All posts by John Ezell

We speak with practice owners and partners about sales, mergers and succession planning issues on a daily basis.  Many firm owners have a general idea of what they want their exit strategy to be, but have not formalized it into an executable plan.  They have an idealized vision of their exit. 

For most firms the responsibility for creating and executing the succession plan falls on the managing partner.  Managing partners tend to be very busy with clients and day-to-day operations of their firms.  As a result, it is all too easy for succession to be put on the back burner. 

Sometimes casual conversation among partners passes for succession planning.  But it is not tied into the overall strategic planning of the firm.  Nor are the real needs, motivations, and values of the individual partners addressed. 

In order for us to increase the probability of success in multiple partner firms, ProHorizons uses three distinct phases in our succession planning process: Discovery, Design and Execution. 

The Discovery Phase involves identifying the individual values and goals of each partner, and defining value alignment and shared goals among the partners.   Conducting a thorough discovery increases the probability of a proper succession or merger at the time of execution.  The goal of the discovery phase is to help the firm owners understand their individual and mutual interests and motivations in the succession of the firm. 

The Design Phase involves taking what was discovered in the first phase and linking it to strategic needs of the firm.  During this phase, partners address issues identified in the Discovery Phase.  They anticipate challenges that will affect succession.  This also allows them to manage the expectations of clients and staff.   The plan will include objectives, target dates and necessary resources to assure a successful exit.

The Execution Phase is where the outcomes of the earlier phases get tested and implemented.  This phase begins as soon as the Design Phase is complete.  It includes a regular review of the plan. Changes in the firm will lead to adjustments in the plan.  The final portion of the execution may be a merger, an internal succession arrangement (selling to insiders), a sale to outsiders, or some other solution. 

Succession planning sustains the viability of a lifetime’s work.  In smaller firms, it means peace of mind and ensuring your hard work is rewarded in the long run.  In larger firms, it ensures stability in the leadership and management of a firm.  It assures the needs of clients are not neglected in times of transition and the goals of the partners are acknowledged and met.

Comments (0) • Posted July 9th, 2010 at 2:02pm

In my last blog, I asserted that some brokers lie in order to induce practice owners to list their firms. So, how should a broker approach a practice owner?  They should be upfront and honest.  

First, I think it is very important to learn information about the practice and the owner before we talk about price and terms.  This frustrates some practice owners because they usually ask about price and terms early in our conversation.

Ultimately, it is not fair to a potential seller for me to tell them the price they want to hear just so I can get the firm listed for sale.  My reluctance to inflate a price means sometimes I lose a practice listing to another broker because they “quote” a higher price.  That is OK with me.

Next, even if I think I know who the buyer might be, I still want to market the firm to many prospective buyers as if I do not know who the buyer might be.  That may cost my company a little more in advertising and marketing the firm for sale, but it is important that we identify the “right” buyer for a practice and not sell to the buyer we just happen to have in our back pocket.  It is important to me that I do not get calls from buyers and sellers a year later saying they made a bad deal or the firm was a poor fit.  Frankly, I like to sleep at night.  

I look at it this way, either I will get the listing down the line when they figure out the other broker’s tricks or maybe the other broker did have a desperate buyer that was willing to pay an unrealistic price.  In both cases my goal is met, a happy seller and buyer.

Comments (0) • Posted April 30th, 2010 at 6:15am

It is an unfortunate truth that sometimes brokers lie to get listings.  It is an easy thing to do when a listing is on the line.  You see sellers usually want to get the most money they can with as much cash down and with the least possible hassle.

So an easy way to get practice owners to sign up, or list, is to inflate the price you tell the seller they can expect, assure the seller it is easy to get all cash and tell them you have a “special” buyer ready to pounce.  Great, where do I sign up?

I have to admit; early in my career I may have inflated a price or two just to get the listing. I think this comes from fear and inexperience. Fear that if I did not tell the client what they wanted to hear they would not hire me. Inexperience because an experienced broker knows their worth is not in the number of practice they list but in the number they actually sell.

Timing is a funny thing because as I wrote this a friend of mine received an email message that stated, “A buyer contacted us specifically about buying your practice in his city (I will keep it confidential). If you’d consider selling this year we will provide more details regarding this particular buyer.”  My friend sent it to me because he found it funny since he does not own a practice and he never has.  I found it disturbing because it is such an obvious trick to get an owner to call the broker.

We work hard in our role and in maintaining our ethics.  We see ourselves as valued advisors, but struggle with the market perception that “brokers” are not trustworthy.  After all, how trustworthy is a relationship based on a lie?

Comments (2) • Posted April 21st, 2010 at 7:43am

Many accountants we meet are excellent business advisors but sometimes neglect to take their own advice, especially when it comes to firm development and succession planning.  For many accounting practice owners, the exit strategy has been thought about and consists of building up a client base, adding a few staff, and then selling the practice to an employee or younger partner, merging with another firm, or the selling their accounting practice to an outsider.  Then, the plan is typically shelved until just before the accountant is ready for retirement.

Steven Covey, in his best selling book, The Seven Habits of Highly Effective People, advises people to begin with the end in mind.  So the wise accountant, even with no plan to sell their firm for several years, develops their firm keeping their exit in mind.

The reason this is typically not done and the plan is shelved until just before retirement is usually a flawed perspective of succession planning.  When asked what succession planning is most will reply that it is a plan focused on a single succession event.  We think succession planning is a development process that leads to an event.  The focus is spread across a series of development stages and growth steps with the natural outcome being the sale or merger of the firm to an outside firm or the continuation of the firm under new internal leadership. 

The succession plan begins with understanding your firm and your long term goals.  Only then can you begin developing, documenting and executing a succession plan.  The plan should be an all inclusive roadmap of your development stages and key milestones including client acquisition, staff development, pathways to partnership, expansion of services.  The succession plan should be developed today if not yesterday and implemented long before the seller or partners approach retirement age.

The result of a well-designed, implemented succession plan will be a larger, more profitable and easier to manage firm that can be transferred with greater ease to the successor.  The reward for the exiting owner is in greater value and consideration at the time of succession and a stronger legacy for years to come.

Comments (2) • Posted April 19th, 2010 at 10:00am

We heard from an accounting practice owner last fall, “My practice is doing about 10% more than last year”, he said.  That caught my attention since we were in the midst of a recession.  He attributed the growth to his “marketing efforts the past few months.”  Last week we checked back in with him to ask how tax season was going and he responded that his efforts were paying off and he was having the best tax season in his practice’s history.

It’s no wonder his practice is doing well.  He developed a marketing plan and executes his plan.  This may seem like a no-brainer for many, but the fact is many accountants do not plan when it comes to marketing.  We surveyed more than 1,000 accounting and tax professionals last year and 48% responded that they seldom or never follow a strategic marketing plan.  Only 21% of respondents often or always follow a plan.

Can you imagine investing in a company that admits to not creating or following a marketing plan?   A company that is going to rely solely on referrals and repeat business clients from last year to help them achieve this year’s goals. 

Now, I am not saying that every firm needs a marketing plan or that every plan needs to be extensive.  Some accounting practice owners are happy with the status quo.  But 54% of respondents to our survey expect their practices to grow this year, both in revenues and in number of clients.  Many are going to hit that number by accident.  Others will do it by keeping busy and working hard.  A majority or going to need to work hard, be smart and following a strategic plan if they hope to achieve this goal.

My advice is to spend some time after tax season looking back at what worked for you and what didn’t work. Then, lay out a simple plan on how to leverage those successes throughout the remainder of the year.  Then, implement and follow the plan.  You will likely need to make adjustments during the year, but having a roadmap is an important starting point and will help you document lessons learned so you can tune and improve the plan year to year.

We will have discussions and posts related to this topic throughout the year.  Keep an eye open for them let us know what you think.

Comments (0) • Posted April 12th, 2010 at 11:55am

With tax season in full swing the last thing on most accounting and tax practice owners’ minds is buying, selling or merging their firms.  But for someone that hopes to sell their firm before the 2011 tax season, that is a year from now, the time to start is immediately after this tax season is finished.

We have found that those practice owners that start the selling process in April, May and June are much more likely to have a successful outcome (better choice of buyers, more money upfront and better overall price) than those that wait until October or November.

Many practitioners believe that buyers and merger partners will not want to close a transaction until the fall, or even just before the next tax season, and end up starting of the process too late.  Most buyers realize that in a competitive market, the time to buy or merge is when the best firm is available and that is not always on their time line. 

Another reason practice owners miss the sales window is they begin the process as a “For Sale By Owner” and work with only one or two buyers at a time.  They start talking to someone about buying or merging in May or June, and then let that process play out all summer, only to find out in the fall that the buyer or merger candidate is either not qualified or not as interested as they initially let on, leaving the seller less time to identify their successor.  

Keep in mind, most buyers see “For Sale Buy Owner” as an opportunity to get better terms from the seller and ultimately pay less.  A better way is to work through a process to identify multiple ready, willing and able buyer or merger candidates.  This aligns market forces so that you can identify the best successor for your clients (and staff) and ultimately end up with the best price and terms.

Comments (0) • Posted March 17th, 2010 at 1:35pm

Rita Keller, in her recent blog Surroundings Really Do Matter, asks the question "do people perform better work in a neat, clean, organized environment than they do in an environment of disorder?"   She lists points to ponder that relate to staff and management issues, such as how cluttered offices hinder the working environment with loss of productivity and ultimately increased stress.  It is interesting because we often have to address this in the sale of a practice.

Many years ago I went to meet a prospective seller of a CPA practice.  His entire office was a disorganized mess.  From dust and cobwebs to piles and piles of files and other paperwork.  I recommended that he really ought to clean and organize the office before we have a buyer come to meet with him .  After several weeks of preparation he told me he was ready.  So I set up a meeting with a prospective buyer.  After the meeting the buyer said, "John, I would need to spend $50,000 just to get that place organized."

Whether we are working with a firm who is looking to grow or a client who is looking to sell his or her firm one of our main concerns is the office condition.  Remember, there is only one chance to make a first impression to any prospective client or buyer of the firm. 

Here are a few quick tips you might be able to use.

• Use some type of a contact management system.
• Establish a routine for incoming mail.
• Keep your desktop and workspaces available for actual work. One former client had a one file out at a time policy that each person in the office followed.
• Consider a file system utilizing less paper (or better yet paperless).  You can start by scanning your current year files.
• Schedule a few minutes each day for planning, clean up and organizing.

For more ideas take a look a Rita’s blog.

Comments (8) • Posted March 3rd, 2010 at 7:38am

I recently got a note from a CPA who said “so far, this year has exceeded my expectations, and its only January!”

I wrote back to say that I was happy the season was going well for her. I asked her to what did she contribute her success and was pleasantly surprised with her response.  She mentioned streamlining work processes and great support from home, by ensuring the following:

1. Having a routine and sticking to it
2. Limiting herself to a 12 hour work day, no matter how much energy she may have.
3. Taking a late lunch and exercising daily
4. No matter what, taking Sundays off.

Some who read this may shake their heads and disagree. What they will not realize is that this CPA has figured out that the time to recharge her batteries is not when they are totally run down. She realized that it is better to work harder and smarter. Stress is a big part of most people’s lives these days, and a busy tax season will just pile on the stress.  Taking time to recharge and “de-stress” will make your time at work more productive.

I can not wait to speak with her later this spring.  I imagine that, when I do, the same smile will be there.  At the same time, many others will have that tired, worn-out look and will need a while to de-compress before they truly enjoy the fruits of their labors.

I say find some time to recharge your batteries this season and enjoy the journey. What are your thoughts?

Comments (0) • Posted February 17th, 2010 at 8:20am

For many firms, January through April is the most critical time of their year, with most of their revenues derived from year-end financial statement work and tax compliance services. The long hours leave staff and principals exhausted and often overwhelmed. During this period, maintaining a business development mindset can be vital, especially for practices that perform a wide range of services.

In our fifteen years of evaluating practices, we have seen varying extremes in revenues per client. Our experience has shown that the more profitable practices are paying attention to client development during the busy season. If these competitors are in the market when you are not, they will get the new clients you are seeking, and perhaps will get your clients over time.

This tax season will be demanding, but it does not have to be chaotic. Spending time planning, educating the staff and developing a business development strategy will increase:

• Profitability
• Sales per client
• Potential referrals

This is the time of the year where your clients, the public, and the business world are all paying attention to accounting. There is a tremendous opportunity to grow your practice.

Firms need to look at the busy season as a stepping stone for 2010, while your clients are focused on taxes/accounting more than any other time. Benefits from maintaining a business development strategy are numerous and include:

• Accounting draws attention: The tax season is the time where you get the opportunity to meet your clients in person. Accounting is an important issue that, generally, captures an audience.
• Competitive advantage: Firms that make an effort at marketing during the busy season gain a competitive advantage over other firms who are not in the marketplace.
• Strengthened relationships: It is an opportunity to further strengthen relationships with existing clients.
• Increased referrals: Strengthened relationships will improve both quality and quantity of referrals.
• Accelerated growth: It offers opportunities to increase business and should not be wasted.

How does an accounting or tax firm develop business during tax season? It certainly is a challenge.  If it were easy, everyone would be doing it. There are a numerous ways, but none of them will be successful without the proper foundation; planning and preparation.

We will address other business development issues that your firm can employ to go from busy season to always busy and enhance your firm’s value in greater detail in our blog during the weeks to come.

Comments (0) • Posted December 16th, 2009 at 3:10pm

Most firms are looking at tax season as a stepping stone for 2010. New business development should always start with your current clients. Your current clients are the targets for other firms looking for more business, so maintaining your relationships is a crucial first step.  Improving that relationship and treating clients favorably, will lead to loyalty, repeat business, and referrals to additional clients.

Client relationship management is an indispensable part of business development especially with regard to existing clients. We have a saying in our office that clients don’t care how much we know until they know how much we care. Client relationship management is all about showing that you care about them both professionally and personally.   

Here are some key techniques that will help you to maintain strong client relationships:

Communication: Keep in touch with your clients.  Use tax season as a way to re-connect and build a better relationship. Plan to keep in touch throughout the year.

Appreciation: Listen to your clients. Find out what is happening in their lives and businesses. Show a genuine appreciation of who they are and what they are experiencing, in addition to what their current tax needs are. Let them know you care and appreciate their business.

Reinforcement: Educate your clients on the areas of tax and finance that affect them, as well as strategies that may benefit them. Reinforce your ability to HELP them.

Endorsement: Building a highly successful business is all about referrals. After you have taken the time to show how much you care, it is time to have a discussion of referrals, in this order:

• Think of someone you know that may need the services your client provides. Provide the referral to your client.
• Think of someone you know that may provide a needed service for your client that you do not provide. Refer your client to them.
• Remind your client of all the various services that you provide. Let them know how much you value their referrals. Reciprocating interest in each others businesses will strengthen the relationship.

Although important, client relationships are only one facet of business development. We will cover other business development issues in greater detail in our blog during the weeks to come.

Comments (0) • Posted December 8th, 2009 at 2:50pm