The Attributes of High Value Firms

1. The Attributes of High Value Firms

2. Accountants Advisory Groupwww.AccountantsAdvisory.com • Strategic consulting firm to CPAs • Leadership, management and strategic direction • Marketing, new business development and public relations strategies • Human capital and recruiting programs • Merger and acquisition consulting • Partner retreat facilitation • Recruiting partners and managers • Objective and independent advice • Practical experience from industry specialists • Network of resources

3. The “Perfect Storm” Consolidation/Franchises Retiring CPAs Quality CPAs Gender Unfunded Retirement Increased Competition Leadership

4. The “Perfect Storm” • The regional, mega-regional, and national firm “franchise” concept taking hold and creating competitive issues (for attracting staff and clients) for smaller firms. • Local mergers escalating, both with medium and large firms. (i.e. EisnerAmper , DixonHughes Goodman, CliftonLarsonAllen)

5. The “Perfect Storm” • Retiring accountants outpacing new accountants by 3:1. • “Baby Boomer” partners entering their 60s at a rapid pace. 10,000 Baby Boomers a day are turning 65. A Baby Boomer turns 60 every 8 seconds. • The # of partner-quality “rainmaker “ accountants not adequate for succession planning. Shortage of practice development partners and quality staff is a significant factor in merger discussions. • The % of partner retirement pay to net fees is averaging over 4%, up from 2% in 2000 ,and is starting to reach cap levels at some firms. This trend will continue and force upward mergers or firm splits.

6. The “Perfect Storm” • Over the last 5+ years, 55% of new hires were women, who represent only 20% of all partners, creating a void in succession planning. • Over 90% of all firms have unfunded partner retirement plans. • Firms are experiencing significant voids in leadership as founding partners retire.

7. Firm Classification Large National FirmOfficesRevenue $MIL CBIZ 150 575 Clifton Gunderson 41 243 Crowe Horwath 26 481 Small National Larson Allen 19 227 Marcum 18 251 UHY Advisors 15 205 JH Cohn 11 230 Baker Tilly 11 238

8. Firm Classification Mega-Regional FirmOfficesRevenue $MIL Dixon Hughes Goodman (SE & CR) 32 280 Parente Beard (MA) 24 163 EIDE Bailly (MW) 19 152 Moss Adams (W) 18 316 Plante & Moran (GL) 16 298 Wipfli (GL) 15 115 Carr, Riggs & Ingram (GC) 15 86 Horne (GC) 14 56 Cherry Bekaert & Holland (SE) 14 98

9. Firm Classification Large Regional FirmOfficesRevenue $MIL Rehmann (GL) 16 75 Novogradac & Co. (W) 12 65 Withum Smith & Brown (MA) 12 72 EisnerAmper (MA) 8 252 Rothstein Kass (MA) 8 164 O’Conner Davies (MA) 6 65 WeiserMazars (MA) 5 120 Citrin Coopermann (MA) 5 100

10. “Big 5” International Large National Small National Mega-Regional Large Regional/Local Future Classification of Firms • Consolidation / mergers will take place at a rapid pace and as a result, the future classification of firms will change and will look like:

11. More Firms Will Not Be Able to ScoreIn The RedZone

12. Attributes of High Value CPA Firms

13. Driving Value Leadership Human Resource Management Values State of the Art Technology Marketing, Public Relations and Practice Development Recruiting the best talent possible at all levels either directly or through M&A Practice & Engagement Management Training, Career Development, Succession Planning, Partner & Staff Performance Management Efficient & timely delivery of service Leading edge services, industry specialization & niches Profits

14. Attributes of High Value Firms • Strong purpose driven leadership with effective management that doesn’t procrastinate when there is a need for tough decisions. • Talented partners and staff that provide world-class service to “delighted clients”. He firm has a partner-staff pyramid structure with adequate quality professionals for partners to delegate work to. They have at least 1:5 partner to staff ratio. • Succession planning is a daily process not a periodic event.

15. Attributes of High Value Firms • A highly profitable firm that continuously upgrades the client base and carefully manages client practice management statistics. • The firm is run like a business with each business decision adding more value to the firm.

16. Attributes of High Value Firms • Staff is provided the opportunity to advance within the firm and they are supported by career development programs that guide and manage performance. • Promotions to equity partner are carefully evaluated with specific criteria. New partners buy-in to the firm. They have “skin in the game.”

17. Attributes of High Value Firms • Over achievers are rewarded handsomely and underachievers are not tolerated whether a partner, professional, staff person, or administrative personnel. • The Firm embraces and trains their professionals to use leading-edge technology.

18. Attributes of High Value Firms • A marketing and practice development culture that continuously adds to the growth of the firm each year. • Clients are a significant referral source of new business. • The Firm is well positioned in its marketplace and continuously maintains its competitive edge through well-developed and executed marketing and public relations strategies.

19. Attributes of High Value Firms • The Firm has strong niches and/or industry expertise that is highly respected and branded in the marketplace. • The firm researches and monitors the competition and adapts services to client’s wants and needs. • The firm has an infrastructure (administration, HR, Marketing, IT) that supports the partners and staff to provide them the opportunity to succeed and eventually take the firm to higher levels of success.

20. Purpose Driven Leadership

21. 10 Qualities of a Purpose Driven Leader • Are revered by the partners and staff • Leaders should be visionaries and have a strategic plan to take the firm forward. • Leading day to day without a strategic plan or vision is not leadership, it's more like gambling. • Are followed not because of their title, but because of what they represent.

22. 10 Qualities of a Purpose Driven Leader • Have a compelling vision • Leaders should practice what they preach and be good role models to their partners and staff. "A leader" is one who knows the way, goes the way, and shows the way“—John Maxwell • Regularly communicates the firm’s vision with great clarity. • Effective leaders are able to communicate their plans and how they will be implemented. • Inspires and motivates the team.

23. 10 Qualities of a Purpose Driven Leader • Client and staff centered • It’s all about positively moving the firm forward • Creates an environment to have all stakeholders thrive (Clients, Partners & personnel)

24. 10 Qualities of a Purpose Driven Leader • People and Process Driven • Leads people and manages processes • Both are vital in creating a culture of service, performance, and operational excellence. • Leaders should expect accountability from their partners only if they are also willing to be accountable. Accountability by firm leaders establishes trust that is necessary for them to gain the support of their partners. • Leaders should not command trust, they should earn it.

25. 10 Qualities of a Purpose Driven Leader • Principle and value centered • Honesty, integrity, and respect for all. • Passion and excellence in anything they do. • A strong sense of humility • Not about them • Put aside their egos

26. 10 Qualities of a Purpose Driven Leader • Open-minded and lifelong learners • Don’t pretend to know it all • More to learn to be more effective • Willing to take advice • Not afraid to admit failure • Readily regroup and continue in a positive manner. • Don’t blame others.

27. 10 Qualities of a Purpose Driven Leader • Are happy people • Positive outlook • Approachable by all, even if they are having a bad day. • Don’t carry bad attitudes on their sleeves. • They never give up • Tenacious and always pursue success no matter how difficult the path is. • They are willing to take collateral risks and invest in the firm.

28. Leadership • Leaders—Not Managers • Leaders must be able to make important decisions within a reasonable time frame and not get involved with minutia. In other words, leaders should lead and not be firm administrators at all levels. • Run the practice like a corporate business. Hire (full- or part-time) quality administrative, marketing, and HR personnel to manage the daily operations of the business and assist in implementing strategic planning initiatives. • Leaders should spend time communicating with their partners and committees. However, don't allow client service partners and committees to procrastinate and delay decisions in areas they do not have the background or expertise in. In a recent Business Week article, John Chambers, CEO of Cisco, stated that "Without exception, all of my biggest mistakes occurred because I moved too slowly" when describing his leadership experience during the 2001 recession.

29. Talent

30. Build a Quality Staff Pyramid …the Clients Will Come

31. Historical Pyramid Structure Partners WorkFlowingDown WorkFlowingUp Managers Supervisors Staff

32. The Pyramid & Leverage • Many accounting firms have become over-partnered and under-leveraged. • The “over-partnered” syndrome has been fueling merger mania over the last 5 years. • There is a direct connection between the “partner-to-staff ratio” and the ability of firms to be successful in the long-term and develop succession planning. • Need at least a 1:5 partner to staff ratio.

33. Staff Model

34. Inverted Pyramid Structure Managing Partners / Senior Partners Junior Partners WorkFlowingDown WorkFlowingUp Managers Staff

35. Leverage • Is the firm over-partnered for the current state of the “new economy”? • Is the firm “carrying too many underachieving partners and mangers? Is the firm too “top heavy”? • Does the leadership of the practice need to make some tough business decisions regarding the “Over-Partnered Syndrome” for the benefit of the firm? • Are high billing rate partners doing too much low level work?

36. Leverage • Are partners being held accountable for delegating work and increasing profitability on their engagements? • Do we have enough “quality” staff in the appropriate positions to have a successful delegation process? • Are we properly developing our staff? • Is the firm’s scheduling process taking into account the proper matching of work and talent and career development? • Is the current partner compensation program demotivating partners to delegate to junior partners or managers?

37. Attracting and Retaining Talented and Qualified Staff

38. Advertising

39. Advertising

40. Attracting Quality Staff

41. Marketing ↔ HR Cross Over Traditional HR-type recruiting efforts alone are not adequate in this highly competitive marketplace. This marketplace demands a professional marketing and sales approach. Talented accounting professionals have numerous employment options and compensation is typically not an issue. The firm that does the best job “selling” the candidate normally “wins.”

42. Marketing Approach For TalentedAccounting Professionals Increase the awareness of the career benefits of the firm. Identify and cultivate qualified candidates. Develop a network of capable referral sources. Create opportunities for face-to-face contact with candidates. Develop a dialog with key candidates. Make proposals and “close” qualified candidates.

43. Retention Plan A documented plan that includes policies, programs and procedures to retain staff. Assigns roles, responsibilities and accountability.

44. Top 20 Attraction Factors: 2011 vs. 2006 Source: PCPS 2011 Top Talent Survey. * The 2011 survey asked separately about client and internal projects. The 2006 survey asked about client and internal projects combined.

45. Top 20 Attraction Factors: 2011 vs. 2006 Source: PCPS 2011 Top Talent Survey. * The 2011 survey asked separately about client and internal projects. The 2006 survey asked about client and internal projects combined.

46. Succession Planning

47. The Perfect Partner • Is involved with staff recruiting, development and retention • Is a good role model to staff • Excellent financial practice management • Contributes to succession planning • Has professional & business acumen skills • Works hard at partner relationship building & teamwork

48. The Perfect Partner • A high level of comprehensive technical skills • Leadership capabilities • Practice Development & Marketing Skills (A Rainmaker) • Client Service & Retention • Contributes to Firm management • Managerial & Supervisory Abilities

49. 3 years 5 years 7 years 10 years

50. Highly Profitable