Securing the Future, Volume 2 Implementing Your Firm's Succession Plan

Is your firm poised for long-term success and viability? Do you even know what that looks like for your firm?

The reality is that most CPA firms have their work cut out for them if they want exiting partners to retire comfortably and future leaders to flourish. In the new edition of this popular book, Reeb and Cingoranelli impart the same no-nonsense advice on succession planning and management that they share with their clients, providing you with the benefits of their years of experience, research, and methodologies.

Once your firm’s leadership is on board with the fundamental concepts, Volume 2 provides your implementation team with the tools and resources they need to make it a reality.

This workbook includes the tools, tactics, and strategies you need to draft a customized plan and see it through. Each chapter includes expert-developed exercises, forms, and checklists tailored to each phase of the planning process. Also available as a PDF Toolkit to simplify your planning!

Bill Reeb has been consulting for over three decades to all sizes of businesses, from mom and pop operations to Fortune 100 companies. Prior to his life as a CPA, he worked for IBM in sales in the late 1970s. As an entrepreneur, he has founded seven small businesses, from retail to software development to advisory work. An award-winning public speaker, Reeb lectures throughout the United States. and Canada to thousands of executives and CPAs each year. As an award-winning author, he is internationally published, with numerous magazines, journals, newspapers, and books to his credit. Besides Securing the Future, Reed and his partner Dom Cingoranelli have also authored Becoming a Trusted Business Advisor: How to Add Value, Improve Client Loyalty, and Increase Profits.

Dom Cingoranelli is a  consultant whose engagements over the last three decades includes organizational development work for CPA firms and associations, as well as on construction projects for the Big Three auto makers; for regional, national, and international contractors; and for organizations in a variety of other industries. He has performed strategy consulting and planning; process improvement studies; management consulting, training, and development; team building; coaching; and group process facilitation for a variety of groups. He co-authored Securing the Future and Becoming a Trusted Business Advisor: How to Add Value, Improve Client Loyalty, and Increase Profits, as well as the AICPA PCPS Succession Resource Center and Trusted Business Advisor Resource Center. Cingoranelli has also written numerous articles and CPE offerings on executive recruiting, performance management, leadership, planning, and organizational culture. He speaks frequently on management and consulting topics throughout the country.

How to Use This Workbook 1

Organization of This Workbook 1

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 1 2

Dealing With the Barriers 2

The Barrier Scale™: Barriers to Overcome for Succession Planning 2

Getting Buy-In 5

Wrap-Up 7

Tools and Resources 8

Crisis Succession Planning Aid 8

Additional Learning Resources 8

Building Your Firm’s Robust Succession Plan 9

2 Developing and Implementing Your Strategy 11

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 2 11

Developing Your Plan 11

Monitoring and Accountability 12

Tools and Resources 13

Planning to Plan™ Worksheet 13

Additional Learning Resources 26

3 Monitoring Your Practice With Metrics 27

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 3 27

Benchmarks to Consider 27

Tools and Resources 29

Comments on Key Performance Metrics for CPA Firms 29

Marketing / Net Revenues 37

Technology / Revenues 38

Training (CPE) / Revenues 39

Billing Worksheet 41

Using the Billing Worksheet 43

Multipliers 45

Additional Learning Resources 46

4 Determining Which Business Model Your Practice (Mostly) Follows 47

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 4 47

Tools and Resources 48

Determining Your Present Business Model 48

Additional Learning Resources 50

Building Your Firm’s Robust Succession Plan 50

5 Exploring Valuation and Related Considerations 53

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 5 53

Using Book of Business as a Valuation Method 53

Use the Correct Type of Buy-Sell Agreement for Your Business Model 54

Buyout, Retirement, and Business Model 54

Using Multiple of Salary as a Valuation Method 55

Using Ownership Percentage Times Revenue as a Valuation Method 57

Tools and Resources 61

Additional Learning Resources 61

Building Your Firm’s Robust Succession Plan 61

6 Establishing Roles and Responsibilities 67

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 6 67

Client Classification Scheme 67

Marketing and Its Impact on Roles and Responsibilities 68

Client Relationship Management and the Marketing Component 68

Marketing—Active or Passive? 69

Active Marketing for “A” and “B” Clients 69

Marketing for “C” Clients 70

Dealing with “D” Clients 70

Rainmaking and the Referral Process 71

The Downside of Typical Rainmaker Models 71

Growth by Adding Rainmakers 72

Growth by Adding Infrastructure and Emphasizing Partners’ Roles and Responsibilities 72

Tools and Resources 74

Illustration of Partner Roles and Responsibilities 74

Illustration of Managing Partner Roles and Responsibilities 77

Partner Group Roles and Responsibilities 79

Tax Department Head Roles and Responsibilities 80

Policy Committee’s Roles and Responsibilities 82

New Client and New Work Acceptance SOP 83

Additional Learning Resources 85

Building Your Firm’s Robust Succession Plan 85

7 Establishing Voting Rights, Decision Making, and Equity Distribution or Redistribution Processes 91

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 7 91

Tools and Resources 92

Voting When a Partner Is Removed From the Vote 92

Equity Reallocation 93

Four-Step Process for Equity Reallocation 94

Additional Learning Resources 99

Building Your Firm’s Robust Succession Plan 101

8 Defining the Managing Partner Role 107

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 8 107

Structuring the Managing Partner Position 107

Tools and Resources 109

Chairman of the Partner Group Roles and Responsibilities 109

Additional Learning Resources 111

Building Your Firm’s Robust Succession Plan 111

9 Building Capacity for Long-Term Sustainability 115

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 9 115

Annual Performance Reviews Are a Waste of Time 115

Tools and Resources 118

What You Can Start Doing Now to Develop Your People 118

Examples of Competency Definitions 121

Example of an Action Plan 126

Additional Learning Resources 128

Building Your Firm’s Robust Succession Plan 128

10 Transitioning Client and Referral Relationships 133

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 10 133

Transitioning Relationships 133

Sample Transition Plan 134

Tools and Resources 135

Additional Learning Resources 142

Building Your Firm’s Robust Succession Plan 142

11 Defining Admission to Ownership and the Development Process 145

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 11 145

Knowing When and If to Admit Someone to Partnership—Remove the Guesswork 145

Getting Your Partners-to-Be the Development They Need 146

Tools and Resources 148

Sample Partner Competencies 148

Shareholder-in-Training Program Checklist 150

Admission of Non-Equity Partner Policy 154

Share Purchase Policy 154

Clarification of Non-Equity and Income Partner Status 154

Additional Learning Resources 155

Building Your Firm’s Robust Succession Plan 155

12 Dealing With Partner Departures 161

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 12 161

Tools and Resources 162

Policy on the Termination of a Partner 162

Separation or Severance 164

Additional Learning Resources 170

Building Your Firm’s Robust Succession Plan 170

13 Establishing Processes and Procedures for Retired Partners 175

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 13 175

Tools and Resources 176

Sample Terms for a Retired Partner Employment Contract Policy 176

Additional Learning Resources 178

Building Your Firm’s Robust Succession Plan 178

14 Defining the Maximum Payout Process and Other Buyout-Related Issues 181

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 14 181

What About Mergers and Sales? 182

Typical Acquisitions of CPA Firms 182

Typical Mergers of CPA Firms 187

Tools and Resources 192

Policies for Consideration 192

Maximum Payout of Guaranteed Payments for Retired Partners Policy 192

Sale or Upstream Merger of the Entire Firm Policy 193

Purchase Price of Other Companies Policy 194

Using the Transfer of an Accounting Practice Checklist 196

Transfer of an Accounting Practice Checklist 197

Sample Practice Summary for a Firm That Is Being Sold 200

Sample Mutual Confidentiality Agreement 201

Press Release Sample 202

Client Letter From the Mergee 203

Client Letter From the Mergor 204

Sample Letter Notifying Client of Change in Firms 205

Sample Letter Notifying Client of Change in Firms (Not Seeking Appointments or Meetings With a New CPA Firm) 206

Steps to Consider When Selling Your Practice 207

Additional Learning Resources 209

Building Your Firm’s Robust Succession Plan 209

15 Creating a Partner Accountability and Compensation Plan 213

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 15 213

The Managing Partner Goal-Setting Process—Detailed Steps and Samples 214

An Example of the Process 216

Conclusion of the Goal Process—Monitoring 221

Tips for Providing Performance Feedback 222

Tools and Resources 225

Steps Normally Required to Establish or Strengthen Partner Accountability 225

Sample Managing Partner Good Worksheet 226

Additional Learning Resources 226

Building Your Firm’s Robust Succession Plan 227

16 Addressing Death and Disability in Your Buy-Sell and Retirement Policies 229

Key Themes from Securing the Future, Volume 1: Building Your Firm’s Succession Plan, Chapter 16 229

Tools and Resources 230

Sample Terms for a Policy Addressing Partner Death or Disability 231

Additional Learning Resources 233

Building Your Firm’s Robust Succession Plan 233

17 Conclusion 235

It’s About Choices 235

It’s About Success, Not Perfection 236

Things Change 236

Enjoy the Journey 236

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