presentations (see sources/cpa+marketing+toolkit/spe eches.htm) Communicate and Connect with Your Clients, cont d Listen to your clients Obtain feedback surveys and advisory boards Clarify and understand client expectations 22

12 2. Communicate and Connect with Your Clients Show you care and have respect for your clients Demonstration your appreciation for client business and referrals (e.g. handwritten notes and client spotlights) Be the trusted advisor 23 Step 3 WORK WITH CLIENTS IN TODAY S ECONOMY

13 PCPS Podcast Series Helping Firms Help Their Clients through the Current Economy by Cleaning Up Operations Helping Clients with Projections Helping Clients with Cash Flow Helping Clients with Timing of Major Expenses Helping Clients with Strategic Planning Helping Firms Help Their Clients through the Current Economy with Financing & Liquidity Helping Clients with Revisiting Term Loans Helping Clients with Reducing Debt Helping clients with Banking Relationships 25 Move Up the Client Value Pyramid More CPAs are becoming outsourced CFOs for their small business clients Client Value Pyramid Virtual CFO Budget, Business Planning, Business Modeling, etc.. Controllership Services Monthly Close, Fin Statements, Cash Flow Analysis Transactional Services Tax, Write up, Bookkeeping, A/P, Payroll, etc.. 26

14 Trusted Business Advisor Model Marketplace Feedback Excerpts from Wall Street Journal Article 9/22/09 [CPAs providing CFO services] work with business owners to manage their accounting and finance [functions], connect them with business sources that can help them grow and provide financial data to help make strategic long-term or day-to-day decisions. [CEO of Small Business, Vontoo Inc.], pays $5K a month for CFO s strategic advice, bookkeeping services and accounting expertise. It s a tremendous cost-saving [as compared to FTE] 27 Changing Landscape Client Accounting Services Evolves Before Transactional Today Advisory Low margin transaction processing Means to an end; a Tax Return Pressure to keep fees low Non-strategic Improve client financial performance with proactive consulting Save time and reduce cost by standardizing and leveraging automation and repeatable processes Increase real-time collaboration with clients by accessing information in the Cloud Increase margins by providing higher value with increased productivity 28

15 AICPA Trusted Business Advisor SM Solutions 29 PCPS Practice Growth Resource Center in Development Phase I launch Summer 2011 Guidance and tools for small and medium-sized practices Focus first on client retention Market driven and policy driven opportunities exist New lines of service create business Business development and networking skills need to build at every level of employee/owner within the firm Marketing and business development accountabilities included in goal-setting and compensation plans 30

16 Revenue Growth Opportunities: Specialized Areas Personal Financial Planning Business Valuation Traditional CPA Firm Forensics & Litigation Information Technology Firms are able to retain clients by offering services in all areas 31 YOU Are the Value Effectively and concisely communicate the unique value you offer each and every time the opportunity arises 32

17 ONE OTHER CLIENT RETENTION THOUGHT Do you have the right clients? (Now is a great time to ask.) Client Evaluation Tool: 34

18 Client Retention Bottom Line It s about culture These concepts never go away or get old 3 basic steps to successful client retention: 1. Improve Client Service 2. Communicate and Connect with Your Clients 3. Work with Clients in Today s Economy Evaluate your practice and your clients Implement sustainable procedures that will provide returns for the life of your firm 35 Staff Retention 36

19 Cost of Turnover Assumptions Average Salary $60,000 Payroll Tax 25% Total Employees 100 Orientation training hours 20 Hourly rate of trainer $150 Estimated recruiting cost $10,000 Average number of weeks to fill position 4 Average number of candidates per position 5 Cost Per Person New employee lost productivity $9,000 New employee training $3,750 Recruiting cost $10,000 Candidate selection and interview cost $3,750 Substitute employee cost $6,000 Total turnover cost per person $32,500 Recruiter hourly rate $150 Approximate Private annual Companies profit Practice of firm Section $1,000, Key Steps to Staff Retention and Development: 1. Hire right the first time 2. Orient and assimilate from the beginning 3. Manage performance with up front goal setting and constant communication 4. Set career paths 5. Train, train, train 6. Constantly market to your existing people Compensate and reward appropriately 7. Listen 38

20 Step 1 HIRE RIGHT THE FIRST TIME Develop a Recruiting System We need to: Think differently Market the positive not the negative Consistency Beats Occasional Excellence Commit to an action plan Firm Needs Assessment Firm Selling Points Internal/Campus and External Recruiting Understand the talent pool Behavioral Based Interviewing 40

21 41 Step 2 ORIENT AND ASSIMILATE FROM THE BEGINNING

22 Orientation and Assimilation Orientation allows new hires to feel comfortable on day one Assimilation gives new hires the opportunity to ease into the culture and get up to speed properly 43 Orientation / Assimilation 44

23 Step 3 MANAGE PERFORMANCE WITH UPFRONT GOAL SETTING AND CONSTANT COMMUNICATION The Performance Management System Five to seven categories with open characteristics (Competency Model) Specific goals within each category Self evaluation on goals Supervisor evaluation Regular feedback on significant engagements or projects (e.g. over 80 hours) Quarterly counselor-counselee meetings 2 formal 2 informal 46

24 Competency Model for CPA Firm 1) Chargeable Hours/ Productivity 2) Technical Ability/ Business Knowledge 3) Client Service 4) Business Development 5) People Development & Teamwork Do you have any poor or low performers? 48

25 Step 4 SET CAREER PATHS What Works In Your Organization Consider the firm s culture How much flexibility does the firm embrace? What types of flexibility should the firm encourage? Can the firm incorporate: Alternative paths to partnership? On and off-ramping? Does the firm have established partner candidate criteria? Are non-equity leadership roles offered? 50

26 Step 5 TRAIN, TRAIN, TRAIN

27 Training Tips Make it constant learning never stops, neither should training Develop a plan or use learning ladders Consider training dollars well spent Formal and informal are both necessary 53 Provide Leadership and Development Opportunities i.e. Mentoring Firms Established program or simply an encouraged behavior Different from counseling and performance management Leaders Mentor one or two people at any given time Listen and coach by asking questions Take mentees with you on sales calls All Professionals Everyone needs 2-4 mentors Seek out people who you admire and make you comfortable 54

28 Step 6 COMPENSATE AND REWARD APPROPRIATELY Compensation is Just the Beginning Tie to performance goals Establish bonuses that reward per the firm s values and objectives Consider Win-Win agreements 56

29 Offer Great Tangible - and - Intangible Benefits Tangible: Outrageous Employee Benefits PTO Paternity Leave Competitive salary CPE and soft skills training Bonuses for credentials and new business Intangible Flexible Work Arrangements Alternate Career Paths Recognition and awards Time with leadership 57 Step 7 LISTEN INTERNAL FOCUS GROUPS

30 Seeking Feedback Fueling Retention Ask questions Listen actively Research your competitors and MAP surveys Determine life/work balance goals of firm and team members Be a role model Constantly provide internal (and external) customer service Why do people stay? What makes your firm different from other firms? How do your team members define life/work balance? 59 Follow-up Demonstrate That You Are Listening Try out a team member suggestion Ask for further feedback on a particular idea Delegate responsibilities to champions and get help from team members to make desired change Investigate compromises if you think something is not feasible Communicate via the firm s newsletters, team meetings, retreats, and voic s Revise strategic plan if you notice negative trends 60

31 11 Sections of the PCPS Human Capital Center 61 Human Capital Center Subsections Learning Typically Word documents or video segments Describes importance of process related components Explains how to implement Highlights tips and references Tools Tools Word, Excel, PDF and PowerPoint documents Means by which to achieve the recommendations in Learning Simple and customizable Articles Offer a glimpse into an overall subject for a quick user hit Or present a deeper analysis of one specific idea 62

32 PCPS Human Capital Center Toolbox Series 63 Are You Taking Care of You? Is it Life/Work Balance or Career/Personal Balance or Work/Life Fit or etc. Delegate, delegate, delegate Take breaks Evaluate your clients Set expectations up front Take advantage of employee benefits Consider time wasters and eliminate these Develop a disaster recovery plan SMALL FIRMS MUST HAVE A PRACTICE CONTINUATION AGREEMENT! 64

33 Are You Attractive? Tips for Those Looking to Buy or Merge Maintaining the best client base: Saves time by allowing you to focus on current clients, rather than searching for new clients Increases potential for referrals Makes your firm more attractive to potential buyers (both internal and external) If you have people: Hang on to the good ones turnover is expensive Develop or lose the bad ones they are costing you too much Continue to elevate skill set because of future partner and merger opportunities Implement sustainable procedures that will provide returns for the life of your firm 65 Download at AICPA.org/PCPS/succession 66

34 Questions? 67 References and Contacts PCPS Firm Practice Center PCPS Hotline CPA-FIRM Heidi M. Brundage, PCPS Technical Manager

35 Private Company Financial Reporting InterestAreas/ FRC/Accounting FinancialReporti ng/pcfr 69 Exhibit Sample Practice Continuation Agreement Outline (from AICPA s MAP Handbook) The following outline lists the issues that should be covered in a practice continuation agreement: 1. The basis of the contractual agreement 2. Provision for assumption of practice temporary basis a. Terms and conditions upon which contract becomes effective b. Assignment of staff and other employees c. Compensation arrangement with assisting practitioner d. Conclusion arrangement after temporary disability terminates 3. Provision for assumption of practice permanent disability or death a. Terms and conditions upon which contract becomes effective b. List of clients and comparative fees for three year period c. Transfer of working papers d. Transfer of files e. Provision for books and records, including financial statements and copies of tax returns f. Division of work-in-process, accounts receivable, and unbilled work - (1) Provision for billing and collection - (2) Provision for service fee, if any g. Provision for tangible property, furniture, fixtures, equipment, and supplies. 70

36 Exhibit Sample Practice Continuation Agreement Outline (cont d) 3. (cont d) Provision for assumption of practice permanent disability or death h. Provision for existing leases i. Provision for employees of disabled or deceased practitioner - (1) Copies of employment contracts - (2) List of employees and their ages, salaries, length of service, fee scales, and so on j. Provision for existing liabilities and contingent liabilities k. List of insurance policies, including accountants liability insurance l. Statement of fee structure by major category such as hourly rates 4. Payments for practice a. Basis of payment, meaning, and percentage of fees - (1) Number of years payout based on fees billed and collected - (2) Tax treatment to be considered 5. General provisions a. Noncompetition clause until effective date of this agreement b. Provision for termination of agreement by either party c. Arbitration d. Client notification 71