[IMGCAP(1)]From my observation there appears to be a major vision problem with CPA firms: no formal strategic plan for growth other than mergers and acquisitions.

Considering that any strategic plan must identify the firm’s “driving force” for its services and markets before its executive committee can logically determine where it should be going, what they normally all want is “growth,” and most firms believe growth is their driving force. But is it really?

Recognizing the current driving force is one thing, but identifying what the driving force should be in the future is even more important in today’s CPA firm environment. This takes time and management work, the most difficult work there is.

Tax, accounting, audit, wealth management, and financial business advisory are all specialist work. If you look at every CPA’s Web site, large and small, you will find that they all highlight the exact same services. Some package them differently, but the brand remains private label no matter who implements it. This creates an enormous task of keeping and maintaining current clients, since the sole differentiators are now price and rapport. Both can be fleeting.

One of the most challenging situations for any service-oriented firm or company is that you do not own the service like a company can own a product. There are normally no proprietary segments that only your firm can deliver. Thus, you are a phone call away from gaining new business, or losing current business. The main strategic issue for firms is how to insulate their current clients from competitors as best they can while appealing to new clients and markets.

A small CPA firm can master the Tax Code as well or better than the Big Four; and a sharp, knowledgeable one-man firm can master the art of audit, become certified, and perform as well or better than a regional mid-level firm. A local financial advisory firm run by sharp MBAs can devise a wealth management program as well as any.

CPA firms have allowed their services to become commoditized, but unfortunately you cannot brand a commodity. After the great recession of 2008 to 2010, clients were scrambling to reduce costs, and huge five- or six-figure expenses for tax and audit became further exposed when a competitor offered to do the same work with the same credibility for $50,000 less! Sound familiar?

The easy way out for a managing partner of a firm is to have a strategy that facilitates growth by saying that “growth” is the driving force of the firm.

The real problem in this strategic decision-making process is that firms usually do not know and communicate what their current “driving force” is, and what the driving force should be to grow in the future. If “growth” is truly the driving force, then all a managing partner must do is to keep gobbling up other firms and grow by cannibalization, but that works in both directions.

Understanding the function of strategy and your firm’s driving force are perhaps the most difficult responsibilities for a managing partner and a firm’s executive committee to master. It is truly the most difficult of management work in strategic planning, but the most important on which the firm must focus for continued success.

Choosing the improper driving force for the firm automatically implies that the tactics and metrics to achieve the mission of the firm will be improper for the direction where your team needs to go, and the strategic plan will falter.

If you think growth is really driving you, then just keep gobbling up other firms, but indigestion occurs when the partners and managers of those firms gobbled up depart and take their clients with them. So “growth” is normally not the driver, but it could be a segment of the strategic plan.

Since current services are now often seen as a commodity, the two most obvious strategic driving forces for the firm’s future are “clients” and “new services rendered.” Both are related, but both require different tactics to achieve the growth desired.

However here’s where the CPA firm usually gets in its own way. If the firm chooses “clients” as its driving force, this normally means that the partner who is accountable for that particular client or brought it with a merger (we’ll call him or her Partner A), must manage other partners and managers of the firm when they have services which Partner A’s client could utilize, and Partner A does not want to give up any accountability over his or her client. That's accountability!

If the firm chooses “new services rendered” as its strategic driving force, this means that the managing partner must add new services that are not currently shown on the Web site, and have experts to deliver and implement them with the same Partner A above who is reluctant to give up the accountability over the client to anyone but himself. Accountability again!

Normally I see the managing partner not wanting to fight that battle with the partners accountable for the client, instead sticking with “growth” as the driver and attempting to grow through mergers and acquisitions. The better strategic decision is to focus on growing the firm with services that the clients all need and want, with the driving force being clients or new services rendered.

These two strategic driving forces bring value-added services to tax, audit and wealth management clients, and help keep the firm vibrant and growing. How? They provide an extension of value to commoditized services, while insulating current clients from competitors who only offer services in tax, accounting, audit, wealth management and financial business advisory. Plus, you can brand it!
Just keep in mind this axiom of business strategy: If the planned strategy of a company or firm is correct, any number of tactical leadership mistakes will not impact the overall success of its mission.

Greg Weismantel is president of Epic Group, a management consulting firm and advisor on strategy for small and large firms and companies. It partners with clients to identify their primary driving force while recognizing strategic opportunities of their markets, products and services that will deliver the highest value for ongoing growth and sustainability.

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