When Diversity Is the Deal
Planning for the growth, sale, or succession of any accounting firm is challenging, but minority-owned firms require special attention to future leadership, mission, and cultural preservation years before decisions get made.
By Lisa Wilder and Hilary Collins | Fall 2020
What’s next for your firm? At some
point, every firm leader must
make that decision—whether it’s
about how to grow or who will take the reins
next. Mergers, acquisitions, and succession
planning take on new dimensions and only
grow more challenging when the firm is
diverse, minority-owned, and hoping to
maintain its unique culture.
For Kimi Ellen, CPA of Benford Brown &
Associates, caring about diversity is just a
part of who she is. During her time at a Big
Four firm, she met her future business
partner, Alyssia Benford, CPA. They
bonded over being the only Black people
in the room.
“That firm was just not interested in recruiting
from places with diverse students,” Ellen
says. “So I actually changed that for them.”
Ellen went to HR and told them that being
the only Black person in the room was
challenging and that she was sometimes put
in uncomfortable situations when her peers
didn’t recognize her ethnicity.
“They asked me where they could find
more diverse students,” Ellen says. “I took
them to the National Association of Black
Accountants conference and showed them
how to recruit there. The next starting class
had 13 new Black hires. That was all
because I wasn’t afraid to use my seat at
the table. We always say, if you don’t have
a seat at the table, you’re on the menu.”
Ellen and Benford left that firm and started
their own in 1996. They created the name
to sound more like the older white men
who dominated the profession at the
time. “Her maiden name was Lee and of
course my last name is Ellen,” Ellen laughs.
“When people think of firm partners, they
don’t think of two Black women in their
twenties. We came up with the name
Benford Brown & Associates to kind of get
our foot in the door.”
In the 24 years since, their firm has thrived,
adding a third partner, Tim Watson, CPA,
whose father was one of the first 100 Black
CPAs, opening a satellite office in
Bolingbrook, Ill. and specializing in audits,
landing major federal clients.
Building a Business From
the Ground Up
Like Ellen and Benford, when Enrique
Lopez, CPA founded his firm, Lopez & Co.,
in 2007, he knew diversity would be woven
into every element of the culture.
“Since I founded this firm, it’s grown to a
team of seven,” he says. “What makes us
unique is that we’re not just diverse in the
makeup of our staff, we’re also very diverse
in the clients we serve and the business we
pursue. Obviously, with most of us being of
Latino background, we have the ability to
connect with clients who speak Spanish or
share our culture. But being diverse is also
being open-minded and knowing that
mainstream America is the biggest market.”
Edilberto Ortiz, CPA also knows the
benefits of a small, diverse firm with a warm
culture. He emigrated to Chicago from the
Philippines and founded E.C. Ortiz & Co. in
1974, eventually building the firm into a
team of more than 40 staff members,
including 11 CPAs. Ortiz’s firm has served
closely-held business clients in addition to
providing financial audits, single audits,
and compliance examinations for state
government for the past 30 years. Over
that time, the firm has built a “family
environment” that Ortiz didn’t want to lose
as he received offers over time.
This June, he accepted an offer from New
York-based Roth&Co. The expanding East
Coast firm will allow Ortiz’s team to stay in
place and be able to invest more in
technology and professional development,
while giving Roth&Co. a chance to gain a
market in the Midwest.
Ortiz adds that many minority firms have
niches and relationships on the ground that
expanding firms can benefit from. “All these
years, I’ve been looking for a firm I wanted
to buy, but we were able to secure no
change in leadership and continue doing
the same thing we are supposed to do,”
Ortiz says, who will stay with the firm.
The State of Diversity
Minority-owned firms with specialized
experience and diverse teams will be
attractive in a consolidating CPA industry
where mature leadership is getting closer
to retirement. A landmark
2014 Global Accounting Alliance report noted that
about half of all U.S. CPA firms would likely
lose at least one partner or principal to
retirement over the next five years.
Diverse firms with deep experience might
find themselves in an attractive position as
a result, says Dan McMahon, CPA,
managing partner of Integrated Growth
Advisors, which assists accounting firms
with expansion and succession plans. Being able to demonstrate hiring and
promotion patterns for diverse teams will
increasingly be a plus that majority- and
minority-owned firms can take advantage
of either independently or with partners.
“It’s all about building a more competitive
and valuable firm,” he says. “Over the
course of my career, I’ve learned that public
accountants truly do serve the unique
communities they work within. That’s why
you’re a certified ‘public’ accountant. And,
for this reason, it’s important to be reflective
and representative of the communities
we’re part of.”
According to the AICPA, in 2018
minorities represented 29 percent of all professional
staff in public accounting firms, a significant
jump from 1995’s 8 percent. And today
more than half of all accountants and
auditors are women, according to
a June 2020 report by Catalyst. Additionally,
people of color made up close to half of
graduates with accounting degrees,
according to that same report, with 41
percent earning bachelor’s degrees and 46
percent earning master’s degrees. But this
increasingly diverse workforce has not yet
made it into firm leadership.
When senior firm leaders start thinking
about M&A or succession planning,
McMahon says preserving or increasing
team diversity is more than a deal point: It’s
simply a good business idea. Yet he notes
that the industry still needs to make
significant improvement in minority
recruitment in firms large, small, and
independent. According to the AICPA, 84
percent of CPAs employed by CPA firms in
2018 were white, as well as 91 percent of
the partners. “We have a long way to go in
bringing diversity to leadership roles in the
profession,” he stresses.
For minority-owned firms, it’s not about
bringing diversity to leadership roles, but
maintaining it. Leaders of diverse firms
have to keep diversity in focus in every
strategic decision they make.
Planning Ahead
Ellen sighs when asked about how she
wants to hand her firm off. “I think about that
every day. I literally have a 20-year plan
starting this year,” she says. “I’m watching
some older firms who are just not handling
it well. I’m really focused on grooming my
team and growing the next generation, but
I’m open to a merger if it’s right.”
For diverse firms who are looking to
maintain what makes them unique as they
expand, grow, and possibly sell or merge,
it’s essential to have a clear vision for the
future. Like Ellen’s 20-year plan, Lopez
says it’s important to have a vision for how
your firm will be marketable in the future.
“In five, 10, 20 years, what advantages are
you going to have? For us, we’re a diverse
firm and beyond that, we’ve found our
specialties and really pursued those.
Rather than becoming okay at a lot of
things, we’ve focused on being really good
at a few things,” he explains.
How should a leader at a unique firm like
these approach succession planning or a
sale or merger? “Start thinking about it
when you start the business,” says Maria
Prado, CPA, co-founder of Chicago-based
Prado & Renteria. The story of the founding
of her firm is similar to Ellen and Benford’s.
Prado and her business partner Hilda
Renteria, CPA were college friends at the
University of Illinois at Chicago and decided
to form their partnership early in their
careers while working in the audit
department at the First National Bank of
Chicago (now part of JPMorgan Chase). The
firm, at its 30-year anniversary, now has a
staff of more than 25 that serves private
companies, government agencies, and
nonprofits. “Some of the work we love to do
best are the challenging projects, working
with organizations in the middle of change
who may have had changes in their
accounting staff,” Prado says. “We can
support them and put the puzzle back
together in a way that will give them greater
confidence in their financial stability.”
But Prado laughingly admits that she and
Renteria didn’t exactly take their own
business advice when they started their
firm, and the deep succession discussion
they’re having with their team that takes
everything they’ve built over the history of
their firm into consideration is a puzzle
that’s still a work in progress.
“We’re examining how we can distinguish
ourselves, not just for our external clients,
but for our internal team,” Prado explains.
“Because one of the characteristics that’s
really important for us to maintain is our
corporate culture, which includes continuing
the focus on team leadership development,
creating internal and external trust-based
relationships, and achieving outcomes as a
result of integrity.”
Growing and Grooming
the Firm
For minority-owned firms, planning for the
future while retaining what makes them
unique can be a challenge.
Lopez says that developing internal talent
at his firm has been incredibly rewarding
for him and is his first choice for firm
transition when he retires. “I love
developing my own people. I love seeing
them grow and achieve their ambitions and
goals, but I also remain open to outside
opportunities,” he says.
“To really grow, you can’t limit yourself to
people who share your cultural
background,” Lopez admits. “Don’t close
your eyes to the diversity that’s outside of
your heritage. Don’t get too comfortable in
that place. Diversity means being truly
open to other groups that you’re not so
comfortable with and learning more about
them. That will give you a wider appeal.”
That “wider appeal” could be critical in
the future. “There’s going to be more
consolidation, more acquisitions and
mergers in these next few years,” Lopez
predicts. “I’m open to that. I don’t want to
limit our potential.”
Like Lopez, Ellen is extremely focused on
growing her practice and expanding into
new areas that will make her firm extremely
desirable to potential buyers. “I have a
strategy that touches a lot of different areas
in the hopes it will grow my practice into
something really great when it’s time for us
to exit,” she says. One aspect of that
strategy is developing the next generation
in and outside of her firm. “I didn’t have a
mentor when I was coming up in the
profession, so I really focus on growing the
next generation of Black accountants,”
Ellen shares. “I talk to young CPAs and tell
them to go and get all the experience they
can now and come back in 10 years and
maybe we can talk about you buying my
practice. I don’t want to die at my desk!”
On a serious note, Ellen says her team is
committed to only merging if the
relationship is right. They have entered
serious discussions about merging with
other Black-owned firms several times over
the years, but it’s never been a good
match. “I think you have to be very
thoughtful about M&A and make sure the
culture is going to mesh,” she says. “One of
the most important things for diverse firms
facing M&A is knowing when to say no.”