Forget About the "Urge to Merge"

It’s not about succession or retirement; it’s about partnership.

Given all the “merger frenzy” and “urge to merge,” it would be almost heresy to suggest that succession and retirement are not serious top-of-mind issues, because they are.

However, I think this is a much broader topic, with different and less threatening ways to look at what every CPA practice has to contend with: How to plan for the continuity and success of the firm. In my view, it is the same strategy whether you are a multi-partner firm or a sole practitioner. Planning for the future must be done.

For now, though, I want to focus on the smaller firms and especially after Part 1 of tax season 2014 as there are probably a good number who are saying to themselves, “How many more times can I do this?” Good question!

I am the first to say that staying engaged in your career or any endeavor is healthy and wise but, at the same time, it’s also smart to think about the rest of your life.

Do you want to:

• Spend more time with your spouse? (No friendly chuckles please from male or female readers.)
• Spend more time with your children or grandchildren?
• Travel, golf, fish, paint, teach or anything else you haven’t really had enough time for?

So how do you even think about doing any of those things? You need a partner or partners.

This could take the form of:

1. Grooming a partner in your firm to start taking more responsibility and entering into a buy-in/buy-out arrangement. Assuming you have a potential internal successor, it is a multi-year process of getting that person involved in all aspects of the firm. It would include consistent contact with key clients, business owners, and business referral sources. And it would include administration of the practice and external activities, such as industry trade associations and NYSSCPA.

2. Finding a partner. Many partners in smaller firms think it impossible. Not easy for sure, but not true, either. I have helped a number of firms accomplish this. Yes, there are a finite number of entrepreneurially minded younger CPAs, but they do exist, and there are more than many CPAs think. This is the New York Metro area, after all. We have the largest pool of talented professionals in the nation. At any point in time, I am usually working with a few of them. The big challenge is economics. Today a fast-track tax and accounting/financial statement manager or senior manager earns between $115,000-170,000. They may or may not have business to bring and/or covenants not to compete, including a liquidated damage clause with their current firm. But I know from experience that none of these issues need be fatal to a deal between willing and able parties.

3. Finding a suitable merger partner. This is obviously a very hot and robust topic. In its simplest terms, its all about chemistry, culture and economics. Sounds simple of course, but we all know that’s far from the truth. The giant gorilla in the room, in my view, is the unspoken reluctance of the smaller firm to make the decision to merge, no matter how much they really need to. I realize that giving up control is huge. Planning ahead and preparing both mentally and businesswise (i.e. knowing your objectives, documenting firm metrics etc.) can ease some of the anxiety of the process.

Notice that partner is the operative word in all of the above. I can’t emphasize enough how important it is to have the right partner in business… as it is in life as well!