Has your firm become a ‘nothing burger’?
There was a time when generic accounting, auditing and tax compliance services were perceived to have significant value to owners/operators of mid-sized companies, but the business world has changed and today that perceived value has diminished in a big way.
Technology has certainly played a role. So has an economy that, despite tax cuts, continues to see less than desirable productivity, inflation and ever-increasing entitlements — and now trade wars. On top of all this is the fierce competition among CPA firms that continues to drive deflation in accounting fees in the face of the ever-increasing costs of delivery.
If your firm started out years ago with a handful of employees by providing generic accounting, auditing and tax compliance services, today you probably have a firm with a healthy number of partners and a large number of staff. Your challenge now is to stay relevant and to grow your firm so you can continue to provide a nice living to your staff and increased compensation and value to your partners. This is not easy to do year in and year out, particularly if your firm is still providing generic accounting, audit and tax compliance services.
What to do? Your firm can avoid becoming a “nothing burger” (defined as insignificant, especially something with high expectations that turns out to be average, pathetic or overhyped) by creating client value in industry specialization and consulting/advisory services.
Accounting and auditing partners, who are generally the relationship partners in most CPA firms, create value for clients (and healthy margins for the firm) principally through industry specialization. They provide insightful and personalized accounting, tax and consulting services to clients by understanding the nuances of their clients’ industry environment and tailoring services to help them achieve their business objectives. With an industry specialization, accountants can also help clients identify “best practices” for their industry and benchmark clients as they seek to improve. Some of the most valuable advice a CPA firm can offer midsized companies revolves around EBITDA and working capital improvements.
Driving industry specialization in a CPA firm requires partners and managers to concentrate on one, or maybe two, industry groups that are charged with meeting the following objectives:
• To fully understand nuances of the industry and demonstrate expertise in the marketplace.
• To provide the greatest financial return to the firm and significant value to clients.
• To build depth of resources and industry capability.
Utilize the strength of the firm’s marketing professionals to build brand identity and market awareness and position the firm as a leader in the industry. Identify and target marquee prospects within the industry to upgrade the client base and leverage these relationships to maximize practice development efforts.
In terms of practice development, generate top-line revenue growth through new business acquisition in accordance with assigned goals. Develop strong referral relationships with industry centers of influence. Produce top-line revenue growth through cross-selling services to clients.
To improve professional development, build industry understanding and expertise via education and training seminars. Offer value-added service to clients provided by specialists.
To get an industry group off the ground in your firm, a firm first needs to identify a leader or director who has roles and responsibilities similar to those described below:
• Set strategic direction.
• Identify and align resources of the group to achieve strategic goals.
• Clearly communicate long-term objectives and manage the team to achieve these objectives.
Development and Accountability of the Team
• Select team members.
• Celebrate successes.
• Participate in staffing strategy discussions. Work to attract talent to the firm who possess the critical skills necessary for success.
• Ensure the talent is managed for high performance, skill development and career growth.
• Coordinate and lead all meetings. Conduct follow-up actions, prepare plans, and produce meeting minutes.
Work with the firm’s marketing director to:
• Build brand identity.
• Advertise appropriately.
• Provide marketing direction, suggestions and key prospects.
• Develop sell sheets and literature to assist in the proposal process.
• Develop newsletters, e-mail blasts and other communications for group members, clients, and potential clients as appropriate.
• Develop market and competitive data.
• Coordinate specific training that will be required of group members.
• Coordinate group meeting schedule and minutes.
• Communicate to the firm and industry team members.
• Develop an intranet strategy and identify key items to be included within the site. Utilize the intranet site as a means of communication throughout the firm.
• The communications could include minutes of meetings, including any new business, lost business and prospects; industry trends; intranet updates; CPE opportunities; personnel issues.
• Oversee the financial results for the industry group, including a debrief on lost clients.
• Review service offerings and consulting capabilities.
• Identify strategic alliances.
• Monitor realization rate/hour and review of key clients.
• Status report on cross-selling opportunities.
Each industry leader obviously needs team members. The following identifies some important criteria for partners and staff to participate as an industry team member:
• Manager-level or above (in certain circumstances, an experienced senior may be invited to attend the group if the industry leader believes that person has significant talent and spends a large amount of time within serving clients in the industry)
• Industry experience
• Technical skills necessary to provide audit or tax services to clients
The following summarizes the key activities of industry team members:
• Attend and participate in industry team meetings.
• Champion the efforts of the industry practice group.
• Execute duties assigned by the industry leader.
• Get actively involved in industry group activities.
Marketing and practice development
• Take a proactive role in developing relationships with centers of influence and prospects.
• Assist in marketing activities.
• Join trade organizations and industry organizations to promote the firm.
• Co-write thought leadership articles and white papers for internal and external distribution.
• Assist in writing proposals.
• Be willing to participate in sales calls.
• Cross-sell value-added services to clients.
Training and staff development
• Develop skills in particular focus areas to increase their industry expertise.
• Attend appropriate CPE sessions.
• Provide input to industry group regarding various tax, accounting and business issues.
• Communicate matters to the industry leader that include client problems, client questions, new business and prospects.
Providing high-margin consulting or advisory services (which are in high demand as clients ratchet up the outsourcing of their non-core competencies) essentially transforms your firm from the traditional accounting firm model (accounting, audit and tax) to a professional services firm model (accounting, audit, tax and consulting/advisory). This requires a serious investment in people and skills. Start with small bites by hiring a leader for the group (usually a veteran who has cut their teeth at a substantial firm with a successful history of providing consulting/advisory services) and giving them the mandate to build the business over a period of time. Many firms provide the following services to their clients:
• Transaction services (M&A due diligence, financial and tax, and integration)
• Outsourced CFO services
• Risk assessments
Don’t wake up one day and realize your firm isn’t able to compete in this new business world. If that happens, you will eventually be unable to attract and retain quality talent and clients will come to the realization they have outgrown your capabilities. You can avoid your clients asking you “where’s the beef?” by moving into industry specialization and building a consulting or advisory practice. These are big bets on your firm’s future, but experience indicates the gain outweighs the pain.