It is no secret that many CPA firm mergers and practice transfers that made great sense on paper never came to life because of fear that existed on both sides of the negotiating table.
Fear of loss of control. Fear of the unknown. Fear of accountability. Fear of change. Fear of finality for retiring owners. These are just a few of the most common roadblocks that occur when pursuing a practice combination.
Now, along comes a crisis like the COVID-19 pandemic, which brings the unknown, the need for accountability, a loss of control, constant change and the need to be very adaptable. CPA firms have been handling all of this adeptly, which proves that CPAs can overcome the most common deal-oriented fears to make room for intelligent business decisions for the continuity of their firms.
Those sound decisions should be focused on traditional risk and reward scenarios. After all, what’s more clarifying during this time than focusing on the risk or reward that comes from doing a deal versus not doing a deal at your firm? Risk-reward consideration should be applied to the following areas.
1. Technology: Will the technology commitments of time and money be manageable if you remain independent? Or is it more compelling to spread costs and knowledge investments through M&A?
2. Services: Is the client service platform and client continuity enhanced by aligning with another firm? If so, are you dedicating enough time to assessing client service standards, financial policies, technical review, technology, capacity, adaptability, HR policies, culture, vision, client loyalty and infrastructure?
3. Personnel: Will your team be nimble and progressive enough to guide your best clients and engage more top clients if you stay alone or if you align? And what new costs will be necessary? Will members of your team feel more secure or more vulnerable by doing a deal? Will a combination of firms create a stronger magnet to retain and secure top talent?
4. Finances: What is the best way to preserve earnings? What will best protect equity and what will bring the right ROI? Will there be proper ground rules for financial decision-making and what level of input will make sense?
5. Vision. Will a combination merely satisfy short-term financial worries, or is there a vision for a combined firm? Is the vision compatible and compelling? Do the parties define opportunity similarly? Are the parties suited to implement a plan of action, or will the parties be better off on their own?
COVID-19 does not eliminate concerns about succession voids. It does not diminish the administrative headaches that plague so many owners. It does not diminish the need to groom and develop talent. It does, however, make the parameters for choosing the right partner that much more critical.
The rewards firms can receive from efficiencies, new services, fewer distractions, stronger market presence, deeper talent pools, enhanced compensation systems, economies of scale and greater security may be more provocative now than before COVID conditions.
A real and lasting risk is not learning from the experiences of COVID-19 and not finding ways to make your firm stronger. Find ways to explore options and, as you do, place the emphasis on risk and reward — doing a deal versus not doing a deal.
CPA firms are considered essential businesses for many reasons. Start by looking at your firm and its future as essential and take the right steps to ensure firm sustainability and succession.
