Providing a Future: A Succession Story: How Wall, Einhorn & Chernitzer PC Makes the Firm's Long-Term Success a Constant Focus
Twenty-seven years ago, CPAs Marty Einhorn, Jeff Chernitzer, and Alvin Wall got together in Norfolk, Va., and decided they wanted to start something that would Uve on long after they retired. Client relationships and the well-being of employees have always been important to the three co-founders of Wall, Einhorn & Chernitzer PC, which has grown into a full-service accounting firm known as WEC, with 11 shareholders and three related entities (a wealth management entity, a virtual back-office accounting entity, and a wholly owned subsidiary that provides sophisticated tax strategies for clients). "It's all about the people we serve," Einhorn said. "First and foremost, we serve our clients. And in some cases, we're in our fourth generation of clients' families. And the people who work here, we're blessed with very low turnover, and we want to take care of these people and provide a career for them. That's what we have in mind." With a succession plan document firmly in place and a culture that supports development and promotion of personnel, WEC serves as a positive example for how to ensure a sustainable future for a firm, its clients, and its employees. SUCCESSION A CHALLENGE FOR MANY FIRMS WEC's constant focus on the future makes it a progressive firm in this area, according to a recently issued survey report. Just 44% of multiowner firms currently have a written and approved succession plan in place, according to a survey conducted in 2016 by the AICPA Private Companies Practice Section and the Succession Institute, a consulting firm that specializes in helping firms create a strong organizational infrastructure. The lack of succession planning is leaving CPAs--as well as their clients and employees--in unfortunate circumstances. When firms don't have well-designed succession plans, their only exit strategy may be a sale to another firm. With a sale as the only option in a market that's saturated because many Baby Boomers are retiring, a firm is less likely to command top dollar or favorable terms for its clients and employees. "With more and more Baby Boomers wanting to retire--and many of our firms are run by Baby Boomers--you hit a point at which the number of buyers is going to go down in proportion to the number of sellers going up," said Bill Reeb, CPA/CITP, CGMA, the CEO of the Succession Institute. "So I think it becomes a softer market, and some people end up in a bad position." Einhorn, Chernitzer, and Wall were determined that their firm would never end up in an unfortunate position. About a year after starting the firm, they signed a document outlining its succession procedures. The plan provides details for how shareholders who are exiting the firm will pass control to new shareholders who have been groomed for the job. One critical component in the agreement is the age at which the sale of an ownership stake is mandatory. Although 65% of multiowner firms responding to the succession survey have no mandatory age for the sale of ownership or retirement of owners, Einhorn and his colleagues believed it was important to establish a time when they would step aside. WEC set its mandatory retirement age at 65. A shareholder who turns 65 is required to sell his or her interest in the firm. Wall did that on Dec. 31, 2015, and is now a limited-equity shareholder working under a mutually beneficial arrangement with the firm. Chernitzer, meanwhile, works in a separate entity the firm set up for a wealth management specialization (WealthQuest Financial Services LLC) in 2000. About eight years ago, WEC renegotiated his agreement to allow him to remain a limited-equity shareholder in the CPA firm. Einhorn is the lone original shareholder who remains a full shareholder in WEC. PUSHING DOWN One of the most important components of a CPA firm succession plan is building bench strength. …