24th Mid-Year Meeting Takeaways

Our 24th mid-year meeting was held in Fort Worth, Texas. Over 20 attendees including members, prospects and partners attended the one-and-a-half-day conference. Below is a synopsis of the session highlights.

The 2017 Rosenberg Survey

Sarah Dobek and Cornell Rudov of CPAsNET facilitated a highly interactive session that utilized results from the 2017 Rosenberg Survey to help attendees understand the financial metrics that are most important in driving firm profitability.

The session started with a reminder of why we benchmark. Benchmarking is important to:

  • Measure your firm’s performance
  • Understand what you do well and where there is opportunity for improvement by analyzing your performance against peers and best in class
  • Change your firm’s performance by setting goals and taking actions

Next, we moved on to the Top 10 Findings from the 2017 Rosenberg Survey (based on 2016 numbers):

  1. Revenue growth overall has dropped. Revenue growth of 7.8% is down from last year’s 8.1%.
  2. Many firms are still relying heavily on mergers, which continue to have a huge impact on revenue growth. This year, 26% of firms’ revenue increase was due to mergers.
  3. Income per partner was $430,000, 6% higher than the prior year, the HIGHEST increase in profitability since 2007. What is driving this increase? A few reasons include
    1. Introducing new service lines and revenue streams
    2. More cross-selling
    3. Deep specialization
    4. People development
    5. Focus on billing rates, removing D clients
    6. Focus on delivering a quality client experience
  4. Older partners are retiring and being replaced by younger partners. We are seeing a shift, among our member firms, in the average age of partners and the age of partners over the age of 50.
  5. The percentage of female equity partners in multi-partner firms is increasing, from 17% to 19%.
  6. Firms with the smallest attest practices (the lowest 25%) outperformed those with a higher percentage.
  7. There is a strong correlation between leverage and billing rates.
  8. Growth in IPP (6%) is finally catching up to the growth in fees (8%) for the first time in 10 years.
  9. This year we had 94 firms achieve more than $500,000 in IPP (last year was 79). We also had a smaller population of firms in the survey due to all of the M&A activity!
  10. There is a tremendous opportunity to offer financial services. 90% of those that do not offer these services responded that it is not likely they will offer them in the next 12 months.


Introducing New Revenue Streams

The accounting industry is experiencing rapid change, with audit, tax and compliance services becoming more commoditized. As a result, many CPA firms are looking to add new revenue streams to reboot or expand their practice. We invited Bryan Eberle of Hayden Rock to lead a session on best practices for adding new services. In his session, Bryan covered

4 of the Biggest Mistakes Accountants Make When Adding a New Service:

  1. Ignoring diamonds in your backyard
  2. Waiting for the client to raise their hand
  3. Determining direction on behalf of client
  4. Selling watches

4 Building Blocks for Success (a simple process CPA firms have used successfully for over 20 years to generate up to 80% of firm revenues from advisory services):

  • Look different
  • Separate traditional services from value added services (so you are paid properly!)
  • Identify client needs (move away from adding hours to adding value by finding the right solution)
  • Access the appropriate experts (this ultimately helps your ability to solve problems while generating a 2nd revenue path that is scalable)

If you would like to find out how to find proactive services that generate recurring work and revenue just like traditional compliance services, let us introduce you to Bryan at Hayden Rock.

Tax Legislative Update

As you know, tax reform is one topic you can’t escape these days. With proposals in both the House and the Senate, this will be the largest change to the tax system in 3+ decades. We thought it would be beneficial to provide our members with a tax update to learn about key individual, business, retirement and international provisions on the table.

We were fortunate to have Rick Lazio, former U.S. Congressman & Senior Vice President of AlliantGroup, as a speaker at our 24th mid-year meeting. In addition to providing an overview of the key forces driving change for the CPA profession, Rick also addressed the most significant tax reform in 30 years.

The biggest changes, according to Rick, will be on the business side. We can expect to see:

  • A new business pass-through rate
  • C Corp rate reduction
  • Pass-through entities receiving relief
  • Child tax credit increase

We will not see:

  • Significant changes to retirement, just minor tweaks
  • Changes in capital gains or dividend rates
  • Changes to the Affordable Care Act in this bill

Cyber Security: Best Practices When Responding to a Breach

Every week brings news of data breaches affecting millions of people. When a breach occurs, companies face the daunting task of coordinating legal compliance with myriad state and federal notification laws, while simultaneously containing the damage, conducting a thorough investigation, and developing internal and external communications strategies.

Several of our member firms have recently experienced a data breach. It’s not a matter of “if” you will get breached, it is a matter of “when” it will happen. Soon it will be companies that have been hacked and companies that will be hacked again. We invited Michael Titens Esq. of Thompson & Knight LLP to address our group regarding the elements of an effective incident response plan.

Michael went into detail on the federal and state notification process and the key differentiating factors among various state laws. Each state has different obligations, except for Alabama and South Dakota.

Some of the common remediation and compliance obligations include,

State notifications

  • Residence of individuals affected
  • Special industry requirements
  • Payment Card Industry (PCI) requirements
  • Some states require notice to the State Attorney General

Response documents

  • Notification letters
  • PCI notifications
  • Regulatory and government agency notifications
  • FAQs and communication strategy
  • Press releases

Breach notification laws dictate what the notice needs to communicate. Common components of a response document include,

  • Date of the notice
  • Description of the incident (Massachusetts notice cannot disclose the nature of the breach or the number of people affected)
  • The date or date range of the breach
  • Description of the actions the company is taking to remedy the breach
  • The type of personal information affected
  • Whether notice was delayed due to a law enforcement investigation
  • Contact information for the company and credit rating agencies, etc.
  • Advice to the consumer to be vigilant and how to protect against fraud
  • Information about credit freezes

To whom and when do you need to give notice?

Notification rules are based on the residents of the individuals whose information was compromised, not where the information is coming from. Each state has a different limit regarding when you need to give notice by. In some circumstances law enforcement might ask you not to disclose information as they investigate. Notices are often sent to affected individuals, state attorney general and credit reporting agencies.

The Takeaway

A single solution or law for responding to a security breach does NOT exist. This makes the process of responding frustrating and expensive. View the requirements for a specific state here.

Stay Interviews

Since 2000, Gallup polls show that employee engagement has barely changed, despite the fact that most companies pour thousands of dollars into initiatives aimed at retaining employees and keeping them engaged.

The primary reason why employees word harder and stay longer is a good relationship with their employer. In this session, Sarah Dobek, President of CPAsNET, talked about the conversation you can have with your employees that will help engage them and build a relationship.

A stay interview is a meeting between a direct supervisor and their employee. These one-on-ones are conducted with the assumption that the employee wants to grow. The conversations that take place during a stay interview reveals what is important to employees and how their desire can be satisfied. They are not:

  • team meetings or focus group,
  • conducted by HR,
  • career development plans,
  • focused on job performance or
  • a fad.

There are 9 steps to keep in mind when delivering a stay interview. CPAsNET can help you introduce Stay Interviews in your firm; call us for more information.

If you would like more information or have a question for one of our speakers, please let us know. Our 25th Annual Meeting will be held June 19-22, 2018 in Chicago. More details coming soon!

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