Industry Insights – A Conversation with Marc Rosenberg

Marc Rosenberg
This week’s Intacct Industry Insights conversation is with Marc Rosenberg, a nationally known consultant, author and speaker on CPA firm management, strategy and partner issues. President for 18 years of his own Chicago-based consulting firm, The Rosenberg Associates, he is also the founder of the annual survey of mid-sized CPA firm performance statistics, The Rosenberg Survey. Rosenberg has prior experience as a CPA with Ernst & Ernst (now Ernst & Young) and as a corporate CFO. 

Our conversation with Marc covered CPA practice management and succession planning for firms. Here are some of the highlights… 

INTACCT: You work with CPAs on a number of practice management issues. Which are the most overlooked ones and why? 

MARC ROSENBERG: First, it's important to understand how CPA firms operate. Running a firm is essentially very simple: bring in clients, service them and keep them. Eighty percent or more of all compensation to partners is based on doing that. Billable hours are critical. Other issues like managing the firm and developing people don’t often factor in much to the goals of the partners. In local firms, partners earn an average of around $360,000 a year doing it this way. Why should they change? Most CPA firms are small, generating well under $10 million in annual revenues, so their focus always seems to be on production. These small firms have the most difficulty buying into the fact that it’s more important what they do with their non-billable time than their billable time. 

To answer the question, the most overlooked areas are overall management of the firm, including planning, hiring, training and marketing. Partners are too busy with their clients to do this and they are not typically trained in management techniques. Next is specialization, which is important because it enables a firm to more easily bring in business. You stand out in the market, you can charge more, and you can better serve clients because you are an expert. Then there’s strategic planning, which is science fiction for most small firms. The fourth area is succession planning and leadership development. This might be on the agenda of issues to address at firms, but the partners are not focusing on it with passion. 

INTACCT: Let's talk about succession planning. Is it necessary for all accounting firms? 

MR: You could make a strong argument for saying no. You love your clients and do a great job for them. The will is there and you make some effort on developing people. But partners also may think: If we don’t develop the next generation, we can always sell out to a larger firm. That's not a bad strategy. The partners will still have had an excellent career and made very good money. Yet most partners will tell you they want to keep their firm intact and keep that legacy going. If you want perpetuation, succession planning is absolutely critical. 

INTACCT: How has succession planning changed in the industry, in terms of selecting the leadership traits that are needed today for growth? 

MR: It's more common for firms to create leadership development initiatives these days. Partners tell their young employees today that the technical accounting and tax skills are merely “ante” to enter the game and that developing strong interpersonal skills and business development skills will determine their success. There's also more focus today on mentoring skills. Partners are seeing the value in mentoring younger people at their firms in a way that retains them, inspires them, makes them better performers and develops them into leaders. 

INTACCT: How can the CPA firm owner develop a succession plan that is both effective and free from cronyism? 

MR: This is simple but hard to do. Cronyism is not a factor but attitude of the current leaders is critical. They really need to want this to work and to commit the time. In turn, that means the firm has to sacrifice some short-term profits for long-term profits, success and the ability to survive their current generation. One thing that would help would be to provide financial incentives to partners for focusing on leadership development. This all takes leadership at the top. 

INTACCT: Finally, how about a few questions just for fun… 

How do you like to play "tourist" in Chicago?
MR: Chicago is one of the most vibrant cities in the country. I’ve lived here all my life and relish the opportunity to go somewhere I haven’t been in a while. One of my favorite “tourist” activities is simply walking around Chicago’s downtown. Our architecture is world-renowned and there is nothing better than walking along north Michigan Avenue on a nice day. 
What is your idea of a perfect vacation? 
MR: It would be one that blends a visit to a world famous international city, learning the history of that country and experiencing the unique culture of my destination. Places I’ve been to in the last couple of years include five cities in China, Australia and New Zealand, Ireland and Scotland. Winston Churchill said “Those who fail to learn from history are doomed to repeat it.” There is no better way to learn the history of a country than by visiting it. 
If you didn't go into finance, what other career track would you choose? 
MR: No question, I would be a writer. Not quite sure of what, but I would definitely write a few novels. In fact, one of the items on my “bucket list” is to write a John Grisham-type novel where the hero is not a lawyer but – that’s right – a CPA because CPAs are really cool people. 


Want to stay connected to Marc? Be sure to follow him on Twitter (@mrosenbergcpa) and be sure to follow the Marc Rosenberg Blog. You can also follow Intacct on all our social media channels, including Facebook, Twitter, and LinkedIn

Do you have interesting industry insights you’d like to share? Do you know someone else that we should interview? Send us your suggestions for consideration

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