Passing the Torch

Transition to new management team just one par t of Eide Bailly's longevity, expansion plan

BY KRIS BEVILL

For some business leaders, knowing when to step aside is the most difficult decision of their career. Some wait too long, and their companies suffer for it. Others fail to put a succession plan in place and end up ready to retire with an inadequate pipeline of new management replacements For Jerr y Topp, retiring from his role as CEO of firm Eide Bailly after a decade at the helm of the regional accounting firm was a strategic move designed to avoid either of those missteps for the betterment of the company Yes, age and a desire to slow down a bit were also factors in his decision to retire, he says. But more importantly was the need to ensure that the firm would have leadership with the energy and training to continue its recent impressive growth plan into the future For those reasons, Topp decided last year to step down from CEO and begin transition- ing out of the firm as a new management team, led by Dave Stende, takes the reins.

“It seemed prudent to do that earlier than later and hope for a good transition in the firm,” he says “I know the firm is better off with the decision I made ”

Topp, who now serves as chief executive partner, began serving as CEO/managing partner of Eide Bailly in 2003 He has since led the firm through an impressive period of expansion, tripling the firm’s size over the course of 10 years, from nine offices, about 650 employees and $54 million in net fees to 22 offices, more than 1,200 employees and net fees of $171 million in 2013

While the firm had a history of growth since its formation in 1998 as a merger between Fargo-based Eide Helmeke & Co , and Charles Bailly & Co , Topp says industry changes spurred the firm’s most aggressive growth plan in the early 2000s

The infamous Enron scandal in 2001 had resulted in the dissolution of Arthur Anderson, one of the world’s largest audit and accountancy partnerships, leaving its clients in need of new audit firms. Meanwhile the accounting industry was also beginning to experience consolidation “In the profession there was a move to try to get these bigger clients that were falling through the cracks from the bigger firms because everybody was moving upstream with the size of the clients,” Topp says. “Our firm made the conscious decision that we were either going to play in this market or wait for five or six years and all this activity would go by us and we’d look back and say we should have taken advantage of that ”

The firm chose to play, and began acquiring other firms in the Midwest and Mountain regions of the countr y, growing at a rate of about 10 percent each year. It also began adding specialty ser vices to compete w ith other firms’ expanded service offerings

By the time the global recession took hold, Eide Bailly had grown substantially and was operating successfully, but it was not entirely immune to the economic downturn Growth slowed at the firm during that time, down to between 3 and 5 percent, as acquisitions and the roll-out of additional service offerings were put on hold, to the dismay of some of the firm’s partners, but unlike many other businesses around the world, the firm was able to continue to operate profitably, thanks in part to Stende, who served as chief operating officer from 2006 until his appointment to CEO/managing partner last May Topp credits Stende and the rest of the firm’s management team for their careful management of staff and costs during that time, allowing the firm to successfully navigate through the recession

With the recession now in the rear view and the transition from COO to CEO going smoothly, Stende plans to con- tinue building on the firm’s tradition of growth “Our five-year vision is to continue growing in the region west of the Mississippi, specifically in the Great Plains and inter-Mountain states,” he says.

In fact, the firm’s five-year plan anticipates Eide Bailly doubling in size Half of that growth is expected to stem from acquisitions of firms in the desired region, with an immediate emphasis on growing its presence in Nebraska, Kansas and Iowa, Stende says Topp will make use of his industry contacts to aid in this goal over the next two years, concentrating his remaining time at the firm on relationship building and mergers and acquisitions The firm also operates a group of noncompeting CPA firms called Practicewise, and Topp will continue to provide leadership for this group as well as provide leadership training within Eide Bailly for the short term

One of the firm’s most recent acquisitions speaks to the increasing emphasis on technology in the accounting industry. Denver-based Next Business Systems recently joined Eide Bailly to boost the firm’s ability to provide business management through cloud computing Owners of Next Business Systems train end-users and Eide Bailly staff on NetSuite Inc. and help the firm consult, promote and implement the web-based busi- ness software Stende says technology has been one of the two biggest changes to the accounting industry that he’s witnessed in his 32 years with the firm Not only has technology drastically changed the way Eide Bailly delivers its services, but the cost associated with implementing technological changes has also altered the industry in that it is not as economically feasible for new accountants to launch firms as it was a few decades ago, he says “It’s no longer easy to hang out a shingle and start a practice, which creates the opportunity for more industry consolidation,” he adds

The other half of the firm’s growth over the next five years is expected to be achieved internally through additional specialty services, an increase which represents a significant shift in the firm’s focus

In 2013, specialty services accounted for only about 20 percent of the firm’s total revenues. The vast majority of revenues continued to be earned through traditional tax, accounting and auditing services Within the next five years, however, Stende expects Eide Bailly’s revenues from specialty services to double. Areas expected to experience the most growth include technology consulting, international tax activity and estate planning “Deep niche” tax consulting services for states and municipalities have also grown in demand recently as a result of the recession and will continue to grow, Stende says “They’ve become much more aggressive on pursuing companies to make sure they get their fair share of sales tax, income tax, use tax, that sort of thing,” he says “We have a group where that’s all they deal with is state and local tax issues and the enhanced enforcement that we ’ re seeing at state levels.”

Increased regulations in the banking and health care industries will also require specialized services, and Eide Bailly expects to provide the expertise its clients need. “There has been an explosion of regulations coming from the government and put onto our clients; we are helping our clients through all those issues and, therefore, it is a huge growth area, ” Stende says.

Changing health care regulations as a result of the Affordable Care Act has represented an area of significant opportunity for the firm. The firm created an analytic tool for its clients to evaluate differences between providing care for employees or sending them to an exchange and on Dec 10, the firm announced the launch of a private insurance exchange system known as Eide Bailly Private Exchange. The system is geared toward businesses that no longer qualify or can’t afford group health plans, offering them the opportunity to contribute a fixed dollar amount for employees’ personal health insurance rather than pay traditional premiums.

“Cost and regulations are making group health insurance plans less and less viable,” says Linda Heuer, principal of Eide Bailly Employee Benefits. “This approach allows even the smallest of businesses to offer their employees quality health-related benefits, while maximizing the IRSapproved tax savings for both the employer and employees ”

As the firm’s size continues to grow so will its number of employees Stende says additional employees will be added at the firm’s Fargo headquarters over the next few years, although most new staff members will join the firm through its acquisitions And while growth through acquisitions can sometimes cause challenges in terms of employee management, Stende and Topp say many of the firms acquired by Eide Bailly have had long-standing relationships with the firm and are easily “tucked in” with existing Eide Bailly offices The firm has also fostered a strong culture that emphasizes work-life balance and professional growth which has helped to attract and retain quality employees and firms that blend well with the existing staff “Eide Bailly is very proud of the culture we ’ ve created over the past 15year period and most of these firms are looking to aspire to our culture, not pull us toward what they may have had prior to that time,” Topp says “The firms that we have expanded into know that we take the culture pretty seriously. We walked away from a huge deal in the past two years largely because we didn’t believe it was going to be a culture fit, so we ’ ve been pretty serious about that ”

As any good manager knows, positive culture starts with management Topp and Stende convey that through a commitment toward bettering the firm which stems from a true love for the company and career. Both men say the highlights of their careers have been receiving the opportunity to lead the firm For Topp, the opportunity resulted in a successful run that he will now be able to look back upon with pride. Stende’s run as CEO may have just started, but it signifies the height of success after a long career which began as a job at an accounting firm and soon became something more. “When I started here in 1981, interest rates were 20some percent, the job market was terrible, I was just happy to get a job and was just going to do the public accounting thing for a few years, ” he says “But I’ve loved every day I’ve worked here.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag com