buyout

technology playing center stage in cpa profession

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woman using midair interfacealso: retirees who want their buyouts had better transition their clients.

by marc rosenberg
rosenberg map survey

anyone knowledgeable about the state of the cpa firm industry would agree that technology is playing center stage

the potential of blockchain, artificial intelligence and data analytics is set to transform cpa firm technology in the same way that previous blockbuster inventions – pcs, laptops, the internet and software – did that almost instantly made obsolete the manual work cpas painstakingly performed for decades.

every year, the authors of the rosenberg map survey ask the industry’s top consultants to share their observations of what they are seeing at cpa firms. specifically, they are asked the following questions: read more →

23 key provisions in a partner buyout

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handshake-1388361357w8dh9-150x150vesting, notice, clawback and other points to ponder.

by marc rosenberg
how to bring in new partners

in determining buyout, i have discussed several key points, such as:

more on partnership: buyout: the flip side of buying in | research results: how firms pay new partners | what does buy-in buy? | how to structure partner buy-in | keys to bringing in new partners

  • will the buyout be limited to capital only or will it include a goodwill provision? (ninety-five percent of all firms with retirement plans pay both.)
  • how will the goodwill be valued? the average goodwill valuation is roughly 80 percent of fees, although there are still many firms at 100 percent and many firms well below 80 percent.
  • how will an individual partner’s buyout amount be determined? two partner retirement benefit systems that you should consider are aav or average annual value, better described as “cumulative benefits,” and multiple of compensation, the most common method used by firms, especially those with six or more partners.

read more →

buyout: the flip side of buying in

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three businessmen shaking handsplus 9 reasons why goodwill averages 80 percent.

by marc rosenberg
how to bring in new partners

one of the benefits that new partners receive in exchange for their buy-in is that they will receive a buyout when they retire.

more on partnership: what does buy-in buy? | how to structure partner buy-in | keys to bringing in new partners

the flip side of this is that they must agree to buy out the older partners when they retire. therefore, any plan for bringing in new partners must include a provision for a partner retirement/buyout plan.
read more →

partner buyout 101

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scales, money and gavel6 ways to calculate buyout payments, 6 ways partners leave firms, how partner retirement plans have changed over the years and how to be sure yours isn’t a ponzi scheme.

by marc rosenberg
cpa firm retreats

a partner is retiring from your firm. how will you handle the financial aspects?

more: 27 tough questions every firm needs to address | make more money | system vs. system: partner compensation best practices | 10 benchmarking missteps | how to address partner compensation at a retreat | partner accountability: how and for what? | 18 essential management questions to cover at a retreat | how to decide who decides what | management styles: partnership vs. corporate | 30 marketing and growth questions to cover at a retreat | how marketing for cpa firms is different | why create a marketing plan? | thinking of merging? discuss it at a retreat | how to take action after a retreat | 12 simple rules for a retreat | leave your retreat with a to do list | every retreat needs a leader, but who? | retreats are no place for clowns | who should participate in a retreat? | retreat logistics: how long, what kind? | what should cpa firms discuss at retreats? | why do cpa firms conduct retreats?

there are six methods to calculate the buyout payments to a retiring partner. in brief, they are:
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how mergers impact a firm’s retirement plan

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plus how to handle partners who want to opt out.

older businessman sitting at desk smiling as wall clock indicates 5 minutes to retirementby marc rosenberg
retirements & buyouts

how do mergers impact a firm’s partner retirement plan?

more on buyouts: why 30% of cpa firm retirement plans are defective | are partner buyout plans just ponzi schemes? | clawback and how to handle it | can partners compete after they leave? | disability is far more complex than death | mandatory retirement? 4 reasons the firm comes first | how to transition clients from retiring partners | vesting can cover part-timers, too | eat what you kill? then maybe ‘book of business’ is for you | the multiple of compensation method, fully explained | 5 points to consider when paying out goodwill | how to set terms and limits for goodwill payouts | 4 ways to decide how to pay out capital

these suggestions propose verbiage that could be included in the firm’s partner agreement: read more →

why 30% of cpa firm retirement plans are fatally flawed

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senior businessman holding briefcasemake provisions, or state partnership laws may do it for you.

by marc rosenberg
retirements & buyouts

twenty to thirty percent of all accounting firm partnership agreements have no provision for goodwill-based retirement payments to partners departing due to death, disability, retirement or withdrawal.

more on retirement: the top 10 mistakes in partner retirement plans | 20 new, essential keys for today’s partner retirement plans | you want goodwill payments? give proper retirement notice | compromise is in order for some goodwill payouts | three ways to calculate goodwill payable in partner buyouts, none of them great | the ins and outs of aav for goodwill | 5 points to consider when paying out goodwill | how to set terms and limits for goodwill payouts

they’re in for a rude surprise. read more →

five things to think about before you think about a merger

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learn how to ask the right questions.

by marc rosenberg
cpa firm mergers: your complete guide

as a generation of aging baby boomer partners marches towards retirement, thousands of firms are seeking the only exit strategy available to them – merge into another firm. thus has a voracious appetite for mergers been created at all size levels, particularly:

  • sellers who are sole practitioners (remember, 30,000 of the s.’s 45,000 cpa firms are solos and a huge percentage of those are at an advanced age) and multi-partner firms under $2 million
  • buyers with annual revenues of $3 million and larger

read more →

the top 10 mistakes in partner retirement plans

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top 10 signis your firm guilty of any of these?

by marc rosenberg

mistakes abound in partner retirement plans. here are the top 10 we see:

more on retirement: are partner buyout plans just ponzi schemes? | 20 new, essential keys for today’s partner retirement plans | clawback and how to handle it | can partners compete after they leave? | how to juggle tax considerations for partner retirement benefits | retirement plan funding? what funding? | vesting can cover part-timers, too

read more →

are partner buyout plans just ponzi schemes?

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businessman tightly holding briefcase with dollar sign on itapply this test to your firm’s succession plan.

by marc rosenberg
retirements & buyouts

most multi-partner cpa firms have partner buyout plans that enable partners who leave the firm via retirement, death, disability or withdrawal to redeem their share of the firm’s value.

more on buyouts: 20 new, essential keys for today’s partner retirement plans | clawback and how to handle it | can partners compete after they leave? | retirement plan funding? what funding? | why you’ll get less from your partners in a buyout than you might by selling the whole firm | partners may balk at guaranteeing retirement obligations

over the last 10-20 years, retirement plans have come under more scrutiny as younger partners question whether departing partners are worth the payments due them and whether the firm can afford those payments. staff with near-term partner potential also question whether to commit themselves to making these payments. both of these groups fear that the firm will not be able to survive the retirement of dynamic, rainmaking partners who have tight relationships with their clients.

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20 new, essential keys for today’s partner retirement plans

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contract concept - conceptual close up of eyeglasses and ballpoint pen on top of partnership agreement paper placed on white table.

a lot is changing fast. here’s what your partner agreement needs today.

by marc rosenberg
retirements & buyouts

let’s take a moment to simply summarize the many critical aspects of a well written partner retirement/buyout plan.

at first glance, those unfamiliar with how a proper plan should be written may find the 20-plus key provisions listed below to be daunting. but i would caution against such thinking.  in my 20 years of consulting to cpa firms in this area, i have been asked to resolve messy disputes regarding every item listed below.

more on retirement: clawback and how to handle it | can partners compete after they leave? | disability is far more complex than death | even partner agreements must face death | 6 ways to leave a cpa firm (retirement’s just 1) | how to juggle tax considerations for partner retirement benefits | two ways to retire, and one’s not pretty | how to transition clients from retiring partners | compromise is in order for some goodwill payouts | why you’ll get less from your partners in a buyout than you might by selling the whole firm | the multiple of compensation method, fully explained

read more →

clawback and how to handle it

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bear paw with clawsbear paw with clawsfive-year adjustments may ease partners’ minds.

by marc rosenberg
retirements & buyouts

some firms struggle to agree on the details of a partner retirement plan.

more on retirement: can partners compete after they leave? | disability is far more complex than death | how to juggle tax considerations for partner retirement benefits | mandatory retirement? 4 reasons the firm comes first | you want goodwill payments? give proper retirement notice | vesting can cover part-timers, too | why you’ll get less from your partners in a buyout than you might by selling the whole firm | the multiple of compensation method, fully explained

one of the biggest items of contention is the valuation of their goodwill for internal retirement purposes. in these cases, the partners are anxious about obligating themselves to pay huge buyout benefits.

read more →

can partners compete after they leave? maybe.

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businessman with fingers crossed behind backbonus: sample non-solicitation agreement.

by marc rosenberg
retirements & buyouts

a non-compete covenant prohibits departed partners from joining another cpa firm or creating their own firm within a radius of a specified number of miles from the firm, within a specified period of time after their departure.

increasingly, firms are writing and enforcing tougher and tighter non-compete clauses.

one of the key tests that courts have used in ruling on the enforceability of non-compete agreements (different from non-solicitation) is the extent to which such agreements prevent the departing partner from earning a living.

more on retirement: disability is far more complex than death | 6 ways to leave a cpa firm (retirement’s just 1) | how to juggle tax considerations for partner retirement benefits | mandatory retirement? 4 reasons the firm comes first | how to transition clients from retiring partners | retirement plan funding? what funding? | when retiring partners take a specialty with them | clients leaving? time to reduce retirement benefits | partners may balk at guaranteeing retirement obligations

the vast majority of u.s firms are local practices located in areas with many competing firms. if a partner leaves to join another firm and does not attempt to take clients, it is very difficult to claim that the departing partner will substantially and irreparably damage the interests and the value of the firm.

read more →

partner disability: worse than death?

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mature male patient playing a mobile on bed in hospital.the willingness to return to work may outstrip ability – then what?

by marc rosenberg
retirements & buyouts

you’ve probably heard the saying “disability is worse than death.” the point is that both death and disability are horrendous, catastrophic events.

more on buyouts: even partner agreements must face death | 6 ways to leave a cpa firm (retirement’s just 1) | how to juggle tax considerations for partner retirement benefits | two ways to retire, and one’s not pretty | mandatory retirement varies by firm size | mandatory retirement? 4 reasons the firm comes first | how to transition clients from retiring partners | you want goodwill payments? give proper retirement notice | retirement plan funding? what funding? | retirement vesting: the devil’s in the details | compromise is in order for some goodwill payouts

but the handling of issues related to death – for all parties concerned – are more straightforward, both personally and financially, than in the case of a disability. read more →