Since 1982, Miami-based CPA and business advisory firm Watson Rice has worked with a neighboring accounting firm to fill its personnel needs in auditing engagements. That may not be so unusual, but what makes the relationship unique is the way the two firms have solidified the partnership - through a handshake.As unbelievable as that seems in today's litigious culture, another firm shares a similar experience.

Bill Pirolli, a partner at DiSanto Priest & Co., in Warwick, R.I., merged his small firm into a larger neighboring one after three years of what he described as a "courtship." When he moved his former firm, Pirolli, Deller & Conaty PC, into DiSanto Priest's location before the merger, there was a spatial contract, but how work would be relayed back and forth was done by a gentlemen's agreement, he said.

In both cases, where no formal contracts were involved, the firms' partners had long-standing relationships with each other.

Ron Thompkins, managing partner for the three Florida offices of Watson Rice, realizes his situation is atypical. "To tell you the truth, in this day and age, if I was to start over and do it again, outright, right out of the box, I would probably have a formalized agreement," he said. "Especially as we start to pass [the practice] to our younger partners, we just want to make sure we have a formalized document."

But whatever unofficial or official method is used to seal a partnering agreement, an increasing number of firms are discovering that the right partner can help usher in both an expanded number of client services and healthier bottom lines.


Many firms enter into partnerships or strategic alliances to help provide their clients with expertise that they don't offer, or because they need additional staffing resources.

"We're trying to be the value-added provider, not the commodity provider," said Bill Goodman, president of Appleton, Wis.-based Schenck Business Solutions. "There are certain services that our people are the best choice to provide, and yet there are other services that are really not our forte. So we use partnering to provide services to our clients, where the partner has a higher level of expertise and delivery than we do."

Specializing in audits, Watson Rice offers services for health care, not-for-profit and governmental enterprises. The core clientele of BKR Garcia & Co. PLLC, Watson Rice's partnering firm, is for-profit organizations, tax and governmental entities. There is some overlap, but not much.

"Our busy season is the opposite of their busy season," Thompkins said. "To meet our staffing needs, we formed an alliance in which we use their personnel. We have not had to go through the staffing challenges of a lot of firms."

Firms that band together through partnerships can also win bigger jobs that they may not have gotten on their own.

Such is the case with Blum Shapiro, a firm in West Hartford, Conn. Through Baker Tilly International, a network with 126 independent member accounting firms in 93 countries, Blum Shapiro was able to land the year-end audit of a $200 million global education organization.

"We were competing with national firms," explained Frederick Hughes Jr., who is partner-in-charge of the entire engagement, which includes locations in South Africa, England and Germany. "We assembled a team of ourselves and the applicable Baker Tilly affiliates and put together an all-inclusive proposal. We were selected and are currently completing the consolidated audited financial statements."

New Clients Inc., a Mullica Hill, N.J-based national marketing firm specializing in the accounting profession, entered into an exclusive 10-year contract in April with GKM Inc., a tax and accounting outsourcing firm with offices in Berwyn, Pa., and India. The agreement came after New Clients chief executive Bruce Clark began hearing remarks from his clients regarding staff shortages in tax and write-up work. Clark said that he had been approached by upwards of 20 outsourcing firms, but ultimately chose GKM because the timing was right and the firm came from a client referral. "I trusted [the client's] opinion, and that led to the initial meeting," said, Clark, who now offers a marketing plan for clients that will automatically include an outsourcing outlet with GKM.

"We're able to solve a pressing problem for our clients and we're setting up a marketing program around this alliance," said Clark, who works with roughly 3,600 accounting firms.

Don Laine, vice president of Helena, Mont.-based Anderson ZurMuehlen & Co., said that larger organizations seek out his firm's services for assisting in urban area audits because they offer qualified personnel at a lower billing rate. According to Laine, these firms are willing to absorb his staff's travel costs and are able to still turn a profit.

"The other type of outsourcing we're doing is when bigger firms come into our marketplace and don't want to incur the travel costs associated with sending people here, so they partner with us to provide assistance on their audits," Laine explained. "They are coming to Montana and they need staff on those jobs in Montana."

The firm also will work with its competitors. In an effort to tackle an overwhelming auditing job for a local business, AZM proposed a joint venture with a larger firm that could take the lead on the work while they provided the assistance.

"We look at it more as an advantage for the other firms, in that they're able to leverage off of us based on our billing rates and our ability to attract good-quality people," Laine said.


"I think the advantage is that we can meet our clients' needs for services without needing to have all of the investment and maintain the investment in that particular service," Schenck's Goodman said. "The disadvantage is you don't have as much control over your partner as you would over in-house employees. So you are somewhat at the risk that if they provide poor service, you have the negative result."

Partnering can also help firms serve clients better by referring them to somebody who can help solve their problem.

"I make the analogy to a general practitioner physician, the guy you go to every year for your annual check-up," Pirolli said. "When he finds a spot, he sends you to a specialist. That's the analogy I make with my clients ... . When you make those kinds of analogies, I have found clients are very appreciative."

Teaming up with outsiders can also allow firms to be more accommodating and creative with employees. "In the last two years, we went to a flexible working arrangement for our full-time personnel," Watson Rice's Thompkins said. "In the crunch time of the year ... we've been able to keep our peak season to around 50 hours a week. From June 1 through September 30, we go to a four-day work week. That's our slow time of year. So that relationship [with BKR Garcia] has been a catalyst that has afforded us the ability to work that kind of arrangement."

Accounting firms can also apply to become members of networks, which aim to serve the needs of those member firms exclusively.

One such network, CPAmerica International, based in Gainesville, Fla., offers services such as marketing, staff training, practice management and vendor arrangements in an effort to boost business for its firms.

Though the organization is exclusive in its marketing area, currently holding only one firm in cities such as San Diego, Boston and Los Angeles, it does not aggressively recruit firms that are in competing networks.

"I think we'll see that diminish, because the market is narrowing, which is a big trend that is going to affect the full-service associations," said CPAmerica International chief executive Doug Thompson. "You're seeing the larger firms merge and acquire firms that are in the middle market. That's how a lot of them are growing."


It may seem obvious, but investigating a potential partner or strategic alliance through a due-diligence-type process is necessary for a successful venture.

Anderson ZurMuehlen president Tim Bartz recommended addressing the mutual commitment, including the length of time of the partnership, that each firm is willing to give upfront. "I've been disappointed on a couple of occasions where we've gone in and thought we were going to be involved in a three-year deal," he said. "So, we kind of jump through hoops to make things happen, and then find out we're on for a year-and-a-half or something."

Bartz also urges firms to make sure that upper-level management communicates those plans to others within the firm. "At the higher levels, everybody is all positive about this, and then you get down to the engagement level and somebody didn't get the point across to the engagement partner," Bartz said. "So we've been in a couple of situations where it's been embarrassing because that engagement partner gets in there and he doesn't even act like partnering is something that should happen. Those types of circumstances make you want to pull your hair out."

For DiSanto Priest's Pirolli, the most important element in pairing up with an outside firm is firm culture. "The risk is that the firm that you partner with, or that you ally with, doesn't have the same sort of philosophy of service that you do, that your client won't appreciate their services," he said. "The risk is always the loss of the client."

The key, Thompkins said, is to find a partner you have confidence in and trust. "I almost look at it like a marriage. You've got to have a courtship before you get married, especially with something in this day and age that could be pretty high-risk."

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