Succession plan brought about intended growth, my own retirement
Have you noticed more people retiring recently? The rise in the investment markets over the decade, aging baby boomers and workplace changes seem to be driving more retirements. This is happening in large corporations, closely held and family-owned businesses, as well as across professions.
Eleven years ago, we, the Hungerford Nichols shareholders, had been reading research from the American Institute of Certified Public Accountants (AICPA) and hearing from our colleagues in AGN International (our professional trade group) about the changes ahead for CPA firms. Most of the CPA firms nationwide were owned by baby boomers, and many of them had not developed the next generation of talent to take over the firms. How would they be able to retire, have their clients cared for and transition their firms?
Most CPAs care deeply about their clients and the families who own these businesses, and they work extraordinarily hard to take care of their clients. However, they often consider themselves too busy to take care of themselves and their firms.
At that time, 2008, our firm’s name was Hungerford, Aldrin, Nichols & Carter PC with 63 total team members in the organization. As a shareholder group, we discussed the AICPA’s research on this issue and decided to take a closer look at our own firm’s succession. After all, the firm had been around since 1941 and had made it through multiple recessions, retirements, shareholder deaths, etc.
We wanted to look ahead and determine the possible impact of the demographics of the CPA profession. To do this, we needed data. So, each of us shareholders were given a two-week notice to decide on our retirement year and declare it at our upcoming shareholder retreat.
When the time came at the retreat to discuss succession, a timeline was drawn on the board. One by one, we each went up and put an X on the timeline to represent our retirement date. One X was rather soon, and that wasn’t a big surprise. Four X’s were grouped around 2015-16, and three of us had at least 12-17 years to go. It was an eye-opening exercise to see what would occur by 2016, and this was what we needed to know.
After we all took a deep breath, we discussed what these retirements would mean for the firm and then looked at our options. The option of a sale to any of the larger firms that had approached us was ruled out. We desired to remain an independent organization where we called our own shots and cared for clients and employees in a manner that aligned with our values. This meant we needed to intentionally develop a full succession plan.
We began the process by considering all the up-and-coming talent we had been developing within the firm. Hungerford had been unique in our practices of investing in our new talent, so we had a large pool of people to consider. But who could step into these roles? Were they ready? Would they desire to become shareholders in the firm? Did we need to search outside for additional talent?
To answer these questions and fast track our future leaders, we set up a leadership development program and invited about 14 of our managers to participate. They would be asked to make a multiyear commitment to read books, participate in retreats and create projects for the firm in order to grow in their understanding of business ownership, firm leadership, management and team development. Twelve of those key employees accepted the invitation and participated. It was an expensive endeavor as we flew in a nationally known industry expert each quarter for three years to lead the program.
As our leaders developed, we continued to build out our secession plan and set significant goals for the firm. Seeing so much talent coming through the pipeline, we decided to grow the firm to make sure all our developing leaders would have opportunities within the Hungerford organization.
So, in 2011, we brought in another national industry expert to help us with a business development plan and then hire our first business development director. This director then hired a full-time marketing specialist, and we rebranded to Hungerford Nichols CPAs + Advisors. We moved forward with the plan and helped all our technical accounting team members learn how to offer our firm’s service to others in the community.
As time went by, the first retirement occurred, and the team found success as they practiced their business development skills. We were growing nicely and adding to our team with top talent brought in from larger firms and other industries. We were taking care of clients and building our bench strength and a greater depth of knowledge in many industries. We also were building our firm infrastructure and technology to serve a larger organization. As opportunities arose, we wanted to be well-positioned to consider them.
CPA industry experts also had predicted merger and acquisition activity would increase dramatically with CPA firms because of the retiring baby boomer owners. The AGN firms discussed best practices for such M&A activity, and we were prepared.
We worked on getting to know other West Michigan CPA firms to determine who might be a good fit for us and who might desire assistance with their succession. Through these efforts, we have grown the Hungerford Nichols CPA + Advisory firm by merging with firms in Greenville, St. Joseph and, recently, Muskegon. We will continue with our strategy of organic growth, as well as growth through M&A.
In order to become the best CPA business advisers possible, we understood many business services and skills were needed by our clients in addition to the traditional accounting, audit and tax services. Our business advisers had expertise in each of these areas and developed excellent referral sources for more in-depth services. But we also chose to add certain specialties to our complement of services.
During our recent 11 years of very intentional firm development and growth, we decided to build in-depth services with Hungerford Valuation (business valuation and litigation support), Vision ESOP Valuation, Hungerford Financial (wealth management), Hungerford Technologies (managed IT services) and, new this fall, Hungerford Media (website development and digital marketing).
Other opportunities continue to present themselves now. Apparently, when you are on a roll, people take notice. The best part of this growth and development is that it has made us an employer of choice. Rather than struggling to find top talent, they seem to find us. We also have continued with the leadership development classes and many other forms of team development so that each employee can maximize the use of their own unique and natural strengths.
So, back to the succession plan. How did that turn out? What have we learned? Of our group of eight shareholders 11 years ago, five retired from the firm just as planned, and we thank them for their many years of service. Rick Chrisman, Tom Prince and I remain from that group.
Since 2014, we have brought into the circle of ownership seven talented new shareholders to help guide the firm into the future. Additionally, other key team members are developing nicely for the future. The Hungerford family of companies will be comprised of 115 people for tax season 2020, and we know that we are a very strong, vibrant and growing organization.
What we learned through this process can be applied to many types of organizations, including closely held and family-owned businesses:
Be intentional about your succession plan.
Put the organization’s interest first over the interest of any one person. For a family business, this may mean keeping the family intact no matter what.
Start now. Never be in a business or plan to buy a business without knowing the end game.
Talk to all who are involved with frequent and open conversations. This can be a difficult subject for some, so create a safe way to help them open up about these issues.
Don’t guess what others are thinking about this topic. Ask.
Bring in experts to assist your organization with the process.
Succession planning involves not only financial modeling and tax strategies but also people development, communication and emotions.
Spouses of the business owners should have something to say about this, as well.
Demographics and the economy will impact your plan.
The retiring owners actually need to turn over responsibility to others. They can’t keep “hanging on.”
Bring outside talent into your organization when needed.
My fellow shareholders and I all put our X on that succession timeline many years ago. When I wrote my X on the timeline, my thought was to retire just before my 60th birthday. It’s hard to believe that will occur in mid-January during my 39th year in the profession. I guess time flies by when you are passionate about what you do.
The firm and I have been preparing for my transition for many years, and it should be a smooth one. I am ready for a break and ready to determine what my next chapter will look like. It has been a very good ride.
Peggy Murphy, CPA, CGMA has been serving closely held and family-owned businesses in West Michigan for 39 years. She is a shareholder at Hungerford Nichols CPAs + Advisors and leads the business advisory section of the firm. Murphy has been recognized many times as one of the GRBJ’s 50 Most Influential Women and was the recipient of the 2019 ATHENA Leadership Award for her professional achievements, community service and support of women in business and the professions.