Slideshow 10 Things Holding Your Firm Back

  • April 20 2015, 4:29pm EDT
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What's holding you back?

Well-known industry consultant Allan Koltin has identified the top 10 issues that plague accounting firms and keep them from the growth they’re looking for.

He suggests ranking your firm on a scale of 1 to 10 in terms of how well it’s doing on each issue – and then having your colleagues do the same. You may be surprised at how differently you all view your firm!

You have little or no capital to re-invest in the firm.

“Firms that pull every dollar out of the firm each year or operate with a lot of debt are at a major competitive disadvantage,” Koltin said, since they’re unable to retain profits to re-invest in the future, whether that’s hiring more staff, building out new specialty practices, or even making strategic acquisitions.

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Your firm is too eager to accept clients.

Great firms know what their ideal clients look like, and will only let those clients in the door. A crucial element of that is making sure that individual partners can’t make decisions about client acceptance on their own.

“A low-realization client on Day 1 will rarely convert to a high-realization client,” Koltin said.

The wrong mix of client service staff.

This is not so much about having enough client service staff as it is about making sure that the right type of staff are doing the right jobs. Are partners doing managers’ work? Are managers doing seniors’ work? “High-performing firms have clear delineations as to what partners, managers and staff should be doing,” Koltin said.

Too much autonomy – or too little.

Accountability and a common mission are crucial for accounting firms, but some firms find themselves operating without either. This is a form of what Koltin describes as “country vs. country club” firms: “If the firm is a country, everyone puts their hands in the middle and accept leadership’s change, putting the firm first and their individual needs second,” he explains. “At the country club firm, partners pick and choose how they want to interpret each policy and procedure, and get upset when leadership challenges them on why they are doing things differently than what was agreed on.”

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Not enough emphasis on practice growth.

A firm may lack a growth engine, or its rainmakers may be hoarding work due to perverse incentives in the compensation plan, but either way, it means new work and new clients are coming in the way they need to in order to sustain the business. Koltin said that this is often an issue with second-generation firms.

Not enough emphasis on profitability.

“Any firm can manipulate its numbers to show high profits in a given year,” Koltin said, but this is “asset milking,” as opposed to “asset building.”

The focus, he said, should be on building a long-term legacy of profitability for the firm, which can mean foregoing short-term profitability to invest.

Not enough young superstars.

“Every decade, firms need to replace talent at virtually every position,” Koltin said, and that means keeping a pipeline of developing talent.

“Think in terms of a professional football team, when they show the depth chart by position,” Koltin suggested – then figure out how deep your firm’s bench goes.

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Autocratic leadership – or not enough.

Finding that “Goldilocks zone” where a leader with a strong vision of growth leaves room for entrepreneurship, creativity and individual achievement is incredibly difficult, and often means filling gaps in the leader’s skillset in terms of communication, delegation and the like. (In larger firms, Koltin added, this issue can reach down to department heads and service line leaders.)

Too many unproductive partners or staff.

“I surveyed a 10-partner firm,” Koltin noted, “and nine of the partners indicated that the No. 1 issue was too many unproductive partners.”

He noted that this can vary from staff are partners who simply aren’t performing up to the level of their position, or who are performing at the right level but are overpaid, or – worst of all – those who are divisive and a “cancer” on the firm’s culture.

The partners aren’t on the same page.

The source of disagreement may be as specific as the comp plan or whether to go through with a merger, or as broad as the firm’s future strategic direction, but firms need to “agree to disagree,” Koltin said, “but then make a decision and get a call to action.”

“When partners aren’t on the same page, there is often a breakdown in trust and respect,” he noted. “Sadly, sometimes the wounds are too great and can’t be healed.”