My client and book of business vs. the firm’s clients and revenues

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Unlike many law firms, the prevalent view is that midsized CPA firms strive for strong leadership and tight management, their partners look and act as a team and their clients become “institutionalized.” As such, midsized CPA firm work hard at the notion of “firm clients” and not “individual partner clients.” It’s a visible sign of a well-managed firm.

It’s a prevalent view that midsized law firms are not particularly well-led and well-managed. Many of their partners operate in silos and refer to clients as “my clients” and “my book of business.” Sure, they share space and other overhead, but they do not institutionalize clients for the long-term benefit of the firm.

Many midsized law firm partners look at themselves as “free agents” and at “their book of business” as “portable.” When these law firm partners are either unhappy at their current firm, or if they think they can get a better compensation package from the firm across the street, they pick up and leave. They continue to service their clients with little, if any, disruption to client service and without dealing with the ramifications of “covenant not to compete” provisions contained in partnership agreements. This is one reason why so many law firms are unable to grow and prosper. “My book of business” vs. “firm revenue” — these are concepts with distinctions and huge differences.

But while many midsized CPA firms strive to be well-managed, many fall short of this ideal state and revert to the loosely managed style of midsized law firms, which allows for operating silos.

When I hear a partner at a midsized CPA firm say “my client” or “my book of business”, the hair on the back of my neck stands up because such a reference is code for a partner who operates in a silo. When CPA firm leadership hears one of their partners say these words, they should be very wary. Sooner or later, there is a very good chance that such a partner will financially hurt the firm as they hold the firm back from cross-selling the client base and institutionalizing client relationships. Eventually the operating silo mentality hurts a firm’s growth and bottom line. Even though CPA firm partnership agreements contain covenants not to compete provisions in their partnership agreements, with organic growth so difficult to come by, many midsized CPA firms are more than happy to bring laterals into their partnerships and, if clients follow (and many often do), pay the liquidating damages due the former firm.

So, how does a midsized CPA firm develop a culture that clients are “firm clients” and there is no such thing as “my client” and “my book of business”?

It requires a one-firm, entrepreneurial approach to management, which in turn, leads to a well-managed firm. That’s easier said than done, but it’s achievable by firms with strong and effective leadership. It requires considerable discipline and a strong commitment to partners, staff, clients and the community.

Here are a few examples of a one-firm, entrepreneurial approach to management that creates an environment of “firm clients” and “firm revenues”:

• Striving for a shared vision about the future and the strategies (with partner accountability) that will help achieve success;

• Reaching for significant firm loyalty and team effort by placing greater emphasis on firm-wide coordination of decision making, group identity, cooperative teamwork and institutional commitment;

• Emphasizing that long hours and hard work demonstrate high involvement and commitment to the firm;

• Placing an emphasis on continuous education on firm policies, procedures and protocols;

• Insisting on a sound economic model that rewards consistent performance;

• Insisting on sound corporate governance that “walks the talk” when the rubber meets the road;

• Attracting and retaining first-class partners who understand how to build lasting business relationships with clients and contacts;

• Creating a business development culture that includes everyone within their capacity and skill set;

• Making it well known that the firm wants marquee clients who build brand awareness and credentials and not simply volume for volume’s sake;

• Developing partner goals, holding partners accountable for delivering results, and rewarding compensation when goals are achieved both individually and collectively;

• Understanding that the firm needs to demonstrate that it is different by bringing value to clients that is measurably better than competitors — this is readily achieved when firms institutionalize their approach to client service (client expectations) by consistently provide by-products of compliance services such as EBITDA and working capital improvements;

• Going to market by industry-dedicated client service teams;

• Approaching client service with multi-disciplinary client service teams of audit, tax and advisory professionals;

• Looking for smart mergers and lateral hires that add to a firm’s strength, improve its weaknesses and expand its footprint;

• Requiring consistent and persistent leadership by senior partners with a no tolerance view on individual partners who think that they themselves are “stars” and much more important than the firm collectively.

Many small and midsized CPA firms fail to achieve enduring success because their leadership lacks the intestinal fortitude required to be regarded as a well-managed firm. Without strong leadership, operating silos eventually creep into the culture. These operating silos break down the DNA or fabric of a firm. A one- firm, entrepreneurial approach to management is the key to endurance. While it isn’t easy to achieve and maintain, it certainly bears considerable fruit.

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