riding the big gray wave.
by brannon poe
the demographic tsunami actually might surprise you. according to pew research, millennials are projected to soon overtake baby boomers as the largest generation. that’s right, they will be the biggest generation in the u.s. and they are almost there.
- boomers – born from 1946 to 1964 – 74 million
- millennials – born from 1982 to 2002 – 71 million
another very important consideration is the declining number of cpas in the profession. the total number of first-time licensed cpas has declined about 20 percent since the 1990s.
it appears that the “greying of the profession” may be more of a function of the number of people who have chosen the profession and those that have decided to get out of public practice altogether.
that said, we remain very bullish on the marketability of cpa practices that are profitable and well-managed.
i’m going to go out on a limb here and talk about some of the stereotypes of these two generations. i realize the dangers inherent in stereotyping and there are of course many, many outliers.
boomers have a ton of grit. from our experience, a lot of the cpas that are now thinking of retiring work long and hard. we have met many cpas that work 2,500, 3,000, and even more hours per year. i can remember working seven days a week at ernst and young when i started my career in the early ’90s. the partners then had every expectation that everyone would work like that. if you wanted to move up, you had to work those long hours. that was just beginning to shift when i came into practice.
millennials demand work-life balance. millennials find the long hours that the boomers worked to be absolutely unacceptable. they won’t do it unless there is a huge silicon valley-type of payoff for them. honestly, who can blame them? if you don’t have to work that hard, then why should you? finding good talent is a challenge in the accounting profession, so they can make work/life balance demands on employers. couple this with their ability and willingness to automate their work with new technology, and they are able to work less than past generations have.
bridging the gap
there is a big gap. however, it will be bridged one way or another as people exit from firms and new leaders take their places. acknowledging this gap is crucial for succession planning purposes. it’s also an opportunity to build a far better cpa practice.
what boomers can do to prepare: build a better cpa practice. the key metrics to focus on are owner hours and cash flow. if you want to be able to sell or exit from your firm, you simply have to make it stand out from the crowd. shoot for working less than 2,000 hours per year. check out our column on working less and start taking action. improve your cash flow. in my opinion, the first place to help with this is pricing. make the switch to value pricing and it will create huge (successful) ripples in your practice.
what millennials can do to prepare: don’t be afraid of a little temporary hard-work. if you want to lead a firm, there will always be patches that require more hours and more grit. however, it’s worth it. the freedoms and benefits of owning your own cpa firm are immense. the tools for running a firm are really getting interesting. it’s creating so much opportunity, and the early adopters are going to be richly rewarded.
3 responses to “how to transfer a boomer-owned cpa practice to a millennial”
victor lerro
i don’t fully agree with you. there are many older firm clients that have thriving businesses that will be taken over by their children or third parties, or maybe there would be some wealth planning and trust work. besides, you have a larger base of revenue and a larger pool of resources to constantly gain new younger clients. a practice is a moving target, all businesses have a life, but a firm can create a foothold in the community and referrals from sources.
frank stitely
one thing missing from the article that will be too late for many boomers to change is client demographics. if your client base is 65 years old or older, finding someone to buying those clients will be tough. they’ll be dying off, and while that gives a little temporary additional revenue, it makes them considerably less valuable than younger clients. buying old clients is like buying a bond that never repays your principal. you can’t sell them to the next buyer.
brannon poe
from our experience, client demographics may be a material consideration for buyers of cpa practices if the clients are material to the practice. it’s smart for buyers to keep the pareto principal in mind. often, a large percentage of total revenues (80% for example) will come from the top 20-30% of clients. understanding the dynamics with those clients -including age- is often important. other than that, it’s probably not worth worrying about. every practice will experience natural attrition and therefore every practice needs a way to develop new business to replace and grow.