attraction is the name of the game: keys to … sessions/2011 seas material… · keys to...

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, [email protected]

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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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


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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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


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


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


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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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


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


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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Private Companies Practice Section 41

ORIENT AND ASSIMILATE FROM THE BEGINNING

Step 2


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


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


Do you have any poor or low performers?

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SET CAREER PATHSStep 4


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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TRAIN, TRAIN, TRAINStep 5


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


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


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


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• [email protected]• 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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