CPA Leadership Institute CPA Leadership Webinar

1. CPA Leadership InstituteCPA Leadership Webinar “Common Success Characteristics of Successful Firms and Partners”

2. Presented by: Allan D. Koltin, CPA CEO Koltin Consulting Group, Inc. Chicago, Illinois

3. Allan D. Koltin, CPA CEO 312/662-6003 (t) 312/662-6004 (f) 312/805-0307 (c) akoltin@koltin.com www.koltin.com “Always follow ‘GAAP’ if you want to be successful – Goals, Action planning, Accountability and Passion!” (Allan’s response to a question at a National Conference on common characteristics needed to be successful in professional services firms today.) Koltin Consulting Group, Inc. is a Chicago-based consulting firm that specializes in working with professional and financial services firms in the areas of practice growth, practice management, human capital, and mergers and acquisitions. A nationally recognized speaker and industry analyst, he has appeared on the CNN, WGN and Fox Television networks and has been quoted frequently in such media as the Wall Street Journal, New York Times, Washington Post, Chicago Tribune, Los Angeles Times, USA Today and New York Post, as well as Bloomberg News, BBC World Service, Business Week, Forbes and Reuters. He has also spoken nationally and internationally at hundreds of conferences including those held by the AICPA, international CPA associations and state CPA societies. For twelve consecutive years, Allan has been named by Accounting Today as one of the Top 100 Most Influential People in the accounting profession. In 2010, he was the only consultant among the top 10 vote-getters which include such notables as President Barack Obama, U.S. Treasury Secretary Timothy Geithner, SEC Chair Mary Schapiro, IRS Commissioner Douglas Shulman and AICPA President Barry Melancon. Koltin was also voted one of the 10 Most Recommended Consultants, for the seventh straight year, in the “Annual Survey of Firms” conducted by INSIDE Public Accounting. In 2012, Allan was named by CPA Practice Advisor as one of the Top 25 Thought Leaders in the profession. He was one of the first inducted into the Accounting Marketing Hall of Fame by the Association for Accounting Marketing (AAM). He has also been a recipient of the NACVA Instructor of the Year Award and winner of the Journal of Accountancy Literacy Award. Previously he was recognized by the Illinois CPA Society with the Distinguished Service Award for outstanding service and commitment to the profession. Koltin is the author-editor of three books for professional services firms: CPA Firm Merger Strategies That Work, CPAs That Sell and the AICPA’s Marketing a Consulting Niche. He serves or has served on the editorial advisory boards of CPA Practice Management Forum, the Journal of Accountancy, Accounting Today, Public Accounting Report and Law Firm Management. He is a founding member of The Advisory Board, a think tank for the accounting profession, and has served on various advisory boards, including Outsource Partners International (OPI), the Association for Accounting Marketing (AAM), the National Association of Certified Valuation Analysts (NACVA) and H&R Block (HRB Business Services). Previously, Allan was the President and CEO of PDI, Global, Inc. which was the largest publisher of marketing newsletters for professional services firms. Allan originally sold PDI Global to H&R Block in 1998, buying it back in 2008, and then selling it again to Thomson Reuters in 2011. Prior to that, Allan was a Senior Partner in the Chicago-based accounting and consulting firm of FERS, where he served as the leader of the Investment Banking Group, as well as the Law Firm Consulting Group. At age 27, Allan had the distinction of being named the youngest partner in the history of the firm and was also a member of the firm’s Executive Committee. FERS was acquired by H&R Block in 1998. Allan attended both the University of Wisconsin – Madison and the University of Wisconsin – Milwaukee and received degrees in accounting and marketing. He lives in Chicago with his wife, Sharon, and his three children, Jack, Brian and Julia. His hobbies include playing with his children, travel, chess, and playing and watching basketball. Highly sought for his ability to engage and inspire audiences, Allan enjoys delivering keynote addresses at conferences throughout the professional services industry. His passion is facilitating retreats and providing coaching for firm leadership and partners. His specialties include strategy, governance, profitability, compensation, growth, human capital, and mergers and acquisitions.

4. Outline – Critical Ingredients of a Great Firm • Great leadership • Partners with exceptional skills in rainmaking, client service and development of talent • An exciting, if not contagious, vision of growth for the future • Ability to recruit, retain and develop future talent • A passion for profitability • A partner compensation system that encourages performance and high achievement • A governance structure that holds partners accountable and is consistent with the firm’s strategic goals for growth • An ability to grow organically, as well as through mergers and lateral talent • A commitment and passion for industry and service line expertise.

5. Great Leadership

7. The Critical Ingredients of a Great Firm

8. Where You Sit Makes a Difference… Or Does It? • Older Partners • Need to ensure their retirement payout • Want to preserve the Firm they spent their career building • “Looking in the rearview mirror” • Mid-Age Partners • Have valuable years of productivity ahead…and want to ensure those years will allow them to retire • “360-degree perspective” • Younger Partners • Have balance of career in front of them…leadership is vital to the outcome of their career • “Eyes on the horizon”

9. Coaching Your Partners(you can make a difference!) • New business • Billable time • Realization • WIP/AR • Client satisfaction • Recruiting, retention & staff development • High impact ideas • M&A candidates • Managed book of business • Succession planning • Partner peer ratings • Professional growth • Administrative compliance • Technical quality • Team & department leadership • Community involvement

10. Partners with exceptional skills in rainmaking, client service and development of talent.

11. Partner Charge Hours Recede Source: Inside Public Accounting, October 2011

12. Guerilla Marketing Strategies are Back!

13. 5 Facts I Wish Someone Had Told Me About Clients The Wine Bottle Concept #1

14. Where Oh Where Have All The Future Leaders Gone? What is your leadership quotient? On a scale of one to ten (with 10 being the highest) how would you rate yourself: • A risk taker ___ • One who dares to be different ___ • Ability to make the tough calls ___ • A schizophrenic communicator ___ • Self-confident ___ • Gets results through others ___ • Great motivator ___ • Would rather work “on” the business versus “in” the business ___ • Trusted by others in the firm ___ • Respected by others in the firm ___ Total Score: ___

15. An exciting, if not contagious, vision of growth for the future.

16. Door #2 Major Reconstructive Surgery Will look better, but at what cost? Hint: Some partners want change, some want to stay as is, and some are unsure and/or want to avoid conflict. Which Firm is Yours? A question for firms and individual partners to address. • Door #3 • High Performing Firm • They understand spending money to make money • They understand the principals of risk and reward. • They have a cohesive partner group with great leadership. • Hint: • They may appear a bit dysfunctional, screwed up and in constant chaos, but that is because of their continual commitment to change and greatness. Door #1 Ground Hog Day No Pain – No Gain Hint: The to do list from this year’s retreat resembles the to do list from a prior retreat.

17. What Makes Great Leaders? The 10 “C’s” of great leaders (How would you score on a 1 – 10 scale?) ____ Competitive spirit ____ Clutter ____ Cohesiveness ____ Communication ____ Candidness ____ Crystal-clear vision ____ Curious ____ Contagious enthusiasm ____ Change Agent ____ Crazy!

18. How Does Your Firm’s Signature Story Compare? • Firm growth has doubled over the past 5 years • Growth projected to double again over the next 5 years • Will need to double the size of the partner ranks • Average age of partners – 41 years old • Great leadership - as measured by partners and associates

19. How Does Your Firm’s Signature Story Compare? (continued) • Awesome testimonials – client survey/ upward evaluations • Very high profits per partner • Customized career development/university level training • Recognized as an ‘Employer of Choice’ firm • Great work/life balance

20. Ability to recruit, retain and develop future talent.

21. Why Does Talent go Elsewhere*? • Work / life balance • No future • No connection • “A partner (or manager) is a jerk!” • Money *Business WeekArticle – Highest Pay, Quickest Advancement and Best Training

22. Use of Upward Evaluations

23. A passion for profitability.

24. The Maister Formula* *NIPEP = Leverage x Utilization x Billing Rate x Realization x Margin Source: INSIDE Public Accounting 2012

25. Ten Passions for Engagement Profitability Engagement Planning Engagement Budget Staffing & Scheduling Client Acceptance START The Client Engagement Management/ Utilization Client Satisfaction FINISH Collections Relationship Management Surprises/ Change Orders/ Revisions of Completion Date Billing

26. The Quest to Conquer the “C” Client • How to know when you have a “C” Client: • The client causes staff to continually grumble about them at lunch. • The client doesn’t meet our minimum realization requirements for firm profitability • The client continuously causes chaos and disruptions related to scheduling and preparation. • The client does not pay on time and is typically an AR problem. • The client is a high-risk client and of questionable integrity. • All of the above!

27. A partner compensation system that encourages performance and high achievement.

28. Source: AICPA 2012 PCPS Succession Survey

29. Is Your Firm a Book-of-Business Firm? Originating Partner (Aggressive Alvin) Client Relationship Partner (Loveable Larry) Service Partner (Billable Bob)

30. What is the Most Valuable Use of Time for You and Your Firm? Please rate from highest to lowest

31. Partner Compensation Survey Results What is the ratio of the highest to lowest paid partner? • Agree on worth • Doesn’t always make sense • Values can change annually • Occasionally have to over pay • Individualized off-season training • Individual goals & measurements differ

32. OLD SCHOOL What is your book of business? How much new business did you bring in? How many billable hours did you have? How many years have you been a partner at the firm? I was one of the firm founders. NEW SCHOOL Who did you recruit to the firm last year? On the upward evaluation, how many people identified you as the reason they are with the firm? How many current and future partners would identify you as their “sponsor”? How did you rate on the partner peer survey? How did you rate on the client satisfaction survey? Partner Compensation

33. A governance structure that holds partners accountable and is consistent with the firm’s strategic goals for growth.

34. Resolve the Corporate Culture Question Source: Journal of Accountancy, April 2007

35. The Four Corners of Firm Governance

36. An ability to grow organically, as well as through mergers and lateral talent.

37. Strategies for Growth The Triangle Offense • Organic Growth • New Clients • New Products/Services • Raise Rates • Cross Sell • Invest in Sales/Marketing “If you don’t grow, you’ll die (worse yet, it will be a slow death)!” • Free Agency/Lateral Talent • Rainmaker • Industry/Service Line Expert • Leadership • Client Service • Geographic Opportunity • M&A • General Practice • Niche Practice • Geographic Opportunity • Merger of Equals • “Out of the Box” Merger

38. Mergers, Acquisitions & Divestitures • M&A Frenzy of 2011 is continuing in 2012 • 2011 was a record year for mergers and acquisitions • Top 100 firms continued their record pace • Locals are becoming Regionals, Regionals are becoming Mega-Regionals, Mega-Regionals are becoming Nationals, and Nationals are becoming Internationals • Firms in the $10-$30million fee range probably have the greatest challenges in the M&A area • Mergers in the under $10 million size range are “off the chart!”

39. Size Has Its Benefits and Opportunities • Access to more profitable clients • Access to larger clients • Access to larger projects • Ability to leverage each other’s industry and service line expertise • Ability to recruit, retain and grow talent at all levels • Ability to make deeper investments in areas such as growth, technology, talent and specialization • Higher profits per partner (firms over $20 million average income per equity partner of $472,838 vs. firms under $20 million which average $321,558)

40. Background on Lateral and Merged-in Partners • More activity in last 5 years than in last 20 years • National firm partners have successfully integrated into local, regional and middle-market national firms • Many merged-in partners have thrived and assumed leadership roles in new firms • Lateral and/or merged-in partners have become the #1 growth strategy of many Top 100 CPA firms!

41. What has Caused These Changes to Take Place? • Lateral (and in some cases, merged-in) partners are now welcome, even without books of business • Firms have changed their traditional partnership structure to better accommodate “outsiders” • As firms have become more specialized (niche focused) the demand for building and growing expertise has gone up – hence the birth of “free agent”

42. Free Agency – What Can a Lateral/ Merged-in Partner Bring to the Table? • Rainmaking skills • Leadership/management abilities • Can assume someone else’s book of business • Can help to leverage another partner’s book of business • Has a unique or specialty expertise that the firm doesn’t have or wants to expand upon • Firm is trying to fill in age, experience or diversity gaps in certain places • Ability to take partner book and cross sell other services

43. A commitment and passion for industry and service line expertise.

45. Criteria for “Famous Persons” Recognition • Serves at least 10 significant clients in the industry, or have completed at least 10 significant engagements in the technical area where “fame” is claimed. • Involved in their industry’s trade association and have frequently published, or presented at trade association meetings. • To the extent the industry is served by specialized credit, legal and other communities, the individual should be well known and referencableamong those communities. • Competitors in the industry or technical area should know the individual.

46. “When Selecting a Champion Internally to Head Up a Niche, it is Important that the Champion:” • Have the available time to work the niche • Be passionate about the niche • Have the other partners’ support and buy in • Is a risk taker/self starter • Can “sell” within the niche • Derive a significant portion of their compensation from success within the niche • Have a marketing plan with accountability • Take the right courses, training, certification, etc. • Is the best person within the firm to head up the niche

47. Outline – Common Success Characteristics of Great Partners • Ability to build relationships, both internally and externally • Ability to communicate • Ability to take risks as it relates to professional growth and what’s best for the firm • Ability to make money and take risks • Ability to manage the clock and have a “whatever it takes” attitude • Ability to perform with passion and have that passion rub off on others.

48. Common Success Characteristics of Over-Achievers in CPA Firms

49. What They Taught (and didn’t teach!) Me at the University of Wisconsin* They taught me: • Accounting, auditing and tax What they didn’t teach me: • How to build relationships • How to communicate • How to take risk • How to make money • How to manage the clock • How to play with passion *Recent CEO Survey of Fortune 500 Companies

50. What They Didn’t Teach Me How to build long-lasting relationships: • Externally - How to move Customers to Clients and move Clients to Cheerleaders • Internally – Learn to treat your peers and staff like you would treat your clients and referral sources • The Balance Sheet vs. The Income Statement – You can make the time if you want to!