[IMGCAP(1)]Pessimists always capture the headlines. Some things are getting worse. like obesity, but in reality, most things are getting better.

The media has been impacted significantly recently and they have utilized their resources to communicate not only their plight, but also everything negative in an attempt to avoid the loss of readers and audiences. In reality, a new crop of pessimists appears regularly. Yet my generation has experienced more freedom, leisure time, travel, medical care, education and technology than any generation in the past. With this said, many people still get caught in the gloom communicated by well-known pessimists.

Sadly, pessimists are rarely challenged and held accountable for their past mistakes. Too often optimists are dismissed as naive, while pessimists are portrayed as sages in the media. Remember polio, food shortages in the 1950s-60s, and Y2K? Technology has met the challenge in many cases, and I believe it will do so in the future. The pessimists would often be right if it weren't for change. People are innovative and adaptable. It just takes leadership and optimism.

Look at Apple's most recent quarterly revenue. Over 60 percent of their revenue was from new products and services that weren't even for sale three years ago. I challenge any accounting firm to have their partners brainstorm for two hours about how they can replace 60 percent of their existing revenue with new revenue in three years.

My guess is some of the partners will only be able to focus on reducing expenses. However, I am optimistic that by talking with your entrepreneurial clients, you will learn that there are many services that they want, need and value much more highly than the commoditized services being offered today. Sure, every firm has clients who are struggling, but these are not the clients I am referring to.

We call this meeting "The New Opportunities Conversation."

You may ask, "Why just entrepreneurial clients?" The answer, according to economist Jean-Baptiste Say (1767-1832), is that, "An entrepreneur is someone who takes resources from a lower level to a higher level of productivity."

They tend to create value from creativity, leadership and relationships. The creativity provides new opportunities, the leadership provides direction, and the relationships provide confidence. These are the three basic components of value creation.

Timing and change management are also important, as industries have life cycles. If you look back over the past 200 years, some of the best industries have been: textiles (starting around 1800); railroads (1830); electricity (1890); automobiles (1920); airplanes (1950); computers (1980); and the Web (2010).

It can be said that the accounting profession has benefited from all of the above industries, and is in a great position to benefit from the transformation of the computer industry to the Web. Last week I heard someone describe this innovation as the mating of the telephone and computer. After giving this some thought, I agree. Innovation isn't an epiphany where lightning strikes and sudden change occurs.

Given the fact that most people don't like change and accountants are no exception, innovation occurs over a longer period of time, but is often recognized with a major breakthrough. Most people are annoyed or distressed by changes, while a few embrace the changes and are later known as innovators or transformation agents. Most technological change comes from the improving of existing technology. It doesn't come from the ivory towers of intelligence, but by users sharing knowledge. This ever-increasing exchange of ideas is what causes the ever-increasing rate of innovation.

I have seen this happen over the past 20 years, where industry leaders come together in various formats willing to share intellectual property, rather than protect it. Knowledge is different from real property because it is useless if you keep it to yourself. The American Institute of CPAs, associations and user groups are great examples of how the members all get better. Through collaboration, new tools such as workflow, portals and cloud computing are being rapidly accepted.

Innovators are in the business of sharing. It is the most important thing they do. Almost all technology is a hybrid. Today these meetings are global, rather than local. Granted, this may not be obvious to some, because inventors like to deny the ancestry of ideas and often try to claim the glory themselves.

Knowledge can never be gathered together in one place. It is collective, not individual. The Web has allowed knowledge to be aggregated on a global basis. The more knowledge we have, the more rapidly innovation occurs. Today, no country remains the leader in knowledge creation for numerous reasons, but most importantly because bureaucrats typically become predators and parasites by writing too many laws and taxing under the false assumption that innovation will not occur without government intervention. In the past, politics, religion and war have also impacted the spread of knowledge.

Even with these dangers, innovation has a way of igniting itself in another part of the world where it is able to flourish. Thankfully the U.S. has been such a country. The question becomes, will the U.S. be able to continue as an innovative leader?

 

REASONS FOR OPTIMISM

I believe that it will, and here are 10 reasons for CPAs to be optimistic. When I say optimistic, I am not implying that it will be easy, or that it won't involve changes in skills, and the economic and delivery models.

1. The most recent economic downturn has changed attitudes in many ways, particularly with respect to leasing versus ownership. Clients are looking for ways to better focus on their unique abilities, which generally are not accounting and technology. The sourced CFO concept and cloud-computing model provide firms with new revenue opportunities and the potential for increased margins.

2. Now is a great opportunity to change from the effort-based (hours times dollars) to the results-based (value) economy. This will require better upfront communication, contracts rather than proposals, and the use of change orders. The biggest change in thinking will need to be internal, as most clients understand this model.

3. New technologies are available that provide 24/7 services based upon digital platforms. To be more specific, Web-based content management systems, including client portals, are affordable and reliable while increasing client privacy and security.

4. Multiplier leaders who can double the production of their people through increased training and improved technology will be able to increase margins and revenue per full-time equivalent substantially. Technology is the accelerator that allows you to produce more with fewer resources.

5. Mesh-based businesses are based upon network-enabled sharing - on access, rather than ownership. The mesh-based business requires extremely high levels of trust and transparency. CPAs are the No. 1 trusted business advisor. The Web platform (infrastructure) exists and firms already have their community of clients who respect and trust them. Clients are waiting for their CPA firms to provide value (leadership, relationships and creativity).

6. Business analysts who understand the business, including processes, accounting and technology, are becoming exceedingly valuable. They know how to utilize business intelligence tools, as well as how to filter and interpret meaningful results. If you don't have these people, recruit and develop them immediately. They know how to leverage the technology and provide real-time knowledge.

7. Transactional accounting has become commoditized, but eliminate this danger by moving up the value chain to the role of trusted advisor. As I said earlier, the market and the technology are in place and growing. You need to position your firm to focus on this opportunity and leverage your strength as a trusted advisor.

8. Growth is necessary in order to provide employees opportunities, as well as to meet expanding client requirements. Growth can occur organically or through mergers. The meshing strategy does not limit mergers and acquisitions to other accounting firms. Think of ways you can leverage your resources (people, technology and infrastructure) to expand your services (wallet share) to clients who meet your criteria. The Web allows you to be a global company, even if you only have one office.

9. Continuous learning and development reduces the stress caused by change. It also allows you to retain and attract top talent. Talent does make a difference, and a learning/training culture will allow you to meet the needs of the client. You can do more with less. According to Gartner, for every hour you train, you increase your capacity by five hours.

10. Today human resources exist at both ends of the spectrum. Baby Boomers who have relationships and business savvy are willing to work beyond normal retirement age, while the younger generations have skills and capacity. With a training/learning culture both groups can benefit. Compensation is only one of the motivating components. The old carrot-and-stick approach is no longer relevant for many people. They prefer training, recognition as a valued team member, increased responsibility, and flexibility. You can meet the needs of most individuals with communication and planning.

Think - plan - grow. Be an optimist and start the ball rolling in your firm today.

 

Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.

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