Many firms, wishing to remain independent, have responded by designing a strategy of driving revenue through niche practice groups and vesting the niche practice leader with increased authority and specific revenue targets.
The dual goal of this strategy is to maintain or even grow revenue while concurrently creating the next generation of firm leaders. This is a complex, multi-faceted objective that takes thoughtful strategic planning, persistent execution, and clearly defined roles and responsibilities for current and future leaders, who should be held accountable for specific and measurable results.
DEFINITIONS MATTER
Historically, many accounting firms have measured their revenue without differentiation, lumping all revenue onto the top line. To grow revenue by niche practice, take a fresh look at the various revenue streams and clearly define and differentiate them. Drill down beyond the general practice areas such as tax, audit or litigation support into industries served (i.e., manufacturing, real estate, nonprofits) and then again into specialized skills that already are, or could become, profitable niches, such as business valuation, internal control reviews, stock option planning, etc.
In the course of day-to-day client service, each of these three areas - large practice groups, industries served and specialized skill sets - are interrelated with cross-functional teams serving clients in a matrixed web of services. Defining these teams allows the firm to identify strengths and weaknesses and to construct the team of leaders who will drive revenue growth in each area.
Some accounting firms have hidden diamonds - practice areas that the firm may have become complacent about simply as a consequence of years of long-standing habit. Sometimes a fresh look at an already existing revenue line can lead to substantial growth with relatively simple adjustments, such as increasing visibility through greater media placement or by making a key strategic hire to bring in a fresh and re-energized approach.
Finally, the firm's management team or business development director should analyze the external competitive landscape, looking for additional markets of interest and unseen disciplines or opportunities that may be unfilled.
ACCESS NICHE LEADERSHIP
Define and communicate to the firm who the leaders of each revenue line are and then vest them with clear authority and accountability for their area.
Are they established partners who have been with the firm for many years, or are they younger partners/principals, developing new areas of specialization or deepening their leadership skills? While the expectation for each niche leader is the same - drive revenue through niche practice - the different generations of leadership will need different types of firm support and resources.
A senior partner who has led a practice for many years can find it difficult to clearly articulate exactly what they do; often they mistakenly believe that their work and network of connections should be self-evident to others. Probing questions should be asked about:
The services they provide;
The difference between client relationships and referral sources;
How they built their network;
What they perceive to be the current risks to the practice area; and,
The current competition.
Preferably, these questions should be asked with the next generation of leadership deeply involved, so relationships are built between generations and experience handed down in the natural course of day-to-day business.
The younger leader may be home-grown within the firm or could be a key strategic hire brought in to take over a leadership role while ensuring that clients experience a smooth transition. In either case, the next-generation players inevitably end up functioning as change agents, often challenging long-established ways of doing business and navigating deeply entrenched viewpoints among the partner group and management team. (In fact, the nascent leader sometimes functions as a mentor to the senior partner, pushing the department to update their style through creative ideas and current best practices.)
Firm management needs to be cognizant of this complicated dynamic, simultaneously encouraging fresh ideas and innovative approaches while facilitating the transition of decades of deep knowledge and expertise, to ensure that the firm's style of client service and its reputation in the marketplace is maintained.
Finally, evaluate the quality of leadership in each niche area to prevent the firm from accepting a sub-par leader simply because of long-standing habits or fear of short-term disruption. Difficult decisions should be made as soon as possible, since a poor leader will derail any and all efforts to grow a niche practice, no matter how committed or energetic the firm support may be.
PLANS AND DIFFERENTIATORS
The next step in driving revenue by niche practice is to draft and present business plans to the management team. The plans should be concise, clear and actionable - there is no need to draft long or overly complex business plans. In a few pages, the plan should lay out:
Revenue goals over a three-to-five-year period;
The go-to-market strategy specific for that area;
The type of clients sought;
The web of referral sources and how these sources will be leveraged for cross-selling opportunities;
An internal analysis defining the leadership and team member roles and responsibilities;
Recruiting and training needs at all levels;
Any infrastructure requirements such as software or IT-related needs; and, finally,
How progress will be measured and what reporting package will be used to measure results.
The reporting package can contain:
Billable/non-billable hours reports;
Profit and loss statements drafted specifically for that area;
New and termed client reports indicating how they were sourced or why lost; and,
Historical revenue data for year-over-year comparisons to both budgeted and actual revenue.
Further, each team should maintain pipeline reports that track potential clients, referral sources and new clients gained or lost, noting how the client was sourced and brought into the firm.
The practice area's unique differentiators should be clearly defined and then supported by the management team. As an example of differentiators, tax clients usually provide an annuity revenue stream, building stable and long-term relationships and a predictable year-over-year expectation of billable time and revenue. But a litigation support practice experiences an unpredictable ebb and flow in the work cycle, alternating between periods of intense billable time followed by a concentrated focus on business development activities to generate the next case in an unpredictable marketplace.
Firm management needs to understand and support each practice area's differentiators, creating unique metrics and financial reports that accurately measure progress or identify barriers to success, while simultaneously providing resources in alignment with these differentiators.
ACCOUNTABILITY AND EXECUTION
Since 90 percent of all strategy is execution, a synchronized implementation with guidance and oversight from the firm's management team, partner group and human resources department needs to cascade throughout the organization to provide the best chance of success.
The new leaders of the niche teams should give regular presentations at executive committee or partner meetings to communicate the level of authority and accountability that is expected from this new generation of leadership. The management team needs to work closely with HR to facilitate thoughtful and targeted recruiting of high-level and pipeline hires and to provide internal training in leadership skills, practice management and business development to the new leaders.
A single member of the firm's management team should assume responsibility for oversight of the overall program. Depending on the size of the firm and the structure of the management team, this could be the managing partner, chief operating officer or a partner who has a solid grasp of strategic HR and excellent people skills, and understands the complexities of driving organizational change. Finally, the management team should continually assess each niche practice, making adjustments for the vicissitudes of life, as progress is made.
These are substantial and complex changes that take time to plan, develop and fold into the firm's culture and succession plan. Following through on this strategy in a consistent manner will build a systemic approach and achieve a cohesive result that can subsequently be handed down to each generation of leadership.
