Structuring for Growth

So you want to build rather than buy. Here are tips from people who’ve made it happen.

by Ed McCarthy

Managing partners at small CPA firms —those having four or fewer professionals on staff—face a challenge. Their chief responsibilities are to build and maintain a solid foundation of financial, technological and legal support and to take action to ensure the firm’s profitability and future.

Firms should give the MP authority to run the firm. He or she should be a strategic thinker who sets policy, creates a vision and decides with the other partners how best to implement it.

When MPs take charge of overseeing where the firm needs to go and what will get it there, they can begin to transfer their clients and billable time to others and free themselves up to identify new growth areas, potential mergers and new talent.

Taking an active role in bringing in business, learning about the trends and technologies that call for new services and products and overseeing activities to move the firm forward will reduce the MP’s chargeable hours.

If most of the MP’s nonproductive time is spent on human resources, the firm can hire someone with a skill set in that area. The right administrator doesn’t have to be a CPA or have a financial background.

A firm should have a certain look and feel to it from top to bottom. An MP needs to coach his or her replacement in client details that are hard to pick up. It takes one-to-one mentoring to teach those subtleties.

Ed McCarth y is a freelance writer in Pascoag, R.I. His e-mail address is .

anaging partners at small CPA firms—defined here as having four or fewer professionals on staff—face a daunting challenge. To build their firms they must acquire and maintain a solid foundation of financial, technological and legal support and take action to ensure the firm’s growth and profitability.

The Journal of Accountancy asked a wide range of accounting consultants, managing partners and firm administrators to share their insights into how a small firm can expand, keep its focus, reinforce the firm culture and avoid managing-partner burnout. Some are still working out solutions while others have met the challenge in ways that have given them a track record and enhanced their firms’ growth. Here’s what they said.

Consider an Administrator and Executive Committee
Sherwin A. Brook, CPA
BrookWeiner LLC

We struggled with the issue of whether to have a managing partner vs. an administrative partner who works with an executive committee. We decided on the latter and chose the then-youngest partner for the role. He spends about 10% to 15% of his time on administration. That’s not to say the other partners don’t have administrative responsibilities. Administrative duties remind them of their responsibility to the firm as a whole, not just their segment of the practice. If we were at $15 million or $20 million, I’d hire a professional as a full-time COO to handle many of the day-to-day operations with the administrative partner and office manager.

Succeed Using a Corporate Structure
Thomas P. Luken, CPA
Kolb+Co. SC
Brookfield, Wis.
We switched to a corporate structure, and I took over as president in June 2000. We now have vice presidents in charge of finance and administration; operations; sales and marketing; and new service development. The percentage of time I spent on client service declined from the 50% to 60% range as tax partner to 40% when I became president. It’s about 10% today, and I spend the balance of my time on management, setting strategic direction and practice development. The corporate structure has provided outstanding results for us. Our staff who are strong in sales and marketing focus on those areas, while those who are strong in operations oversee client service in our divisions.

Give the Managing Partner the Authority to Manage
Rita Keller
COO and Partner
Brady Ware
Dayton, Ohio
For a firm to grow and succeed, the MP needs to be free to focus on development initiatives. That takes more than just being a day-to-day manager of operations and people. MPs need to really lead, even if there are only two other partners. My suggestion: Give the managing partner the authority to run the firm (and report to the partners). Or structure the firm with a board of directors and an MP who operates as a CEO and is not required to service his or her own clients.

Resolve the Corporate Culture Question
Allan D. Koltin, CPA
President & CEO
PDI Global Inc.
The managing partner’s role is a corporate-culture question: Do you want to have a couple of partners who build their books of business as much as they can and have staff and managers service the work? Or do you want to build an organization that’s greater than the founding partners? For most firms it’s a moment of truth: Grow the business or “milk it” for today. It’s not a right or wrong decision—it’s the firm’s particular culture. A firm grows because one individual sees where it needs to go and what will get it there. When that happens, MPs begin to transfer their clients and chargeable time to others and free themselves up to identify new growth areas, new products or services, and potential mergers as well as to recruit talent.

Plan Ahead for the MP Transition
Victor D. Puchi, CPA
Managing Partner
R & A CPAs
Tucson, Ariz.
Eighteen months ago, we decided to restructure and have a full-time managing partner in a strategic and administrative role. My advice for making this a smooth transition is to select staff members with qualities similar to yours and mentor them to take over your previous role. The firm should have a certain look and feel to it from top to bottom. If you’re turning over a client who is used to being handled in a certain way, then you need to coach your replacement in those details that are hard to pick up. It requires one-to-one mentoring to teach those subtleties.

To Grow, Let Go
Dennis T. Larson, CPA
Managing Partner
Larson & Co.
Sandy, Utah
In 2000, a major client group asked me to be their temporary CFO. That assignment, which took me out of the office for six hours a day, was supposed to be for six months but lasted two years. By then most of my previous client responsibilities had been passed to staff, who had expanded the work; as a result, the firm began to grow. In hindsight, I think I was keeping the firm from growing by clinging to the work I had. Give up the idea that you are the only one who can help clients. You spend a lot of time trying to hire good people—turn the business over to them. Energetic young people can make an impact on the clients and expand the work.

  Tips for a New Managing Partner
Visualize and direct the firm’s future.
Understand effective management structure.
Lead through relationship building.
Understand what the partners expect.
Structure a way to receive staff feedback.
Avoid trying to manage partner behavior through compensation.
Keep the firm’s focus on giving value to clients.

Source: Marc Rosenberg, CPA, Rosenberg Associates, Willmette, Ill. His e-mail address is .

Provide Opportunities for Others to Succeed
Michael R. Micholas, CPA
Managing Member
Watkins, Meegan, Drury & Co. LLC
Bethesda, Md.
Giving up my client-service responsibilities has provided opportunities for others in the firm to succeed. For me, the decision was about moving the firm forward. I had to transition my client work so I was free to do other things that would make the firm successful, but that strategy has proven to be a good retention tool.

Keep Your Eye on the Ball
Tom Rosenbach, CPA
Managing Partner
Moore Stephens Beene Garter
Grand Rapids, Mich.
An MP should pay attention to some basics. For example, don’t “buy” work; quoting low fees will slow down your organization, frustrate your staff and lower revenues. Next, consider joining a firm association or partnering with other firms. CPA firm associations can give a firm access to niche services their clients need but they can’t provide, and it can bring referrals. They also provide practice management assistance, joint CPE opportunities and financial benchmarking. Last, treat your firm like a client. Develop a long-term growth strategy and work at it constantly. Don’t be afraid to adjust if some strategies are not working.

Hire Administrators, Not CPAs
Ronald G. Weiner, CPA
Managing Partner
Perelson Weiner LLP
New York, N.Y.
Administration should be done by administrators, not CPAs who could otherwise bill at professional rates. It is critically important for people in professional services to stay close to the client. To take a highly competent practitioner and, in effect, remove him or her from the marketplace sacrifices not only billable hours but also information about the firm’s performance that can come only from working directly with clients. The managing partner should be a strategic thinker who sets policy, creates a vision and discusses with the other partners how best to adopt it.

Work as a Team
Janine Zirrith
Firm Administrator
Wilkin & Guttenplan P.C.
East Brunswick, N.J.
As administrator, I work closely with my managing partner, Ed Guttenplan, CPA, on firm-wide policy, problem solving and decision making. Together we organize and direct the day-to-day operations of the firm and ensure the implementation of firm policies. We meet almost every day to update each other on the status of our current work as well as any personnel issues or scheduling conflicts. Part of what makes us a successful team is that we operate in sync with one another. We share the same values and have learned to trust each other’s judgment and recognize our individual areas of expertise.

Pick the Right Person for the Job
Joseph A. Tarasco, CPA
Accountants Advisory Group LLC
Cold Spring, N.Y.
The question each firm must answer to be successful is: “Who should be the managing partner?” Is it the CPA with the biggest book of business or the person with the best leadership and managerial abilities? More-progressive firms are choosing the best person for the job, who might be a younger partner or even an outsider hired for a CEO role.

Limit Nonproductive Time
Alan L. Olsen, CPA
Managing Partner
Greenstein, Rogoff, Olsen & Co. LLP
Fremont, Calif.
My partner is looking to transition out and I want to grow the firm, so my workload—growing and running the practice at the same time—has increased. This year our revenue grew by more than 25%, and instead of having me become full-time managing partner we hired an administrator. Recognize that the right administrator doesn’t have to be a CPA or have a financial background. Look at where most of your nonproductive time is spent—it was human resources in my case—and hire someone with a skill set in those areas.


Practitioners Symposium
June 4–6
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Chandler (Phoenix), Ariz.

CPE self-study courses
Marketing: Successful Strategies for CPA Firms, DVD/manual (# 181831JA), additional manual (# 351830JA).
Successful Selling Strategies for CPA Firms, DVD/manual (# 181190JA), manual for DVD (# 351191JA).

e-MAP: Management of an Accounting Practice Handbook (# MAP-XXJA).
Management of an Accounting Practice Handbook, vols. 1, 2 and 3 (# 090407JA).
Marketing a Consulting Niche, edited by Allan Koltin (# 056508JA).
Seven Principles for Effective Firm Management, by J. Curt Mingle (# 090480JA)

For more information or to place an order, go to , or call the Institute at 888-777-7077.

JofA Articles
“First Form a Plan,” Oct.06, page 79, .
“Small Firms: Think Big!” June04, page 22, .
“Follow the Leader,” Oct.02, page 59, .
“Meyners Mines Its Talent,” Sep.02, page 47, .
“Strategic Planners Lead the Pack,” Dec.01, page 26, .

Web sites
CPA Marketing Tool Kit, .
PCPS Firm Practice Center, . PCPS provides information for the PCPS membership section of 6,000 local and regional firms whose interests the AICPA represents to the profession, regulators and standard setters. PCPS offers CPAs practical guidance and quick access to information on professional issues affecting performance and profitability.


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