1. August Aquila AQUILA Global Advisors, LLC

3.  Please answer only one of the following ◦ Have started plan ◦ Will start in next 2 years ◦ Will start in next 5 years ◦ Will start in next 10 years ◦ Plan drafted ◦ No need

4.  Multi-Owner Firms ◦ Have started plan 35% ◦ Will start in next 2 years 32% ◦ Will start in next 5 years 10% ◦ Will start in next 10 years 3% ◦ Plan drafted 9% ◦ No need 10%  Sole Practitioners ◦ Have started plan 17% ◦ Will start in next 2 years 43% ◦ Will start in next 5 years 23% ◦ Will start in next 10 years 3% ◦ Plan drafted 3% ◦ No need 10% Source AICPA 2008 Succession Planning Survey

5.  Multi-Owner Firms ◦ Current 20% ◦ Next 1 to 2 years 13% ◦ Next 3 to 5 years 30% ◦ Next 6 to 10 years 17% ◦ More than 10 years away 3% ◦ No challenges16%  Sole Practitioners ◦ Current 14% ◦ Next 1 to 2 years 18% ◦ Next 3 to 5 years 33% ◦ Next 6 to 10 years 27% ◦ More than 10 years away 5% ◦ No challenges3%

6. PARTNERS LIFE IS GOOD, I MADE IT TO THE TOP MANAGERS CAN’T WAIT TO BECOME AN OWNER STAFF GALORE UP AND OUT WHO CARES

7. STAFF WHAT DO THEY LOOK LIKE? MANAGERS TELL ME AGAIN WHY I SHOULD BE AN OWNER PARTNERS NOW, WHAT DO WE DO?

8.  Future partner shortage  Competitive battles  Regulatory changes/Standards overload  Higher client and staff expectation  Lack of desire to engage in business development activities by many partners  Unfunded retirement plans

9.  Retirement seems a long way off, too early to start  We don’t like to think about it  We don’t even want to retire  The thought of anyone else running the firm is painful  You’re too busy to plan for succession  No one can do it better  The firm would be nothing without me

10. “This firm would be nothing without me.”

11.  I’m the key rainmaker  Don’t talk to me about succession  Next in command is not a threat  Younger partners not ready  Internal political issues  I don’t want to transition clients  Senior partners won’t retire  What will I do with my life?  What will my spouse do with me?

12.  Who will take over when you are ready to retire?  How has the firm changed since the last transition?  What skills will new leaders need to succeed?  Do you have a process to follow?

13.  Do you have a succession plan?  Is some or all of your retirement plan funded?  Do you expect to be bought out?  Do you know who will buy you out?  Do you have a fixed date?

15.  What do you want to do with the practice?  What is the firm doing to plan for management succession?  Who will make the choice for you?  What are you doing to ensure that current management will be replaced by a person able to meeting future challenges in a rapidly changing environment?

16.  Do nothing  Split up  Sell  Merge  Internal transition  Bring people in  Practice continuation (sole practitioners)

17.  What could be best for your firm? Select 2 from above) - Option One - Option Two

18. “It makes no difference what size practice you have, the primary goal for future management is continuation of a growing profitable professional practice following the retirement or demise of present management.”

19.  72% don’t have funded retirement plans  Senior management stays in place too long  Firm founder is also key rainmaker  Founder/MP wears many hats  Successors come from within

20.  Safeguard practice  Plan for your own retirement  Install a successor  Let go of the practice

21.  Ultimate management challenge  Addresses your mortality  Touches wide range of emotions  Why can’t we just ignore the topic?

22.  Liquidity  Provide new owners opportunities  Enhance value of your firm  Release energy of successors

24. 1. Separate personal identify from practice 2. Develop 3 prong plan 3. Get independent valuation 4. Cultivate a team 5. Develop other interests 6. Create your succession plan

25. 7. Have a partnership agreement 8. Choose a successor 9. Develop plans for successor

27.  Develop strategic plan for the firm  Develop your own retirement  Develop an estate plan to protect your assets

28.  Multipliers – Revenue or Book Size ◦ More than $1 on the $17% ◦ $1 on the $1 42% ◦ 95 cents on the $12% ◦ 90 cents on the $13% ◦ 85 cents on the $12% ◦ 80 cents on the $17% ◦ 75 cents on the $1 14% ◦ 70 cents on the $13% ◦ 65 cents or less on the $1 13%

29.  Multipliers – Salary ◦ Less than one year’s salary6% ◦ One year’s salary8% ◦ One year’s salary x 1.53% ◦ One year’s salary x 2.0 17% ◦ One year’s salary x 2.5 14% ◦ One year’s salary x 3.0 38% ◦ One year’s salary x 3.5 3% ◦ More than one year’s salary x 3.5 5% Source: AICPA 2008 Succession Survey

30.  Accrual basis capital account (ABC) ◦ Paid over 5 years ◦ Often with interest  Goodwill (computed on cash basis) ◦ Larger firms use a multiple of compensation ◦ Smaller firms use a calculation base on fees ◦ Usually paid out over 10 years ◦ No interest ◦ Annual cap on payments  Usually 5-10% of revenue

31.  For multi partner firms ◦ Learn to delegate  For sole practitioners ◦ Trusted advisors ◦ Spouse ◦ Outside consultant

32.  What are your outside interests? ◦ Civic, charitable work ◦ Other business interest ◦ Travel ◦ Education ◦ Etc.

33. It’s All About Options

34.  Mandatory retirement age from partnership  Client transition tied to benefits  Total dollars to be paid in any one year  Partner termination with or without cause  Vesting period  Partner disability

35.  What is your process? ◦ Anoint the next leader ◦ Hold an election ◦ Make it a competitive process

36.  Identify specific competencies  Provide informal coaching by assigned partner  Give on-the-job training opportunities  Offer formal training in interpersonal skills  Make available formal training in delegation and supervision  Send future leader to external leadership training program

38.  Hold a brainstorming meeting  Failure to plan...

39.  When you reach mid 50s  Gives you a 10+ year window  Know when to leave ◦ Sell at the top of your game  Tie succession/retirement plan to your personal wealth accumulation

40. 1. Will I be financially secure after retirement? 2. Have I identified a successor? 3. Have I announced a firm date for my retirement? 4. Do I believe that there is meaning to my life outside of the practice? 5. Do I have new challenges to look forward to after retirement? 6. Am I committed to an effective succession plan? 7. Can I delegate authority to others?

41.  7 yeses - you didn’t need this webinar  6 yeses - you are almost there  5 yeses - you are more than half way there  4 yeses - start getting serious  3.yeses - get an outside advisor  2 yeses - at least you are thinking  1 yes - you are either under 40 or plan to work forever

42.  What did I forget to say? AQUILA Global Advisors, LLC 952.930.129542

43.  Practice Continuation Agreements: A Practice Survival Guide, Second Edition by John A. Eads, AICPA  Compensation as a Strategic Asset by August Aquila and Coral Rice, AICPA  AICPA/PCPS Human Capital Resource Center www/aicpa.org/pcps

44.  For a free consultation please contact: August J. Aquila 952-930-1295 aaquila@aquilaadvisors.com