Transition Advisors LLC

Transcription

1 Transition Advisors LLC Growing Your Firm Through New Practice Niches August 4, 2016 Bill Carlino

2 NASBA CPE Earned Credit Guidelines Transition Advisors, LLC is a sponsor on the National Registry of CPA Sponsors per the National Association of State Boards of Accountancy (NASBA). In order to receive your one CPE credit You must complete two requirements: 1) Participate in all three polling questions during the presentation. 2) Complete an online evaluation. Once these requirements are met, you will receive your CPE certificate of completion within 10 working days.

3 Attendee Control Panel In order to fully participate in the webinar, please familiarize yourself with the Go-To-Webinar control panel on the right hand side of your screen. The orange arrow on the top of the control panel minimizes the control panel During the presentation all participants are muted, but can communicate with us using the question box toward the bottom of the control panel. Please send us any questions or comments you may have during the webinar. Just type your question in the box and click send Time permitting, I ll try and answer all your questions following the presentation and we welcome and encourage your participation.

4 Upcoming Webinars Transition Advisors, LLC offers FREE monthly CPE courses Upcoming Webinars: August 11 How to Structure Your Partnership Agreement (rescheduled) August 18 - Preparing Your Firm for an Upstream Merger September 7 Succession Planning: Alternative Deal Structures September 29- Preparing Your Firm to Grow through M&A Visit transitionadvisors.com/upcoming-courses.php for more information.

5 Transition Advisors LLC About Us Merger and transition advisors exclusively serving the accounting industry Customized solutions Over 22 years of experience Represent the buyer or seller Services include: Buyer-seller introductions Merger and acquisition transaction structure Document preparation/review, valuation and due diligence Post-transaction business planning Partnership agreements, retreats General consulting and coaching

6 Transition Advisors LLC On behalf of Transition Advisors. THANK YOU ENJOY THE WEBINAR!

7 Today s Agenda What are today s fastest growing client niches? How the economy has slowed down traditional (organic) growth. How to begin a new practice area from scratch Some major hurdles firms face.

8 Accounting Profession At-A-Glance Revenue $99B No. Firms 94,600 (est.) Employment 532,985 (public accounting only) Growth in % (Top100) Growth in % (all)

9 Three Ways to Grow 1. Organic one client at a time 2. M&A 3. Adding new practice niches

10 A Function of Client Demand Clients are asking their CPAs to do more and firms need to respond. Much more sophisticated clientele. Firms looking to leverage core strengths to offer specialized niche services Help both the firm and the client grow! According to AICPA: The more services a firm offers a client, the less likely they are to leave!

11 Evolution of Client Services CPAs moving away from services-driven to strategy-driven approach more analytical. Driving their business where they want in lieu of businesses taking them where they don t want to be decision-making is becoming faster. The role of CPA firm managing partner has become more of a chief executive role. More websites identifying MPs as CEOs.

12 Top Niche Services Attest Business Valuations State and Local Taxes Estate & Trust Planning International Tax M&A Industry Specializations Litigation Support Source: Accounting Today Top 100 Firms

13 Other Niches that Stand Out Among U.S. Firms Distribution IT Consulting Telecommunications/Media Entertainment/Hospitality Manufacturing BPO (outsourced CFO functions)

14 Top Client Categories Manufacturing Midsized Businesses Real Estate Technology Wholesale Distributors Professional Services Large Businesses Source: Accounting Today Top 100 Firms

15 Mergers One Way to Grow Merger-Mania continues!!! 500+ deals over past three years. Three years ago, 55 of Top 100 Reported at least 1 merger!! In 2015 Big Four did 8 mergers while G400 did 56.

16 More Mergers Seeing more multi-disciplinary transactions Crowe Horwath -acquired BaxterBruce, a London-based insurance risk consulting company. Wipfli merged in Brittenford Systems, an IT consultant and software reseller in Reston, Va. Mazars - acquired Corality Financial Group, a financial modeling consultancy and training course provider. They plan to provide project financial advisory and transaction services, project valuation, financial modeling and training services, and audits of financial models E&Y acquired consulting company Parthenon Group Friedman LLP Acquired Sounding Board a turnaround firm. Citrin Cooperman- acquired Real Time Computer Services Inc. an IT consulting company.

17 Reasons Behind the Surge in M&A Geography / New Markets New Niches Competition Lack of Formal Succession Plan

18 Polling Question #1 How many equity partners do you have in your firm? 1) 1 2) 2 to 4 3) 5 to 9 4) 10 to 19 5) 20+

19 What s Keeping Practitioners Up At Night? Finding/Retaining Qualified Staff Succession Planning New Business Development Need to expand beyond traditional services to stay competitive (boutique offerings and other distinguishing services) Clients demanding more interaction and personal service from their CPA more sophisticated Clients feel that their CPA does not provide enough personal attention an un- Intended consequence of technology.

20 That was Then, This is Now Before economy crashed in 2008 plenty of business to go around CPAs were basically order takers. Now traditional work is more competitively bid Low-balling, where lowest price and not best client service wins out. Prompted a race to the bottom. Firms with strong niche capabilities have more negotiating power.

21 This is not your father s CPA firm You can t run a CPA firm in 2016 like you did in 1980! Gradual move toward value pricing and value billing about percent now use some form of VP and VB system. Firms moving to one-partner/one-firm concept rather than individual books of business. Especially among partner-loyal firms vs. brand-loyal practices. More remote workers 1995 there were 9.5 million remote workers 13.5 million in 2012 and by the end of 2016 some 60 million people will work at least one day per week remotely.. Greater use of mobile devices: more than 90 percent of CPAs use smartphones or tablets. Given rise to the birth of virtual firms. Today, about percent of all start-up firms are virtual.

22 Practitioners Top Concern? How to Bring In New Clients AICPA polled nearly 600 firms in 5 size classes Sole Practitioners 2 5 professionals 6 10 professionals professionals 21+ professionals Bringing in new clients ranked as the #1 concern in 3 of the 5 firm size classes and no lower than 3 rd among any of the groups.

23 Recent Trends CPA Firms moving away from being client s Most Trusted Costco - cannot be all things to all clients. Do four or five things well instead of 10 things mediocre. Firms websites often highlight as many as different client services Less than half have an actual Partner-in-Charge. Worst-case scenario: Over-Promise and Under- Deliver.

24 Due Diligence Define the niche you want to be in Identify key drivers in the service lines and then begin interacting in that market to make a determination whether it s viable Outline how the firm and potential clients of that service will find each other Determine the channels of distribution

25 Due Diligence 3 Critical Question You Need To Answer 1. How well is your firm aligned with the niche you re targeting? 2. What if any are the current trends in that industry niche? 3. How well is that niche doing? Currently? Over the past 3 years? 4. The Research Call

26 Questions to Ask Is the niche underserved in your practice area? Is it a good niche for the firm with growth potential? Do you have clients in that niche? Who will be the champion in the firm? Do you have partner buy-in? How do we market these new services to existing and new clients?

27 Advantages of Offering New and Unique Client Niches Forges competitive point of difference! Positions firm as experts in a crowded marketplace Increases client focus and needs can you help them with a problem Specialty firms can get more specific than generalist practices

28 Caution Flags Creating a niche without necessary ancillary support referral sources, billings) I want to make more money! Lack of intellectual capital and growth strategy Top down assessment of in-house talent Ignoring your core strengths.

29 Polling Question #2 What issues do you see affecting your practice most next year? 1) Succession for retiring partners 2) Admitting new partners 3) Client retention for retiring partners 4) Need for growth 5) All of the above

30 How To Begin a Niche Practice Determine client need would there be crossselling opportunities for example if you choose wealth management and your tax clients Develop a market-based approach not an idea- based approach. Determine if there is an opportunity in your client base. Developing the expertise do you build it in house or though acquisition? weigh pros and cons of each.

31 How to Begin (Cont d) * Develop Pricing and profitability models. understand key financial indicators will help steer sales and marketing strategies. Determine your go to market strategy. a. Identification of primary and secondary sales teams b. Development of marketing and sales materials c. Internal service education d. Expected pipeline and sales process e. Identification of primary influencers and potential referral sources f. PR and launch communications

32 Examples of Firms with Successful Niche Services Armanino McKenna Corporate Finance practice to clients with intellectual property and patent sales through a structured process called Auction90, in which it completes a competitive auction within 90 days. Other services will include sell-side representation to help business owners and investors get the most value during an exit transaction. CohnReznick Innovation Lab a service where the firm collaborate with clients on problem-solving and brainstorming using new technology that provides state of the art LCD screen visuals. MBAF Miami Since 1972 has had an auto dealership unit. Authored the Auto Dealership Engagement Manual published by the AICPA. Joseph Eve Montana-based CPA specializes in Indian Reservations.

33 Factors that will Determine Niche Success Niche success a combination of market conditions and committed leader! Don t relegate your established offerings such as tax and audit to the back burner fire on all cylinders!! Strategy development consists of three dynamics services, channels of distribution, and targets. This involves the selection, innovation, and packaging

34 Don t Forget to Network And Network And then Network Some More! Business valuations or litigation support interact with legal associations perhaps divorce attorneys. Restaurants state restaurant or foodservice member associations. Cost segregation builders groups or related associations.

35 Channels in Lieu of Referrals New growth is often a case of strategic matchmaking Identify specific buyer groups One firm that wanted to boost their wealth management discovered they had a large segment of widows in need of financial planning so they partnered with local church groups..

36 Hit the Ground Running! Find that niche leader within your firm -or go out and get one. Niche champions should be equal parts analytical, strategical, and above all... are leaders Assign practical revenue and growth metrics to the new undertaking don t play catch as catch can Remember, the smart money is on specialization, not generalization.

37 Polling Question #3 Do you have adequate talent on the bench to replace retiring partners? 1) No, we don t have the talent we need 2) I think so, but we don t know how to admit them 3) Yes, and we re confident our approach works 4) We don t plan to pursue internal succession

38 Remember Niche specialties are a VALUE proposition! Most firms offer traditional tax and accounting services. Don t be like most firms. Client and market will perceive you as an expert Firms that complement those client niches with specialization will ultimately win the engagements

39 Today s Takeaways Determine your need 1. Use a market-based strategy not an idea-based strategy. 2. Look both inside and outside for niche specialists 3. Find the champion in your firm.

40 Remember the 7Ps! 1. Proper 2. Prior 3. Planning 4. Prevents 5. Piss 6. Poor 7. Performance

41 For More Information Visit the AICPA Succession Planning Resource Center esection/strategyplanning/center/pages/default.aspx

42 For More Information Please visit our website for resources including FREE reports, whitepapers and case studies Bill Carlino