Accountants Spurn Mergers for Solo Practice

Long Island Business News, September 5, 2013, by Kristen D’Andrea

Sal Armao knows a thing or two about starting his own accounting firm.

In June 1995, after Biscotti, Grassi & Co. split up, Armao, who had been a partner in the firm, decided to start his own practice with two former firm supervisors. Their new business had a good run, growing to comprise four partners and 30 employees. In July, however, Armao, Costa & Ricciardi was dissolved after, as Armao said, “we got to a point, like in a marriage, where after a while, you don’t see eye to eye on things.”

When Armao saw what path the firm was headed down, he said he had three options: merge, sell or remain as a local firm and build his practice up again.

“A lot of firms would have loved to merge my practice in,” he said, noting he specializes in accounting work for labor unions and employee benefit plans – two areas of growth not many firms handle. Still, Armao chose the route he had been down before: starting a practice from the ground up.

With 16 employees and a full-time marketing director, Armao has many ideas to grow his firm once again, from creating a tax department to expanding into forensic accounting and business valuation. In fact, he’s so confident, he kept the Garden City space his former firm occupied, which is currently too big.

“It’s going to happen,” he said. “Within the next two to three years, I’ll probably be back to the size I was before we split.”

So far, Armao has no regrets.

“I like to have my own autonomy,” he said. “I don’t want to be governed by a large organization with rules and regulations that would not fit my lifestyle.”

He is not alone. While many accounting firms on Long Island and nationwide have merged in recent years – according to a 2012 survey by the American Institute of Certified Public Accountants, nearly half of all U.S. accounting firms were in merger talks already or expected to be within two years – others are bucking the trend in search of sovereignty.

Eliot H. Lebenhart began his own firm in the early 1980s. In 2009, he merged with a larger 30-person firm and then left in May 2012. Today, his Plainview firm employs eight professionals – each of whom followed him into and out of the merger.

“When you’re with a larger firm, when you’re not the only guy in control, you need everybody to be on the same page,” he said. “Everybody was not on the same page.”

Still, being in charge comes with its own set of challenges.

“When clients call, they want to talk to the boss,” Lebenhart said. “I can’t be everything to everybody. I am spread way too thin.”

 

Laura Sabbagh can relate. After being downsized from a regional Long Island accounting firm in November 2011, the certified public accountant decided to start her own practice earlier this year. One of her biggest challenges, Sabbagh said, is managing client expectations.

“Learning to get your clients to realize their priorities are not necessarily your priorities” has been difficult, she said.

While Sabbagh concedes she may not have decided to start her own firm had she not been downsized, she said she has never been happier. Setting her own time schedule and working when it is convenient for her out of her home-based office in Bellmore are two main advantages she said she did not have previously.

“I like picking the clients I work with and being able to help people in a different way than I was able to at the various public firms I worked at throughout my career,” she said, adding developing her own firm has been a learning experience.

“Partners [at previous firms] didn’t train us on how to ask for referrals or bring in new clients,” Sabbagh said. “Now I take sales training and online marketing classes and do a lot of networking through my website and blog.”

Generating business internally, along with finding and keeping qualified employees, are Armao’s greatest challenges, as well. “The inventory of good people out there is very small and we’re all competing for the same people,” he said, noting he’s up against larger, national firms offering signing bonuses and five or six weeks of vacation.

For Lebenhart, finding qualified employees is not an option – it’s a necessity. While he said he has “wonderful, very dedicated, long-term employees who are extremely competent,” he does not have a successor in the firm. He’s been looking to hire a certified public accountant or CPA candidate since last October with no luck.

“Headhunters tell me it’s hard to find people who want to work at a small firm like ours,” Lebenhart said. “There’s opportunity here, and a clear path to the top if somebody wants it. “

While Lebenhart, 60, said he would love not to merge his practice again, time is running out.

“Something has to give within the next 10 years – I’ll have to sell, merge or bring someone up through the ranks,” he said. “I’m very content being my own firm, but it’s a ticking time bomb as I get older.”

The merger route is an easier one, according to Armao.

“Any CPA firm consultant will tell you your only choice is to merge, depending on how close to retirement age you are, and whether or not there is time to develop a succession plan,” he said.

Still, Armao, whose 29-year-old son, Michael, is studying for the CPA exam and is a part of Armao’s succession plan, said he’s happier doing things his way.

“The other way, I’d feel mired in corporate red tape.”

Armao added, “If it means I’ll make less or have less in retirement, so be it. At least I’ll be doing what I want to do, how I want to do it.”

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