Behind the Scenes of a Private Equity Backed Accounting Firm w/Tim Brackney

Podcast

Summary

In this episode of Growing Your Firm, host David Cristello welcomes Tim Brackney, the Chief Executive Officer of Springline Advisory, a firm backed by private equity. 

They delve into the philosophy of utilizing talent from small firms to enhance shared services, while also discussing the complexities and nuances of private equity in the industry. 

Tim shares insights from his experience as a CEO and his background in scaling a professional services line to over $800 million in revenue. 

Listeners can expect a candid conversation about the good, the bad, and the realities of private equity, alongside potential discussions around AI in the professional services sector. 

Tune in for valuable strategies and behind-the-scenes perspectives on navigating growth in a competitive landscape.

Guest Bio

Tim Brackney: A Visionary Leader in the Accounting and Advisory Space

Tim Brackney is a distinguished executive with a wealth of experience in the accounting and professional services industry. Currently serving as the Chief Executive Officer of Springline Advisory, Tim has dedicated his career to building and scaling organizations that prioritize talent, innovation, and client service. With a career spanning over two decades, he has established himself as a thought leader and a transformative force in the field.

Tim’s journey began at RGP, where he spent an impressive 20 years, rising through the ranks to become the President and Chief Operating Officer. Under his leadership, RGP experienced remarkable growth, scaling its professional services line to over $800 million in revenue. This achievement is a testament to his strategic vision and ability to harness the potential of teams, driving performance while maintaining a strong organizational culture.

At Springline Advisory, Tim is at the forefront of a new era in the accounting profession, particularly in the context of private equity (PE) backing. His philosophy centers on leveraging the incredible talent found in smaller firms, integrating them into a larger framework that allows for shared services and strategic capabilities. 

He believes that the accounting profession is noble and essential, and he is committed to revitalizing it by creating opportunities for professionals to thrive in a supportive environment.

Tim’s approach to leadership is characterized by a deep respect for people and a commitment to fostering a culture that values collaboration and innovation. He understands that the success of any organization hinges on its people, and he actively seeks to create pathways for talent to flourish. 

This is evident in his efforts to provide ownership opportunities to team members, extending equity options down to senior managers, thereby encouraging a sense of investment and commitment to the firm’s success.

A strong advocate for the middle market, Tim recognizes the unique challenges and opportunities that these firms face. He is passionate about helping them navigate the complexities of growth while preserving their core values and culture. 

His strategic vision includes a focus on geographic expansion and the development of specialized advisory services, ensuring that Springline Advisory remains at the cutting edge of the industry.

Tim’s ethos is rooted in the belief that the accounting profession must evolve to meet the demands of a changing landscape. He acknowledges the challenges posed by technological advancements, shifting workforce dynamics, and the need for greater flexibility in career progression. 

By championing innovative practices and embracing the potential of private equity, 

Tim aims to create a more dynamic and rewarding environment for accounting professionals.

In addition to his executive roles, Tim is a sought-after speaker and thought leader, sharing his insights on the future of the accounting profession and the impact of private equity on business services. His ability to articulate complex ideas in an accessible manner has made him a respected voice in the industry.

Tim Brackney’s career is marked by a commitment to excellence, a passion for people, and a vision for a brighter future in the accounting profession. As he continues to lead Springline Advisory, he remains dedicated to unlocking the potential of firms and their teams, ensuring that they not only survive but thrive in an ever-evolving landscape.

Detailed Synopsis

The CPA industry is currently facing a significant talent crisis, largely due to an outdated career progression model. This model has not evolved significantly over the years, leading to discouragement among new entrants and contributing to high turnover rates among younger professionals.

Outdated Career Progression Model

Tim Brackney, CEO of Springline Advisory, highlights that the traditional path within the CPA profession often requires individuals to commit to a lengthy and arduous journey before they can reap the rewards of their hard work. 

Typically, new hires enter the profession with the expectation of climbing a structured ladder, which can take over a decade to reach the partner level. This prolonged timeline, combined with the rigorous demands of the profession, creates a perception that the CPA career path is not only challenging but also unappealing to younger generations.

Image Problem

Brackney points out that the CPA profession suffers from an “image problem.” Many young professionals are drawn to careers in finance, management consulting, or technology, where they perceive more dynamic opportunities and faster career advancement. 

The allure of immediate rewards, such as stock options and flexible work arrangements in tech companies, further exacerbates the issue. As a result, the accounting profession is losing potential talent to these more attractive fields.

High Turnover Rates

The combination of a stagnant career progression model and a competitive job market has led to high turnover rates among younger professionals in the CPA industry. 

Brackney notes that many individuals entering the workforce today are unwilling to endure the traditional “up or out” model, where they are expected to wait years for promotions and face significant pressure at every step. This has resulted in a workforce that is more mobile and less likely to stay with a single firm for an extended period.

Need for Change

To address these challenges, Brackney emphasizes the need for a reimagined career progression model that offers more immediate rewards and opportunities for ownership. 

He advocates for a flatter organizational structure that allows for quicker paths to partnership and greater involvement in decision-making processes. By providing options and incentives to younger professionals, firms can create a more appealing environment that encourages retention and attracts new talent.

The Impact of Private Equity on the CPA Industry

In a podcast episode featuring Tim Brackney, CEO of Springline Advisory, the discussion delves into the evolving landscape of the CPA industry, particularly in relation to private equity (PE) involvement. Here are some key insights from the conversation:

1. Understanding Private Equity ‘s Role

Tim emphasizes that private equity comes in various forms, and not all PE firms operate the same way. Trinity Hunt, the firm backing Springline Advisory, focuses exclusively on business services and middle-market firms. 

This specialization allows them to understand the unique challenges and opportunities within the CPA sector, differentiating them from other PE firms that may have a broader or less focused approach.

2. Cultural Considerations

One of the significant challenges facing the CPA industry is the potential cultural clash that can arise from PE acquisitions. Tim notes that as firms scale, they often face a dilemma: how to grow rapidly while preserving the firm culture that made them successful in the first place. 

He highlights the importance of maintaining a people-first approach, ensuring that the values and culture of the acquired firms align with those of Springline. This alignment is crucial for long-term success and employee satisfaction.

3. Talent Acquisition and Retention

The podcast discusses the ongoing talent crisis in the CPA industry, exacerbated by stagnant entry-level wages and a traditional career progression model that many younger professionals find unappealing. 

Tim points out that private equity can help address these issues by providing resources for talent acquisition and creating more attractive career paths. For instance, Springline plans to offer equity options to employees at various levels, which can incentivize talent to stay and grow within the firm.

4. Innovative Structures and Opportunities

Tim argues that the CPA profession has an image problem, largely due to outdated ownership structures and long paths to partnership. He believes that private equity can drive innovation in this area by introducing more flexible and rewarding ownership models. 

By doing so, firms can attract and retain talent who might otherwise choose careers in tech or finance, where opportunities for rapid advancement and ownership are more prevalent.

5. Market Dynamics and Future Outlook

The conversation also touches on the changing market dynamics within the CPA industry. Tim notes that the landscape has shifted significantly in recent years, with increased competition and the need for firms to adapt quickly. He believes that private equity can provide the necessary capital and strategic support to help firms navigate these changes effectively.

Capital Investment and Growth Opportunities

One of the primary benefits of PE in the accounting sector is the infusion of capital that enables firms to grow and scale effectively. As Tim explains, PE firms like Trinity Hunt focus on business services and provide the necessary financial backing to help firms expand their capabilities. 

This capital allows firms to pursue mergers and acquisitions, enhancing their service offerings and geographic reach. For instance, Springline Advisory is actively looking to acquire firms that can add specialized services, such as business valuation and forensics, which can be scaled nationally.

Innovative Ownership Structures

PE can also introduce innovative ownership structures that address the traditional challenges faced by accounting professionals. 

Tim highlights that many firms have historically operated with a rigid career progression model, where employees must wait years to achieve partnership status. This model can be discouraging for younger professionals who seek quicker paths to ownership and recognition.

By implementing more flexible ownership options, such as offering equity stakes to senior managers, PE-backed firms can create a flatter organizational structure. 

This approach not only incentivizes employees but also aligns their interests with the firm’s success. Tim notes that Springline Advisory aims to provide options down to the senior manager level, which can significantly enhance job satisfaction and retention.

Enhanced Work-Life Balance

The integration of PE in the accounting profession can also lead to improved work-life balance for employees. As firms grow and adopt new technologies, they can streamline operations and reduce the burden on staff. 

Tim mentions that many firms struggle with talent issues, particularly in managing workloads effectively. By leveraging PE resources, firms can establish national talent acquisition strategies and operational support systems that allow employees to focus more on client delivery and less on administrative tasks.

Moreover, the emphasis on creating “best places to work” within PE firms can lead to a cultural shift in the accounting profession. Tim emphasizes that the right PE partners prioritize employee well-being and aim to foster a supportive work environment. This focus can help attract and retain talent, ultimately benefiting the entire profession.

The Impact of Private Equity on the CPA Industry

In a podcast episode featuring Tim Brackney, CEO of Springline Advisory, the discussion delves into the evolving landscape of the CPA industry, particularly in relation to private equity (PE) involvement. Here are some key insights from the conversation:

1. Understanding Private Equity ‘s Role

Tim emphasizes that private equity comes in various forms, and not all PE firms operate the same way. Trinity Hunt, the firm backing Springline Advisory, focuses exclusively on business services and middle-market firms. 

This specialization allows them to understand the unique challenges and opportunities within the CPA sector. Unlike larger corporate PE firms that may prioritize high-yield investments, Trinity Hunt aims to create a supportive environment that fosters growth while maintaining a strong company culture.

2. Talent Utilization and Cultural Integration

One of the core philosophies at Springline is to leverage the talent found in smaller firms rather than displacing them. Tim mentions the importance of integrating firms into a cohesive platform while allowing them to retain their unique cultures. 

This approach not only helps in preserving the identity of the acquired firms but also enhances the overall talent pool within Springline. By focusing on high-performing teams with strong cultures, Springline aims to create a collaborative environment that benefits all parties involved.

3. Addressing the Talent Crisis

The CPA industry is currently facing a talent crisis, with fewer individuals entering the profession and many leaving due to perceived stagnation in career progression. Tim points out that the traditional path to partnership can be lengthy and unappealing to younger generations. 

He advocates for a flatter organizational structure that offers quicker paths to ownership and rewards, which could make the profession more attractive. Private equity can play a crucial role in this transformation by providing the necessary capital and resources to innovate and adapt to changing workforce expectations.

4. Navigating the Scaling Dilemma

As firms grow, they often encounter a scaling dilemma: the need to expand while preserving their culture. Tim discusses the challenges that arise when firms attempt to scale, such as increased bureaucracy and the potential dilution of company values. 

He suggests that maintaining a clear focus on culture and values is essential, even as firms pursue growth through acquisitions or geographic expansion. The right private equity partner can help navigate these challenges by prioritizing cultural alignment and supporting firms in their growth journeys.

5. Future of the CPA Profession

Tim expresses optimism about the future of the CPA profession, despite the challenges it faces. He believes that with the right strategies, including embracing private equity’s potential for innovation and growth, the profession can attract new talent and adapt to the evolving business landscape. 

By addressing the image problem and structural issues within the industry, firms can create a more appealing environment for future generations of accountants.

In conclusion, the podcast highlights the transformative potential of private equity in the CPA industry. By focusing on talent utilization, cultural integration, and innovative growth strategies, firms like Springline Advisory are positioning themselves to thrive in a competitive landscape while addressing the pressing challenges facing the profession.

Successful acquisitions in the accounting space require a comprehensive approach that balances both quantitative metrics and qualitative factors. This dual focus is essential for ensuring a good fit between the acquiring firm and the target firm, ultimately leading to sustainable growth.

Quantitative Metrics

Quantitative metrics are critical in evaluating potential acquisition targets. Key performance indicators such as revenue, profitability, and growth rates provide a clear picture of a firm’s financial health. 

In the episode, Tim Brackney, CEO of Springline Advisory, mentions that they typically transact at revenue multiples ranging from the sixes to the nines, depending on various factors like size, scope, and profitability. This indicates that financial performance is a primary consideration when assessing potential firms for acquisition.

Moreover, Brackney emphasizes the importance of understanding the financial expectations of both parties early in the process. By obtaining financial information upfront, they can determine if they are in the same ballpark regarding valuation, which helps streamline the acquisition process. This quantitative analysis is crucial for making informed decisions and ensuring that the acquisition aligns with the financial goals of the acquiring firm.

Qualitative Factors

While quantitative metrics provide a solid foundation for evaluating potential acquisitions, qualitative factors play an equally important role. Brackney highlights that they are not looking for “broken firms” but rather high-performing firms with strong cultures and leadership. This focus on qualitative aspects is vital because the success of an acquisition often hinges on the compatibility of the two firms’ cultures and values.

In the episode, Brackney discusses the significance of cultural alignment, stating that the people involved in the acquisition must share similar values and goals. 

He notes that during initial conversations, concerns about the impact of the acquisition on employees often arise. This indicates that a firm’s culture and the well-being of its employees are critical considerations in the acquisition process.

To assess cultural fit, Brackney mentions the use of cultural surveys, which can help gauge the existing culture of both firms and identify potential areas of alignment or conflict. 

This qualitative assessment allows for a more nuanced understanding of how the two firms can integrate successfully, minimizing disruption and fostering a collaborative environment.

Leadership Alignment

Another qualitative factor that Brackney emphasizes is the importance of leadership alignment. He points out that they are looking for firms with “fierce leadership” that can work together to take the combined entity to the next level. 

This alignment is crucial for driving the strategic vision of the newly formed organization and ensuring that all leaders are committed to the same goals.

In summary, successful acquisitions in the accounting space require a balanced approach that considers both quantitative metrics and qualitative factors. By focusing on financial performance while also assessing cultural fit and leadership alignment, firms can make informed decisions that lead to sustainable growth and a harmonious integration process. 

This comprehensive strategy not only enhances the likelihood of a successful acquisition but also positions the combined entity for long-term success in a competitive market.

Timestamps

[00:01:10] Private equity in professional services.

[00:03:43] Middle market definition and scope.

[00:08:05] High performing firm criteria.

[00:10:12] Cultural fit in acquisitions.

[00:14:43] Integration process after acquisition.

[00:17:20] Talent acquisition strategies for firms.

[00:20:29] Best places to work.

[00:24:07] What’s killing the CPA industry?

[00:27:34] Solving talent crisis through offshoring.

[00:30:22] Accounting profession’s image problem.

[00:31:32] Scaling business culture challenges.