Barry Melancon is retiring as president and CEO of the AICPA at the end of this month. One of his last presentations in that role was at the Accountants Club of America last week. I have been fortunate to know Barry and to have attended many of his presentations and especially his annual visits to the ACA, which he has been doing since he started at the AICPA in 1995.
Much has been written about Barry and I am sure much more will be written about him. I am looking forward to reading much of this. Also, he will not withdraw into the sunset and will continue to make an impact on whatever he chooses to get involved in.
His presentation at the ACA covered a lot of ground and included expected tax legislation under the Trump administration, the growing federal debt, private equity's incursion into public accounting, the growing use and reliance on artificial intelligence, training new skills for staff and accelerating their growth into the new services they will be needed to perform, and his thoughts about the future of small practices, which make up about 43,000 of the estimated 44,000 accounting practices in America. I took extensive notes on everything he said, but I want to share some of his comments about small practices along with some of my thoughts.
Barry did not define the size of a "small" practice, but I believe they are practices with a single owner working alone up to those with not more than 50 people; and with possibly 15,000 practices with not more than a half dozen people. However, in the whole scheme of commerce, even firms with 50 people are small businesses. The Big Four are huge, ranging from over 50,000 upwards to 170,000 personnel worldwide and revenues from $12 billion to $33 billion. The next dozen firms have revenues over $1 billion and employ from 4,000 to 17,000 people. These numbers are based on the
Barry feels there is an important and definite need that small firms are filling. But he suggests that small practices would be better positioned for the future if they concentrated on developing a specialization in a niche. To do this, they should decide on their business model, who their market is, what they feel they could do better than anyone else or at least excel at, examine what their clients' needs are and what the market would value. They should also recognize who they could partner with when a client requires services beyond their expertise. He suggested that a small firm can no longer be all things to all clients as many have been in past times through to the present.
I liked what Barry said, how he said it and I agree with him. However, I think that when niches are identified, they refer to technical services, types of accounting services or industries. I think that small accounting practices need to consider "trusted advisor services" as a niche. I would define this as being available to clients when they need guidance, want a knowledgeable and independent sounding board, need someone who is aware of their entire situation and who is responsible for keeping everything on track. That is what small firm partners do for their clients.
Incidental to this, they also do tax returns and prepare financial statements; give necessary tax, financial, estate, succession and business planning advice; and the overall coordination and execution to make sure everything is done properly. I know that because that is what I did my entire career, along with my partners. We also trained our staff to follow our lead and many of them have evolved into their own successful practices. In effect I considered myself an "expert generalist" and that was my niche.
It wasn't easy, but neither is anything else, especially becoming an expert in a specialized area. Becoming an expert generalist needs a stronger than basic knowledge in each of the areas I mentioned in the previous paragraph. It doesn't mean becoming an expert in any of those areas but being very good in them. You need to be good enough to handle about 90% to 95% of the issues that arise and able to recognize when you cannot handle something and need to bring in a "real" expert. That is why Barry's advice about establishing a network of other accountants that could be brought in to consult with your clients is prescient. Without that network, I don't think you could serve your clients properly and would actually be doing them a disservice.
Small-business clients are primarily family owned or have two or three partners. However, some can have revenues into the hundreds of millions of dollars with substantial bank debt. The financial statements of the smaller-revenue clients can usually be handled completely by the accounting firm, but any audits and especially the audits of the larger-revenue clients can be done by larger accounting firms, with the regular firm preparing the workpapers, writing the financial statement and perhaps performing an occasional internal control review. Likewise, a larger firm could review the tax returns before they are finalized, as they can with tax plans and other issues as necessary or as they arise.
A small-business client cannot expect their accounting firm to have all the expertise necessary for all situations but would trust them to recognize when they need to call in an expert and would understand the added charges. The client is buying the relationship, trust, availability, and overall knowledge of the client with crucial insights and proven judgement.
A lot will be written about Barry Melancon's impact on the profession and moving it forward … really forward. I also learned a lot from him that has influenced a lot of what I did and will be doing. He was a giant in our midst, and we all owe him gratitude for redefining our profession in a way that puts accountants ahead of the changes rather than us trying to catch up. He saw the future and moved us forward to meet it.
Mark Koziel will be succeeding Barry as the president and CEO of the AICPA and will be continuing Barry's pattern of presenting his views of the profession and where it is heading at the ACA on Feb 10. Here is a link to register if you wish to attend either in person or virtually or if you want additional information about this fine group.
Do not hesitate to contact me at
