Retirement Planning for CPA’s
Getting out seems to be harder than getting in for most of us as CPAs and for many other professions. Stephen Covey, author of The Seven Habits of Highly Effective People, says begin with the end in mind. It is easier to see how it goes than to plan for the future. When we get to the time we decide to slow down, we all want options to be able to do it our way. This transition is the key to most exit plans. Our clients grow to like and appreciate us and no one will do it quite like we do; is our thought. While the world does go on without us and it can be cruel also.
If our clients see we have no plan, they may decide to take it into their own hands and find a suitable replacement. This can be an expensive lesson. Good news is the accounting business is sticky and most clients stay. One option is to find a broker when the time comes. Chances are they can find a buyer, choosing an individual who has yet to run a practice in many cases. We look for a 40/60 accounting & audit to income tax ratio, just our preference, no magic here.
Likely they would not buy yours if they could do it for themselves. One advantage for GYL Decauwer LLP is we have 6 to 7 partners and managers to choose from. Aligning personalities is important to retention. No one person becomes overwhelmed and everyone can give special attention to the new clients.
Culture and Philosophy are the main ingredients that dictate the success of an income tax or accounting & audit merger or acquisition. How do we treat clients, what are your billing practices, how do we treat our people, what opportunities for advancement do we offer and create for staff.
Customization is another advantage for GYL Decauwer LLP. We recently did a deal where the proprietor needed most of the cash flow the first year. We charged a 20% management fee to bill the clients and house the sole proprietor and he kept 80% of the receipts and also did the work. The clients got used to seeing our name and the buyout started in a year, as per the terms of our agreement. A business broker deal would not likely be able to accomplish this.
Normally we become good at what we practice. GYL Decauwer LLP, now in Ontario, California has done seven transactions since its formation in 1998. Most have been go forward income tax or accounting & audit transactions, but some were also reverse moves. Many times we likely learn more from our failure than our success.
This experience has allowed GYL Decauwer LLP to become an expert at determining what works. Someone looking to buy a practice would have a hard time competing with this level of experience.
In summary, CPA practices are relatively easy to sell, the question remains, which is the best methodology? As a practitioner, I feel the brokerage option is not a win/win model and may, at times, be a lose/lose method. I can truly say our deals, whether successful or not, have been win/win. Even our unsuccessful deals turned out favorable for both parties. We feel our ability to customize deals makes our model unique and effective for the right candidate.
Our model has us looking to do a deal a year with some of these being acquisitions versus mergers. Mergers take a bit more time to integrate and have a longer due diligence to hopefully put the odds of success in our favor.
Many people spend more time planning their vacations than their retirement. This likely is one of our largest assets on your personal balance sheet, so treat it with the needed diligence and respect.