By Ira Rosenbloom, CPA (Inactive)

In the accounting industry, succession has become a critical issue, particularly since so many baby boomers have reached retirement age. Yet there is dilemma: the number of leaders in CPA firms who want to become partners and owners is declining. What’s a firm owner to do?

One way to encourage the next generation of leaders is to help them view ownership as smart business. And that’s not the heart talking. Many private equity firms are bullish these days on investing in CPA and financial advisory firms. If those smart financial people think owning a CPA firm is smart business, then there must be ways to encourage your own people to buy in.

Here are five ways to motivate potential internal successors to view ownership as a smart, lucrative, and rewarding path.

Help them understand how lucrative ownership can be – You don’t have to open your books completely to do this, but you can share the percent of growth in income from manager to partner and the typical increases that a partner enjoys over the first five years. Real numbers speak very loudly.

Share achievement data and provide initial and limited options to participate in the achievement – Owners benefit from positive outcome. Provide your people with the chance to benefit. Use a simple target and formula to reward them, and start with a team approach to the reward. The team needs to understand how much of the result is going to partners to motivate them to want to be partners.

Structure deals creatively – Tie pricing to both firm and individual performance. If an individual hits a target, allow them to buy more at a lower price. If the firm drops in bottom line performance in a short period of time, create a partial refund. The refund would be computed if the drop is beyond a particular metric and that individual was not the cause of the drop (e.g., loss of a client poorly served).

Open the door for non-CPA owners – For many years, the riches of ownership were restricted to CPAs, so non-CPAs had not even thought about ownership. But that has changed. After all, private equity groups and financial advisers are not necessarily CPAs, and they are becoming owners. Create ways for different types of valued team members to be owners. Turn to people you know and trust, and provide them with the opportunity. They may be more impressed with the opportunity and the return on investment than the CPAs on staff, and they may even be better entrepreneurs. Many clients have great confidence in non-CPAs who have been guiding them and would be thrilled to know that the provider will be more likely to stay around since they are becoming a partner.

Offer fractional partner options – With ever-changing technologies, hybrid work environments, and a robust and competitive M&A market, CPA firms today may find their options limited when it comes to adding conventional partners. A fractional partner, however, could be a creative ownership solution. While these positions may have different responsibilities and levels of engagement than traditional partners, they must still demonstrate an ongoing focus on the wellbeing, progress, and success of the business. Their investment and return on investment in the firm should reflect that.

Promoting from within will provide the benefits of being less dependent on a merger or acquisition, being stronger and nimbler, bringing new ideas to decision-makers, stimulating others to be interested in becoming owners, and making the firm more appealing for a future merger or acquisition.

Motivating your team to pursue ownership is smart business. Make it your business to make it happen.

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^{Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.}