In a business landscape evolving at breakneck speed, CPA firms that cling to outdated models and mindsets risk losing their relevance.
So, what does it take to thrive in this new era?
Alan argues that the key is embracing change. To remain competitive, firms must shift their focus from billable hours to delivering value, build scalable businesses, and adopt a forward-thinking "what will it take" mindset. In our conversation, Alan delved into the practical strategies behind these imperatives.
The billable hour's last gasp
The traditional hourly billing model is showing its age. In an era where businesses demand agility, innovation, and value-driven service, the billable hour is increasingly obsolete.
As Alan puts it, "Firms that are able to shift from a production mindset to an outcomes and value mindset will break the mold and will be far ahead of those that don't."
But this shift is easier said than done, particularly for larger, established firms with systems and cultures built around tracking and billing time. It requires reenvisioning how the firm operates and generates revenue, a process Alan witnessed firsthand at Baker Tilly.
"We were starting that process when I was at the latter part of my tenure," he recalls. "It's a bold, nerve-wracking step. People would say, 'How are you going to account for everything? How are you going to make sure projects are moving along?'"
Despite the challenges, Alan believes this transition is nonnegotiable for firms to stay competitive.
From inputs to outputs
So, what does a value-based model look like in practice? According to Alan, it starts with shifting focus from inputs to outputs.
"For fixed-fee projects like audits, the focus should be on effective project management and tracking out-of-scope hours rather than all billable hours," he explains. "Firms often focus on hours to accrue revenue, but this can lead to inaccuracies and doesn't reflect true project progress."
Overemphasizing billable hours can disincentivize efficiency, innovation, and value creation. If employees are rewarded solely based on time worked, there's little incentive to find more innovative ways to deliver better results faster.
As Alan puts it, "Nobody gets rich by doing more work. Quantity is not the goal. It's quality, replication and automation." By shifting focus to outcomes and value delivered, firms can reward the behaviors and skills that matter in today's competitive landscape.
Adopting a 'What will it take" mindset
Transforming a firm's business model and culture requires rethinking how work gets done and how the firm is structured and led.
One fundamental shift is moving from a partner-centric model to a client-centric one. "CPA firms need to shift from being organized around partners' individual books of business to client books of business," Alan argues.
This enables firms to build "businesses within the business" — scalable, $100 million practices that create intellectual capital (knowledge and expertise) and financial capital for growth. Alan challenged his Baker Tilly leaders to think this way.
"I had many conversations with leaders: 'How are we going to build a business to $100 million scale?' Building businesses within the firm creates capital for growth."
Tackling a transformation of this magnitude starts with a simple yet powerful question: "What will it take?"
"When approaching complex challenges, leaders should ask, 'What will it take?' and envision building from scratch," Alan advises. "Beginning with a clean slate and working backward can help firms create a roadmap for achieving lasting relevance."
This "clean slate" approach requires setting aside obstacles that hold firms back. "Don't start with the 'Yeah, buts,'" Alan says. "Start with the clean slate, ask what it will take, then decide if you're willing to leap."
The imperative for change has never been more apparent. Firms clinging to outdated models risk irrelevance, but those embracing change can position themselves for enduring success and become the proactive partners their clients need.
Transformation is never easy, but as Alan's experience shows, firms must remain competitive. The future of accounting is here. Will your firm be part of it?
