[IMGCAP(1)]While the end of the busy season always brings a collective sigh of relief to staff and partners alike, the shift in seasonal demand can be a Catch-22.
After all, what do the coming months mean to a sector so reliant on a single season to generate so much of its revenue? Should firms really be forced to choose between chaotic, 80-hour work weeks and potentially plateauing revenues?
Not necessarily. While tax season might generate the most billable hours, the comparatively slower summer months present firms an opportunity to get their affairs in order and increase profitability. To help ensure your firm remains a well-oiled, revenue-generating machine, consider these three paths to growth for the remainder of 2013.
Explore New Business Strategies
Now is an opportune moment to begin identifying and pursuing new business. A profitable strategy should revolve around diversification and expansion of non-tax, non-audit service lines, such as succession planning, financial and sustainability consulting, or asset management.
Expanding service lines certainly can help firms capture new business in the market, but it can also shine a light on potential engagement opportunities for existing clients. But how can you identify which services to pursue? If you’ve invested in a practice management system, tap into it for data that can help identify critical factors including staff with the needed skills, engagement tasks that could evolve into complete service offerings, previous clients who can be references, and even costing information to help guide pricing decisions.
By finding and suggesting add-on services for current clients, firms also gain the added bonus of building stronger client relationships. This added agility in the market goes a long way—not just in the current off-season, but also come next tax season and for the long-term.
Differentiate with Industry Specialization
While the idea of “spring cleaning” might be a little late, it’s never too late to organize your existing clients into industry specializations, like health care or financial services. The most profitable firms are moving to an industry focus, where they can charge more by showing a large portfolio of successful projects and accountants with vertical talent.
To determine where your specializations lie, firms must analyze and segment clients by key commonalities, such as market vertical or service line. This simple act of grouping clients can result in a wealth of benefits. First, it gives accounting firms visibility into what they are doing well.
For example, if a CPA firm discovers it already retains 20 clients in the health care industry, that might be the impetus the firm needs to begin harnessing its attention within that market. From there, that firm can begin to strategize on what has already worked with its current clients, and what needs to be replicated in order to achieve more.
It can also help connect future opportunities across like-minded clients. If a firm has five clients within a segment and four of those clients have invested heavily in wealth management services, it’s a pretty good guess that the last client will also be interested. Why not use such analytical insights to invest your marketing dollars to achieve a higher return?
Again, you can look to your practice management system to provide the business intelligence to draw these conclusions. Your practice management system should be able to summarize the hours your firm has invested across all staff in a given vertical, isolate the tasks and sub-tasks your firm has provided across like clients in the sector, and determine if those services have been profitable. Specialization in a vertical is an exceptional way to differentiate your firm within the highly commoditized accounting market.
Conduct Profitability Analysis
While the previous tactics impact the broad, strategic direction of your firm, profitability analysis identifies gains you can make almost immediately. Picture a service like audit work, doing well in one segment, but failing with another client group. What should you do? A knee-jerk reaction might be to stop offering audits to some clients, or perhaps change the scope to gain a higher profit margin. But deep analysis might bring you entirely different insight, if your practice management system can help connect the dots. It could be the staff mix on the unprofitable audit work lacks experience in the sector; perhaps next time you can adjust the teams, or invest in some industry training to build the appropriate skills.
There’s no way around it—being able to identify cause/effect relationships is completely dependent on the integration of your firm’s critical information. How else would you be able to justify changing work scope or eliminating a service line altogether? To fully recognize the profitable and unprofitable aspects of your business, your firm needs to make sure it’s accurately connecting the dots through an integrated data environment.
When used in combination, these three pathways significantly impact accounting firms’ off-season success. Nevertheless, even if a firm were to focus on only one or two of these pathways, the underlying concept remains the same: use the free time now available to your resources to better understand your business as a whole. Distinguishing exactly where your revenue should come from—as well as where profits are being drained—is the best way to fine-tune for maximum revenue and expected profit from future work. So even if tax season is your firm’s “bread and butter,” there’s no reason you can’t feast in the off-season.
Claus Thorsgaard is Deltek’s EVP and general manager—professional services. He is responsible for managing sales and marketing for Deltek Vision, Deltek Maconomy and Deltek People Planner, enterprise software solutions that power the businesses of accounting firms and other professional services firms around the world.