Tax preparation giant H&R Block has created a new program to draw CPAs and other accountants who are interested in selling their practices or becoming H&R Block franchises, with the new service spearheaded by accounting profession consultant Jennifer Katrulya.

Katrulya will continue to manage her own consulting practice, BMRG Advisory Services, which provides firms with education, resources, tools and advisory services for modernizing their accounting practices, while also joining Block as director of accounting operations for H&R Block Small Business Services.

The emergence of cloud-based technology is changing the way accounting firms offer and price their services, Block noted, and the launch of the H&R Block/BMRG (Business Management Resource Group) program aims to address both problems.

"As we're looking to move into the client accounting services space, with bookkeeping, payroll, etc., an important thing for us was having a certain level of operational and strategic expertise, which Jennifer absolutely brings to the table," said Jeremy Smith, director of H&R Block Small Business Services. "But also we want to be a constructive player in this space and part of the community. An important part of this is we know a big problem within the accounting space is succession."

Block cites statistics from the American Institute of CPAs indicating that an estimated 75 percent of CPAs will hit retirement age over the next seven to eight years. As a result, succession planning is one of the top problems most firms face, according to Smith. When Block began talking with Katrulya about bringing her aboard to advise firms on how to grow their practices, the company also proposed adding succession planning to the mix.

"When we were talking to her and looking at partnering with Jennifer and bringing her to H&R Block, we said, ‘You know what? It could be really interesting, both for H&R Block and the industry as a whole, if we put a little twist on your consulting practice and kind of turned it into a succession plan in a box, where firms will continue to go through your consulting program like they do, but then at the end, if the ‘graduates' of the program were looking for some sort of growth or succession program and they met certain criteria of ours - which we're still working on - then we could either acquire those firms outright if they're looking to exit, or if they're looking to keep on going but want to enhance their growth, then look at turning them into a franchise and then help accelerate the growth of that firm,'" said Smith. "So it's both an exit strategy for those looking to get out, as well as something to help accelerate growth if they want to keep going and become a franchise of H&R Block."


How it will work

Firms can join the BMRG program to transform their practices, with the ability to partner with or sell to H&R Block when and if both the company and firm agree.

Traditionally, Katrulya's consulting practice has concentrated on helping accounting firms adopt practice management and technology strategies such as value-based pricing and cloud computing.

"We focus on several areas," Katrulya explained. "First, we begin with internal firm management, establishing internal budgeting, recruiting, training and management procedures. We focus on really getting the firm organized in terms of what types of services they will be offering, what types of clients they're looking to work with in industry verticals, and what they are best equipped to provide, as far as whether they will work with clients on-site or in a fully virtual environment. We help them select their software solutions and optimize the opportunities for integration and for really making sure that is best of breed for the mix of clients that they'll serve and their specific skill sets, because every firm is different in terms of what they're best suited for. We focus on helping them build out their sales and marketing models. We help them with all the best practice areas, the technology, the sales, the marketing and the human resource management."

However, succession planning is a relatively new area for Katrulya. "A component where we certainly have had a significant number of requests, but haven't helped them as significantly, would be in succession planning and in exit planning," she said. "We've historically brought in resources for them to work with and communicate with, but we have not had a formal process of any kind. We work with them to maximize the value of their firms and increase their opportunities to have a great exit, but a big piece is what they do with it then."

Smith said that Block is still setting up what criteria it will use for evaluating the graduates of the program and what kind of offer it would make. The financial terms would depend on a number of factors, such as the performance of the firm, its growth trajectory, profitability, and the strength of the team, but the offer would be a fair market price.

"If we were to do an acquisition, then they would simply be part of H&R Block -- not even a subsidiary, just part of H&R Block, like any of our company-owned offices," said Smith. "If they were to take the franchise route, then they retain ownership of their practice."


Earlier Iterations

H&R Block used to own RSM McGladrey, which it operated in what was called an "alternative practice structure" with Top 100 accounting firm McGladrey & Pullen, which could provide audit and assurance services as CPAs. But the McGladrey partners eventually decided to re-unify the firm in 2011, and Block resold RSM McGladrey back to M&P for $610 million in 2011, after a few years of deteriorating relationships between the two.

Smith and Katrulya said that the accounting practice would operate in a different manner than McGladrey did in the past, focusing on serving small businesses through services such as payroll and bookkeeping via cloud-based technology. The target is businesses with 10 employees or less such as doctors, dentists, hair salons, landscapers and construction companies.

Some H&R Block franchises already offer such client accounting services, but Smith hopes to roll them out across more Block offices. "That's a big part of the effort that Jennifer and I are working on is creating that sort of competency, stronger, more consistently in the modern way that Jennifer and others have been developing and propagating that throughout the H&B Block network over time," he said.

Block spokesman Gene King pointed out that H&R Block's founders started out back in 1946 with such services. "If you think back to how H&R Block started as a company, Henry and Richard actually had a bookkeeping, accounting and payroll business, and by happenstance moved into individual income tax," he said. "There's always been an element of helping small businesses with their books, more because we're helping them with individual income taxes, and we do have franchisees who offer year-round services to the small-business community. Now what this partnership does is utilizing what Jennifer is teaching to help our franchisees and other offices take this next step as well, with best-of-breed technologies."

"Instead of the bookkeeping, payroll and the like being a means to an end, meaning the tax return, it's an end unto itself now," Smith added. "We're trying to offer that core competency of bookkeeping, payroll, etc., to make it a growth and profit center for H&R Block."

For more information, call (816) 854-5129 or email

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