How to transfer a Boomer owned CPA practice to a Millennial
For all the negative stereotypes about millennials, you would be astounded by how hard they work when they believe their contribution matters.
~Jay Samit
The demographics actually might surprise you.
According to Pew Research, Millennials are projected to overtake Baby Boomers as the largest generation. That’s right, they will be the biggest generation in the US and they are almost there. The numbers are very similar in Canada.
Boomers – Born from 1946 to 1964 – 74 million
Millennials – Born from 1982 to 2002 – 71 million
Another very important consideration is the number of CPAs in the profession. This trend may have an even bigger impact on succession planning. According to a CPA Accounting Institute for Success column:
“Actually, if you look back to the 1990s, the total number of first-time licensed CPAs in the USA has declined about 20 percent. This means fewer people are taking the Uniform CPA examination each year as compared with prior years. In other words, people are becoming CPAs at a lesser rate than in previous decades. It’s unclear as to what is causing this decrease in people becoming certified.”
We looked to see if we could find out if the number of CPA’s staying in public practice, but couldn’t find any reliable statistics on that. Our strong suspicion is that people don’t stay in public practice as long. I did run across a very interesting column by Edward Mendlowitz in Accounting Today titled Art of Accounting: Why CPAs leave Public Accounting. His assessment lines up with our experience as well.
I’d also be really interested to know how many millennials will be self-employed vs past generations. According to the editor-in-chief of MiLLENNiAL magazine, 60% of Millennials see themselves as entrepreneurs, while 90% say they have an entrepreneurial mindset. However, they are starting companies at the lowest rate in 25 years.
In summary, it appears that the “greying of the profession” may be more of a function of the number of people who have chosen the profession and those that have decided to get out of public practice altogether.
That said, we remain very bullish on the marketability of CPA practices that are profitable and well-managed. To learn more, check out our succession planning guide at PoeGroupAdvisors.com/plan.
I’m going to go out on a limb here and talk about some of the stereotypes of these two generations. I realize the dangers inherent in stereotyping and there are of course many, many outliers.
Boomers have a ton of grit.
From our experience, a lot of the CPAs that are now thinking of retiring work long and hard. We have met many CPAs that work 2500, 3000 and even more hours per year. I can remember working seven days a week at Ernst and Young when I started my career in the early 90’s. The partners then had every expectation that everyone would work like that. If you wanted to move up, you had to work those long hours. That was just beginning to shift when I came into practice.
Millennials demand work-life balance.
Millennials find the long hours that the boomers worked to be absolutely unacceptable. They won’t do it unless there is a huge Silicon Valley type of payoff for them. Honestly, who can blame them? If you don’t have to work that hard, then why should you? Finding good talent is a challenge in the accounting profession, so they can make work/life balance demands on employers.
Couple this with their ability and willingness to automate their work with new technology, and they are able to work less than past generations have.
Mind the gap
There is a big gap. However, it will be bridged one way or another as people exit from firms and new leaders take their places. Acknowledging this gap is crucial for succession planning purposes. It’s also an opportunity to build a far better CPA practice.
Bridging the gap – What Boomers can do to prepare.
Build a better CPA practice. The key metrics to focus on are owner hours and cash flow. If you want to be able to sell or exit from your firm, you simply have to make it stand out from the crowd. Shoot for working less than 2,000 hours per year. Check out our column on working less and start taking action.
Improve your cash flow. In my opinion, the first place to help with this is pricing. Make the switch to value pricing and it will create huge (successful) ripples in your practice.
Bridging the gap – What millennials can do to prepare.
Don’t be afraid of a little temporary hard-work. If you want to lead a firm, there will always be patches that require more hours and more grit. However, it’s worth it. The freedoms and benefits of owning your own CPA firm are immense. The tools for running a firm are really getting interesting. It’s creating so much opportunity, and the early adopters are going to be richly rewarded. For a deeper dive, check out Why Millennial CPAs should consider firm ownership.
About the Author: Brannon is the founder of Poe Group Advisors and has been facilitating successful accounting practice transitions throughout the US and Canada since 2003. Brannon started his career in public accounting as an auditor with Ernst & Young. He is the author of “Accountant’s Flight Plan: Best Practices for Today’s Firms” (published by the AICPA and CPA Canada), “On Your Own: How to Start Your Own CPA Firm,” as well as multiple blogs and the “Accountant’s Flight Plan” podcast.
