While the recent wave of accounting firms courting private equity funds has seen many required to split off their audit practices to comply with state ownership regulations, that was not the driving force for DSJ CPAs when the Long Island, New York-based firm split its tax and consulting business from its audit and attestation business last October.
Instead, the restructuring was compelled by another, equally powerful trend in the profession, according to chief operating officer Stephen Jahelka: the talent shortage.
DSJ's alternative practice structure "is not a unique thing going on in the industry, especially as all this private equity money is coming in," Jahelka acknowledged. "Deloitte did this decades ago. For us, at our size, we are trying to take advantage of the changing nature of the accountant. The industry is trying to change the image of the true, typical accountant. We provide people at our firm with not the typical CPA track. They can have a marketing, IT background … . If you come to our firm, you are on the partnership track with no ceiling."
In New York State, you need to be a CPA to attain equity in a CPA firm, so DSJ's bifurcation to form DSJ Advisory Group LLC opens the partnership track up to a cadre of talent who aren't licensed accountants.
And while the firm split its business offerings primarily for these benefits, Jahelka explained that DSJ wouldn't turn down the possibility of future PE funding.
"Obviously the bifurcation gives us a chance at some point to take on outside money as we continue to grow," he said. "But 90% [of the decision] were the reasons mentioned. The generation of people who have been in the business for 30 to 40 years are looking for succession planning, and the younger generation aren't typically getting into the accounting field."
In addition to seeking talent outside the CPA pipeline, which has diminished in recent years, the 45-person DSJ has also widened its candidate pool by growing the firm itself both organically and with some acquisitions over the last five years, according to Jahelka, gaining some ground on its larger New York neighbors.
"All professionals come in and say, given the bifurcation, they have the ability to one day be on an equity track," Jahelka shared. "It makes us competitively advantageous, and with the recent larger mergers [of other firms] buying up middle-market companies leaving a void from a revenue standpoint, in the $10 to $100 million revenue range, if that continues … we're going to continue to attract smart professionals that are a value-add to clients. There are going to be a new set of clients [that need] high-level financial services and big experience, but not at the fees they need to command from larger firms."
Positioning & priorities
DSJ also differentiates itself from the larger firms near its Westbury, New York, headquarters, which is accessible to New York City while appealing to professionals who moved to the suburbs after the pandemic began, Jahelka noted, but still seek fulfilling client work.
"Lots of professionals, myself included, come from the Big Four," he said. "And for those of us with any hint of an entrepreneurial gene, we don't have to sacrifice the level of the client you see at a Big Four firm. There are less of them so they can get high-level work, instead of being one of thousands. And being in Long Island, especially with the exodus from the city — [employees] can feel like they're in the driver seat of their career."
Jahelka and DSJ also believe that the next generation's shifting priorities work to the advantage of a firm of its size.
"Millennials are wanting to have a purpose outside of work, and are not going to work for the sole reason of making money," he said. "With our workplace culture, it's an interesting time for us — we're well positioned."
The firm's offerings are similarly well situated, given that DSJ has offered outsourced CFO and controller services since its inception in 1972. Founded as Demasco & Sena, the firm became Demasco, Sena & Jahelka in 1993 when current managing partner (and Stephen's father) Bob Jahelka merged in his practice. The firm has a large base of nonprofit clients, including some Long Island country clubs, as well as clientele in the health care, real estate, and food and beverage sectors.
DSJ provides full-service accounting, with "anywhere between outsourced bookkeeper and outsourced CFO services," Jahelka explained, and its advisory work includes M&A, bankruptcy and restructuring, succession planning and litigation support.
Despite the restructuring, DSJ aims to remain a "one-stop financial shop" to current and prospective clients, Jahelka explained. "As an accounting firm, it's how else we can benefit them from a financial perspective — wealth management, insurance, maybe a legal component. We ask clients, 'If you could have everything in one shop, what would it be?' That conversation will drive the next two years of additional service offerings."
As for the impact of DSJ's bifurcation on these clients, Jahelka identified the sole challenge as communication.
"They question what changes, and why are you doing this," he shared. "For tax clients — we have 3,000 clients — when we split and made the announcement, the impending field of questions obviously went to customer service. It's educating people at a retail level — why we are doing it, and nothing is going to change. [We are doing it] for these reasons — to be more competitive in the marketplace for talent, which will also help them going forward."
