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Attraction is the Name of the Game:Keys to Prosperous and Preferred SuccessionSoutheastern Accounting ShowAugust 18, 2011
Heidi M. Brundage, CPA, SPHR – Senior Technical Manager, PCPShbrundage@aicpa.org
Private Companies Practice Section
BiographyHeidi 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.
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We’ll cover:Review of the 3 essential components of a client retentionWhy team retention is so important, even in today’s economic climateWhere to turn for guidance
Attendees will walk away with:Solutions and resources to improve multiple aspects of your organizationCall to action – take care of yourself and retain
Agenda
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2009 PCPS CPA Firm Top Issues
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Private Companies Practice Section
2011 PCPS CPA Firm Top Issues
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Keeping with Tax and Standards, Growth, Fee Pressure, Succession and Human Capital related issues top the 2011 listsSlight shift in focus from client retention to client acquisition between 2009 and 2011Human Capital no longer the top issue – but still an issue – temporary shiftFirms with 5 Professionals and under are less focused on Succession, yet the most vulnerable
PCPS CPA Firm Top Issues Bottom Line
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Succession Planning
Private Companies Practice Section
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.
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PCPS Succession Planning Resource Center
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How Do You Want to Get Out?
Merge?Acquire?
Develop leaders to buy you out?Sell outside of firm?Turn out the lights?
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What’s necessary for turning out the lights?
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Continuity of Your Practice
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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
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Private Companies Practice Section
Client Retention
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Maintaining the Best Client Base
Hang on the good ones – replacement is expensiveDevelop or lost the bad ones – they are costing you too muchEncourage client development Continue to evaluate your clients, ascertain satisfaction and tell the ones you love that they are lovedAdvantages 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)
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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
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IMPROVE CLIENT SERVICEStep 1
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1. Improve Client Service:Five Star Client Service
A. Connect With ClientsB. Take the OrderC. Deliver the OrderD. Ascertain Client
SatisfactionE. Offer DessertF. Collect the CheckG. Recovery
Five Star Client Service content provided by the Rainmaker Consulting Group, a division of Five Star3, LLC.
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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)
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COMMUNICATE AND CONNECT WITH YOUR CLIENTS
Step 2
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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 http://www.aicpa.org/Professional+Resources/CPA+Marketing+Toolkit/Speeches.htm)
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2. Communicate and Connect with Your Clients, cont’d
Listen to your clients• Obtain feedback – surveys and advisory boards• Clarify and understand client expectations
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2. Communicate and Connect with Your Clients
Show you care and have respect for your clientsDemonstration your appreciation for client business and referrals (e.g. handwritten notes and client spotlights) Be the trusted advisor
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WORK WITH CLIENTS IN TODAY’S ECONOMY
Step 3
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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
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Move Up the Client Value Pyramid
Client Value Pyramid
Controllership ServicesMonthly Close, Fin Statements, Cash Flow Analysis
Virtual CFOBudget, Business Planning, Business Modeling, etc..
Transactional ServicesTax, Write up, Bookkeeping, A/P, Payroll, etc..
More CPAs are becoming outsourced CFOs for their small business clients
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Trusted Business Advisor ModelMarketplace 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]
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BeforeTransactional
• 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
TodayAdvisory
• Low margin transaction processing• Means to an end; a Tax Return• Pressure to keep fees low• Non-strategic
Changing LandscapeClient Accounting Services Evolves
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AICPA Trusted Business AdvisorSM
Solutions
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PCPS Practice Growth Resource Center…in Development
Phase I launch Summer 2011Guidance and tools for small and medium-sized practicesFocus first on client retentionMarket driven and policy driven opportunities existNew lines of service create businessBusiness development and networking skills need to build at every level of employee/owner within the firmMarketing and business development accountabilities included in goal-setting and compensation plans
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Private Companies Practice Section
Personal Financial Planning Business Valuation
Forensics & Litigation Information Technology
Traditional CPA Firm
Firms are able to retain clients by offering services in all areas
Revenue Growth Opportunities:Specialized Areas
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YOU Are the Value
Effectively and concisely communicate the unique value you offer each and every time the opportunity arises
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ONE OTHER CLIENT RETENTION THOUGHT
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Do you have the right clients? (Now is a great time to ask.)
Client Evaluation Tool:
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Client RetentionBottom Line
It’s about cultureThese concepts never go away or get old3 basic steps to successful client retention:1. Improve Client Service2. Communicate and Connect with Your Clients3. Work with Clients in Today’s EconomyEvaluate your practice and your clientsImplement sustainable procedures that will provide returns for the life of your firm
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Staff Retention
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Cost of TurnoverAssumptions
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
Recruiter hourly rate $150
Approximate annual profit of firm $1,000,000
Cost Per PersonNew 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
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7 Key Steps to Staff Retention and Development:
1. Hire right the first time2. Orient and assimilate from the beginning3. Manage performance with up front goal
setting and constant communication4. Set career paths5. Train, train, train6. Constantly market to your existing people
– Compensate and reward appropriately7. Listen
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HIRE RIGHT THE FIRST TIMEStep 1
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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
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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
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Orientation / Assimilation
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MANAGE PERFORMANCE WITH UPFRONT GOAL SETTING AND CONSTANT COMMUNICATION
Step 3
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The Performance Management System
Five to seven categories with open characteristics (Competency Model)Specific goals within each categorySelf evaluation on goalsSupervisor evaluation• Regular feedback on significant engagements
or projects (e.g. over 80 hours)
Quarterly counselor-counselee meetings • 2 formal• 2 informal
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Competency Model for CPA Firm
1) Chargeable Hours/ Productivity
2) Technical Ability/ Business Knowledge
3) Client Service
4) Business Development
5) People Development & Teamwork
Private Companies Practice Section
Do you have any poor or low performers?
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SET CAREER PATHSStep 4
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What Works In Your Organization
Consider the firm’s cultureHow 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?
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Training Tips Make it constant –learning never stops, neither should trainingDevelop a plan or use learning laddersConsider training dollars well spentFormal and informal are both necessary
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Provide Leadership and Development Opportunities…
i.e. Mentoring
Established program or simply an encouraged behaviorDifferent from counseling and performance management
Firms All ProfessionalsEveryone needs 2-4 mentors Seek out people who you admire and make you comfortable
Mentor one or two people at any given timeListen and coach by asking questionsTake mentees with you on sales calls
Leaders
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COMPENSATE AND REWARD APPROPRIATELY
Step 6
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Compensation is Just the Beginning
Tie to performance goalsEstablish bonuses that reward per the firm’s values and objectivesConsider Win-Win agreements
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Tangible:Outrageous Employee BenefitsPTOPaternity LeaveCompetitive salaryCPE and soft skills training Bonuses for credentials and new business
IntangibleFlexible Work ArrangementsAlternate Career PathsRecognition and awardsTime with leadership
Offer Great Tangible - and - Intangible Benefits
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LISTEN…INTERNAL FOCUS GROUPS
Step 7
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Seeking Feedback – FuelingRetention
Ask questionsListen activelyResearch your competitors and MAP surveysDetermine life/work balance goals of firm and team membersBe a role modelConstantly 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?
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Follow-up – Demonstrate That You Are Listening
Try out a team member suggestionAsk for further feedback on a particular ideaDelegate responsibilities to champions and get help from team members to make desired changeInvestigate compromises if you think something is not feasibleCommunicate via the firm’s newsletters, team meetings, retreats, email and voicemailsRevise strategic plan if you notice negative trends
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11 Sections of the PCPS
Human Capital Center
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Human Capital Center SubsectionsLearning• 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
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PCPS Human Capital Center Toolbox Series
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Are You Taking Care of You?
Is it “Life/Work Balance” or “Career/Personal Balance” or “Work/Life Fit” or etc.…Delegate, delegate, delegateTake breaksEvaluate your clientsSet expectations up frontTake advantage of employee benefitsConsider time wasters and eliminate theseDevelop a disaster recovery plan
SMALL FIRMS MUST HAVE A PRACTICE CONTINUATION AGREEMENT!
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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
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Private Companies Practice Section 66
Download at AICPA.org/PCPS/succession
Private Companies Practice Section
Questions?
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References and Contacts
PCPS Firm Practice Center –http://pcps.aicpa.org/PCPS Hotline 1-800-CPA-FIRM Heidi M. Brundage, PCPS Technical Manager• hbrundage@aicpa.org• 919-402-4825
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Private Company Financial Reporting
www.aicpa.org/ InterestAreas/ FRC/AccountingFinancialReporti
ng/PCFR
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Exhibit 107-1—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 agreement2. 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.
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Exhibit 107-1—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
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