On email, during live video presentations and (imagine it!) via phone, I’m getting questions from firms about growth. Lots of questions. Among those asking are managing partners who want to know, “Gale, what would you do if you were in my shoes?”
The questions are understandable. Given the challenges of managing a remote or hybrid workforce, significant employee distractions, and infrastructure challenges, MPs have little-to-no mindshare left over for strategizing about firm growth. Do they need to?
From there to here
Many firms look fairly flush at the moment, even though organic growth overall trended down slightly in 2020 versus 2019, and is holding at about the same level in 2021. It may have looked like a top-line increase, but peel it back and it was more about net income. However, helping clients navigate the Paycheck Protection Program, tax deadline extensions, and pandemic-related advisory work fueled revenue growth over the past nearly 18 months, even with clients struggling financially.
Combined with lower expenses (remember out-of-town conferences and costly client dinners?) the result has been increased profits. But unless firms act to chart a course for post-pandemic revenue growth, this temporary condition will remain just that. And the risk of bone-dry opportunity pipelines will become an unwelcome reality.
Why do I say this? Because a graph of the last 30 years of annual organic growth among the top firms looks like a roller-coaster. Most firms ride market conditions, focused mainly on what’s right in front of them. Suddenly their revenue is on the way down and it becomes a queasy ride.
Years ago, firms grew because they did good work and word spread through referrals. As time went on, we came to rely on talented rainmaker partners who assumed business development duties for their firms. Way back in the 1970s, our efforts at growth were aided by regulatory changes that finally allowed firms to use traditional marketing methods to reach their targets.
Today, rainmakers are aging out, but younger firm members are not rushing in to fill the void. Traditional communication channels have given way to digital marketing. Strategy — the way to sustain growth — is critical. And your current opportunity pipeline is a reflection of the strategy you employed in the past.
If I were MP
If I were a managing partner with an eye on growing my firm, I would focus on four areas of activity.
1. Study and monitor emerging new opportunities, including the following:
- Environmental, social and governance, or ESG. This expanding area encompasses corporate sustainability reporting in areas ranging from carbon footprint to diversity.
- Digital assets, a.k.a. cryptocurrency. As this specialty area moves closer to mainstream, accounting firms will increasingly be called on to audit and provide tax obligation calculations on digital assets.
- Cannabis. Sweeping changes in the last election are throwing open the floodgates, with cannabis-related regulators, operators and financiers rushing in.
- Cybersecurity. With every headline-grabbing ransomware attack, the need for accounting expertise in this specialty area continues to grow.
2. Ensure that firm members who are in line to lead industry and service lines areas are in an appropriate state of readiness. In other words, they are able to take responsibility for the strategic direction and financial health of each segment.
These leaders, who essentially serve as presidents of their business units, often are not crystal clear about their role. Make sure they share the understanding that leading a service line or industry is a leader-driven team sport (think football, not golf), and that it’s a big step up from managing one’s own book of business. It’s also an opportunity for you to evaluate if they’ve got what it takes to be future leaders in the firm.
3. Prune the client base, with an eye to eliminating clients that exhaust your team and whose work yields sometimes 50 cents on the dollar! Discerning firms (and gardeners) know that constant pruning keeps things growing by making way for the newer, larger, better — whatever adjective you use. Leaders who prune have the confidence in their strategy to continually fill the pipeline and aren’t reluctant to cut out the underbrush. Industry and service line leaders can be effective catalysts for pruning.
4. Move as quickly as possible into project and retainer-based consulting. This includes acquiring technology-centric business consulting companies. Based on research calls and other market intelligence, identify market hotspots, focus resources there, and identify early adopters to confirm strategic directions. I hear a great deal of chatter on the subject of consulting, but don’t see enough action. Yet, it’s an imperative for future growth.
It’s grow time!
A full plate in 2020 and 2021 has certainly been fortuitous for firms that questioned where they would land when businesses started closing down in March of 2020. Generally, it isn’t the result of a long-term strategy, but rather excellent market conditions. Growth strategies are exactly what will be required if we are to remain sustainable in a post-pandemic environment.
With that in mind, it’s time to delve into the principles and tactics involved.
Two hats at once
One of the most relevant concepts is that of concurrency — it takes as much time and energy to sell something as it does to get it in a state of readiness to be delivered. And both processes must take place concurrently. Typically, accounting operates in a kind of start-stop cycle — we focus solely on producing widgets. Then when that work is complete, we address how the widgets will be marketed and sold.
The challenge is that a typical sell cycle in our profession can take months or longer. If we don’t pay concurrent attention to developing offerings and driving demand for them, our pipelines will dry up in short order.
Managing partners and other firm leaders are certainly aware of this imperative. It’s just that they’re often too busy getting the laundry out the door to pay attention to strategic growth (sustainable and most profitable).
Another challenge is the diverse and dispersed nature of current markets. In the past, a buyer was a buyer, and all were equally welcome; we used referral sources to catch one fish at a time. Today, using a variety of distribution channels, we can attract many buyers at once in selected markets.
Caution: Upheaval ahead
I see the post-COVID period as one of massive upheaval, though exactly where that upheaval will lead is uncertain. As a huge rock ‘n roll fan, I was struck by the analogy of the current market to the London music scene of the 1960s and 1970s. It was a time of tectonic shifts dominated by the then-new sound of electric keyboards and guitars, with diverse musical influences from folk to rock and R&B.
A sure sign of upheaval in our industry is the concurrent surge on multiple fronts, such as regulations and potential regulations like PPP and tax laws, the interest in SPACS (special purpose acquisition companies), as well as tech innovations like bots, blockchain, AI, machine learning and, of course, the cloud. Also in play are market forces and emerging opportunities like ESG and cannabis.
We also have the maturing and integration of capabilities to drive digital demand, which has taken on particular importance during the pandemic. The basic digital tools, like websites, email newsletters, video and LinkedIn, are known and used by most firms. But beyond establishing legitimacy and listing services, organizations now have the opportunity to shape a buyer’s online journey with strategically dropped digital crumbs that lead them through a tailored buying experience.
Whether your goal is to stratify potential buyers by industry or need (R&D, automation, tax credits, etc.), it’s in your power to engage with them from that first digital encounter, nurturing and leading them with white papers, downloadable surveys, LinkedIn groups and other assets.
In a recent conversation, CPA consultant, author and speaker Amy Vetter noted the need to explore the human/tech relationship and redefined roles to lean into the full potential of technology. Although cyborgs are typically humans with machine parts, it’s been said that a person could be called a cyborg when using specific wearable technologies, or even using laptops or mobile devices to do work. Her area of inquiry holds great promise for future exploration and learnings.
Need for speed
One final suggestion for post-pandemic growth planning is the need to pick up our pace. Speed is necessary to capture the full potential of changes brought about by the current upheaval. It’s not only about potential, but relevance in the market. The challenge is that accounting firms are built for accuracy, not speed. Precision is at our very core, and not to be sacrificed. However, speed in decision-making and execution in today’s times is also essential.
Consensus decision-making within a partner group is slower by its very nature. It’s quite different from typical corporate pyramids, like technology companies. Midmarket firms will need to continue to figure this out.
One factor working against that need for speed is insufficient people power. Our firms are chronically understaffed, yet we’re behind in investing adequately in human resources infrastructure. My years in tech taught me that HR was critical to sustaining revenue growth rates, which were often up to 30% annually.
Girding CPA and accounting firms for post-pandemic growth can be a do-it-yourself/internal initiative. Or, MPs can reach out for the support of trusted outside experts in practice management, HR, technology and growth. I tell my clients it’s a bit like that deck you’ve been wanting. You can go to Home Depot, amass the supplies and build it yourself, or find a guide and get there faster!
