Art of Accounting: Making your practice into a business

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A friend of mine has an enviable goal of growing his 15-person practice fourfold over the next 10 years. He has a plan and is using that as a roadmap to help get him there. It also seems he is on target. However he recently expressed regrets that he did not have time to learn new skills to add to his practice since he is “bogged down” running his business. This leads to the question of what role he really wants. He is a sole practitioner and right now has no staff able to be promoted to partnership.

I believe running a business is an important role and, for a practice to be elevated into a business, it needs someone at the helm to steer that ship. I could make a credible argument that a 10-person firm that wants to grow into a substantial business should have a dedicated person to run that business, i.e., a managing partner or CEO. However, I firmly believe that a 100-person firm should definitely have a dedicated CEO. So this leaves a gap of firms up to 100 people who might be wandering into that situation. Should it start when there are 15 people, or maybe 25, 50, 80 or possibly 99 people? Should it even start for a 10-person firm?

Whenever a decision is made to have a full-time dedicated CEO, a realization has to follow that this person will be running the practice, and the practice will be his or her only client. This takes an investment, and a plan, financing and an understanding that there will be substantially reduced chargeable time from this person. Now what about my friend? He has a small practice that he wants to grow and is spending considerable time on that, along with time supervising the client work, mentoring and training staff, doing taxes and business planning for clients, reviewing the final deliverables and meeting with clients. In between he is marketing and doing whatever else needs to be done to develop his firm. At the same time, he is losing opportunities to add services since he is too busy and is turning down innovative work or refers it to others.

It would seem to be that his time is misdirected in all respects. If he wants to spend the time and effort to grow his practice, he needs to somehow delegate much of his work and better leverage what he has. Bringing in a dedicated person to be the “CEO” doesn’t make sense for him, nor becoming a full-time CEO. He needs some compromises and perhaps some reorganizing of how he is functioning. Here are some suggestions:

1. At this point he needs to maintain client contacts and relationships. That should not be delegated away. However, he could ask his staff to be a little more proactive with clients while keeping him in the loop and referring difficult questions and issues to him. And he could spend some extra time calling and checking in with clients.
   
2. Based on the size of his practice, I do not believe he has enough critical mass of work to hire a dedicated tax reviewer or someone who could review the other type of client work. Instead he would need to have his current staff perform most of these functions. He can have the deliverables go through a pre-review stage before going to him. The pre-review could be done by another staff person, ideally on a higher level, but it can also be done by someone on the same level or slightly lower. This would not relieve my friend of his review, but he would have a better-quality product and it should take him less time. He would initially train the staff on how he wants the pre-review performed. This should also increase the knowledge and improve the quality of those doing the pre-reviews. Also, equal-level staff could pre-review each other’s work. An emphasis must be placed on the quality of the work to be provided to the client, but also first to him.
   
3. To cover the added time these extra steps would take, he would need to hire another staff person, but it could be at an entry level. That person would need training and he would need to make sure there are systems in place for the higher-level staff to properly, efficiently, effectively and uniformly train the new staff. I’ve been there and know this method works as it does for every firm that routinely hires staff out of school.
   
4. If he doesn’t have the right systems in place, then he would need to work on that, and that should be a priority. Without the right systems and especially training and growth of staff, he would never be able to reach his growth goal, unless he becomes extremely lucky. I do not view that as a strategy; it’s a bonus if it occurs, but not a strategy.
   
5. Along with reconfiguring his accounting staff, he should hire a personal assistant to whom he could pass work that could be done just as effectively, or almost as effectively, as he could. That assistant could learn by shadowing him until picking up on how he likes things done.
   
6. If opportunities arise to perform an innovative service, he could either delegate it to one of his more experienced staff people, or learn it himself and perform the necessary work for that engagement. If he is the “great” business person he believes himself to be, then he would now have a new service he could offer to other clients while training a staff person to do a substantial portion of such services.

What I’ve suggested is adding two staff people, spending time to make sure there are systems in place and upgrading the current staff to more effective and responsible roles. This will take some time and incur added costs. That will become his investment in his growth plan. I do not know how long this would take to fully implement, but I believe it could be done in six to nine months. If this is properly organized with a dedicated and single-minded resolve, and cooperative and understanding staff, it could be done. The added costs, along with the six- to nine-month time out, could prove to be the best investment he could make.

The above is more than a suggestion; it is a model of something that I did and successfully accomplished. It wasn’t easy and, while I had partners, we each had different responsibilities, and we had clear divisions of management and administrative functions. While we were supportive of each other, it was left to each of us to implement any changes we wanted, and that became our “role.” So, I did all of the above and know it works. I believe it can be done by others.

If you want growth, consider what I suggested, or parts of it, and go for it.

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions or about engagements you might not be able to perform.

Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People list. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” He also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. He is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where he shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. He welcomes practice management questions and can be reached at (732) 743-4582 or emendlowitz@withum.com.