How Will Small Firms Pass on Ownership to the Next Generation?
Like many businesses across the country, small and family-owned CPA practices are facing mounting challenges when it comes to passing the torch to a second generation.
Steven Remy, CPA, is extremely proud of his seven children, most of whom are grown and enjoying successful careers in finance, education, administration, and veterinary medicine. But not one of Remy’s offspring wanted to be an accountant, leaving him in a predicament as a managing member of RVG Partners LLC in Oak Brook, Ill.
“It used to be that family members would come in and follow in your footsteps and then eventually take over the business,” he says. “It’s not like that anymore.”
In fact, one of Remy’s sons was straight up about why he didn’t want to become a CPA. “Look Dad, I don’t want to sit in an office like you do; I’m not looking forward to working that hard,” Remy’s son told him. “I just don’t want to be in a business where everything is based on how many hours you can work.”
There’s more to this story than just trying to avoid working long hours. After all, veterinarians, teachers, and finance professionals are all known for putting a lot of time and sweat equity into their educations and careers. The fact is, being a CPA just doesn’t seem to have the same allure that it once did.
“Accounting isn’t a glamorous profession,” concedes Remy, who has spent more than 30 years in public accounting. “Young people are more drawn to techy, engineering, and finance-type positions these days.” These realities not only impact small firms like RVG Partners, where Remy’s niece is the only family member in the business, but also the broader profession.
“I Don’t Want to Do Taxes”
The fact that small CPA firms are having a hard time getting family members interested in the business is a major issue in a profession where everything from the “aging out” of baby boomers and lure of sexier careers, to clients increasingly looking online for accounting and finance advice, is making it more difficult for firms to stay in business.
Kathleen Orlando, CPA—who has no family members interested in joining and/or taking over her suburban Palos Heights, Ill. firm, Kathleen Orlando & Associates Inc.—lives with these going concerns daily.
“One of my friend’s daughters just graduated from Saint Xavier University with an accounting degree. When I approached her about bringing her into my business, her response was, ‘I don’t want to do taxes.’ In fact, she’s not even sure she’s going to sit for the CPA exam because it’s really not required outside of public accounting,” Orlando says.
She also sees online tax preparation software and the Internet as two big competitors. “Intuit came in and saturated the market with its software to the point where people no longer think they need a CPA to do their taxes or payroll,” Orlando says. “And a lot of clients just don’t see us as a business partner anymore. They buy a piece of software and think it can run their business.”
And while succession planning for small and family firms is getting more difficult as family members choose to explore career opportunities outside of the accounting realm, these challenges aren’t isolated to the accounting field. According to PwC’s 2019 U.S. Family Business Survey, just 33 percent of companies last beyond their founder’s generation and only 12 percent survive to a third generation of ownership.
“In making the transition from first generation to second, family businesses face the transformation from start-up entrepreneur to a more structured, complex organization,” PwC reports. “This is the most difficult transition for family businesses; not all will succeed.” This fact creates another challenge for firms: how do they sustain their family businesses when the family businesses they serve aren’t sustaining themselves?
“We Don’t Want That Kind of Life”
As the owner of six-person CPA firm Holland & Company CPAs in Naperville, Ill. Dean R. Holland, CPA, runs his company alongside an investment advisory firm owned by his brother. The brothers have been working from the same office for 25 years, but both are now facing serious succession planning issues. “We’re in the same boat in that none of our kids wanted to get into the business,” Holland says.
“When my two kids got older and were talking about college, I asked, ‘Well, do either of you want to go to school for accounting and maybe take over your dad’s business or get involved in it?’” Holland recalls. Their answer was straightforward: “When we were growing up, we saw the long hours that you worked. You weren’t around from January through April; we don’t want that kind of life.”
At that point, a disappointed—but not overly surprised—Holland realized that his firm probably would never see a second generation of family ownership. “It was enough to scare them away, but that’s just part of being a CPA in public accounting,” he says. “Your life is pretty much put on hold from January through April. I've been doing this for more than 30 years now—it does get a little old.”
Testing the Waters
Knowing that they’re not alone in their struggles to bring a new generation of leadership onboard, the Illinois CPA Society members interviewed for this article suggested there are some things that firms can do to help right the ship.
For example, Holland sees value in internship programs, which could be directed either at family members or outside candidates who want to test the waters. He says the experience can give young people “a really good, inside look at what the industry is really like.” This is particularly true for small firms, where an intern can be cross trained on various responsibilities (versus a larger firm, where he or she may be placed in, say, the audit department).
“In a small firm setting, you wear a lot of hats,” Holland says, “so small firms can offer interns many different hands-on experiences. One week we may be working on payroll returns and the next week we’re doing write-up work.”
Remy suggests it takes a reversal of perception to get new people interested in accounting. Getting people to understand its value sometimes means impressing the point that it’s a very stable, consistent profession that offers very low levels of career risk.
“A lot of young people are grabbing for the brass ring and wanting to make millions of dollars,” Remy says. “I've created a very good career for myself, as have a lot of others in this business. We need to be sharing that message and using it to attract new talent.”
Going forward, all three CPAs say they’re concerned about the small, family-run firm’s future. In a world where accounting goes head-to-head with engineering and IT in recruiting analytically minded students and young professionals, Remy says the onus is on the profession to start doing more to win the war for talent.
“We’re all competing for that same mind,” Remy says, “and let’s face it, it’s a lot more fun to make something than it is to report on it.”
The original article appeared in the Illinois CPA Society’s Insight magazine.
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