In today's climate, accounting firms more often view competition in the unfavorable light of low-balling clients than in terms of internally focused growth.
Instead of trying to win games of bidding limbo, firms should find their competitive edge by increasing -- and communicating -- their value. Pricing, and clients willing to pay premiums, will follow.
"Firms need to do a lot less complaining about the price war in the market and understand that not all businesses and potential clients see the world the same way," advised Allan Koltin, president and chief executive officer of Chicago-based Koltin Consulting Group, which specializes in professional and financial services firms, and partner with professional firms think tank The Advisory Board." There are really good, high-paying potential clients out there. We need to do much more to uncover who they are."
But before luring this untapped business, Koltin continued, firms should get competitive in five key areas.
1. GROWTH
The most obvious and tangible measure of success, firm growth comes from three sources, according to Koltin: organic, mergers and acquisitions, and lateral talent.
Firms most often struggle with the organic equation." Many firms haven't made the necessary sacrifices to truly embrace organic growth," he explained." In many firms, their best rainmakers continue to manage large books of business ... when it could be handled by another partner, freeing them up to bring in new business."
In this digital age, there are more paths than ever to bring in new business, according to Thalia Zetlin, principal and chief marketing officer of New York-based Top 100 Firm Berdon, who has been with the firm for 24 years." Today, too many firms are looking at what their competitors are doing and rehashing old approaches, with the result that we're seeing homogeneity and less of an attempt to distinguish themselves," she explained." This leaves the field wide open for even a small firm to compete with a large firm by distinguishing themselves."
Standing out requires firms to locate and market their specific identity, whether that be a niche area or client approach. Here, Zetlin said, the firm Web site is critical. It should provide an experience in which potential clients can find possible solutions in case studies, firm expert analysis and videos.
This very act of seeking should not be glossed over. Marketing in general has switched from the" push" approach of mailing campaigns and cold calls to the" pull" dynamic of clients hunting for services via search engine clicks and online research." It's not, 'Let's just get our name out there' -- it's getting the name out there in a useful way," Zetlin explained." When you are sharing useful information, you can reach out to many more people who click back to the Web site and it reflects, ideally, who you truly are."
On the other hand, firms looking beyond organic growth to external expansion must exercise discretion." If you are looking to merge up, it's dangerous to put it out there -- it's very important to maintain confidentiality," Koltin said." It's tough when the word gets out."
Patience is also paramount." Firms should understand that they should treat [potential M&As] no different than courting a large potential client -- that it's the most important thing they are working on," he continued." Rome was not built in a day. It might be a couple years before a smaller firm is ready to merge up, but you don't want to give up if the timing is not right today. I see firms that want to merge someone in today like they are checking it off their to-do list. They need a long-term approach on how to do mergers."
2. TALENT
With the private industry hiring again, CPA firms must pay market value to retain staff, Koltin advised." We need to remind ourselves, talent is our No. 1 asset," he added." We can't take it for granted."
Peter Kitchin of New York-based boutique staffing agency Atrium, which provides talent to midsized accounting firms, has noticed, especially in the last 12 months, an increased demand for senior-level employees. There are a few perks that this size firm, especially, can offer to nab high-caliber professionals.
"The key attraction for candidates, compared to those for a larger firm, is the rate of flexibility and understanding that for people, there is a life outside of the office," explained Kitchin, director of finance and accounting in the agency's recruitment and sales divisions." [Midsized] firms can differentiate in a few key areas, and one is flexibility in and out of the office -- it's probably the core way a midsized CPA firm can make itself unique compared to its bigger brothers." Compensation, an open-door firm culture and opportunities to shape the scope of the job position are also big advantages that a midsized firm should emphasize, Kitchin continued.
3. SPECIALIZATION
Firms that abandoned the crusade to explore industry service-line niches in 2003 are now part of the" rebirth of specialization," according to Koltin.
In recent years, there was" so much business to be found, we were essentially order takers, but that is clearly not the case now," Koltin said. Now," Traditional work is being competitively bid, and in many markets there is quite a bit of low-balling where the lowest pricing wins. But it's like with heart surgeons and Wall Street M&A attorneys -- we are no different in that those that command the highest billing rate are the ones that continue to prosper."
This expertise can be leveraged to expand the scope of client work." Clients [might] want to hire you for consulting and someone else for compliance," Koltin said. But firms with niche capabilities have the negotiating power to say," 'The only way I'm giving you consulting work is if we are also doing the compliance work.' Some firms are so embedded in the industry, they can do that."
Becoming the best requires a" champion," according to Koltin," someone willing to bet their professional career on going from a generalist to a specialist. Our profession is 95 percent made up of what I refer to as dabblers -- they have a day job doing something else, and dabble in [a specialty]. The [other] 5 percent give up everything else ... knowing that to survive, they need to build industry expertise."
4. FIRM GOVERNANCE
One big differentiator that Koltin has noted in firms that have risen above today's bidding wars is efficient management." Firms that continue to prosper have had a very effective model for making decisions," he said." Those are firms that could make hard decisions, and then there is the opposite of that -- watered-down decisions, made over long periods of time, with consensus as the goal."
Firms utilizing a" CEO concept" model with a strong leader at the top are better equipped to make the quick resolutions now required of firms, Koltin continued." The high, high-performing firms with a CEO concept, those firms dwarf firms run as more of a partnership. The firms that really shined in the recession had the ability to take on sacred cows and make tough decisions at the speed of light."
5. COMPENSATION
One such decision is often predicated on the economy.
"Many firms were dealing with the issue of a rising tide, where essentially every year from 2003 to 2007, most firms made more money in the next year and the next year going into the recession," Koltin said." Quite a few firms have made significant adjustments downward, and for partners that rolled with the tide and have now gone away, they haven't found a way to replace value to the firm."
Lower down the ladder, the recession hasn't eroded senior-level expectations.
"Compensation is No. 1 with most candidates," said Teresa Napoli, Atrium's finance and accounting recruitment consultant." Firms should be consistent with promotions and bonuses to show [employees] they are appreciated. One complaint I've seen from candidates is that they haven't seen a bonus in a couple of years -- they were promised it and haven't gotten it."
Bolstered in these five areas, firms are ready to aggressively market, said Koltin." There are clients willing to pay premium rates for exceptional service," he explained." We need to remind ourselves of that."
