No matter where a CPA practice is in its life cycle, owners should have growth in mind. A young practice will strive for growth by adding clients and offering new service lines, sometimes sacrificing margins to bring in new opportunities. Midlife practices may want to acquire other practices or merge with competitors to form a new entity.
Mature practices, where the founders may be looking to retire or sell, should keep the practice in growth mode. This is to
As a business owner, here are some lessons learned and tools I've used to strategically plan for the future.
Types of growth
Expanding a business can happen through
Inorganic growth occurs when a practice merges with or acquires another company. The revenue streams of the target practice are added to those of the purchasing practice, increasing its size and reach.
CPA practices may achieve growth through a combination of organic and inorganic growth. Strategic planning is a powerful tool for maximizing growth regardless of type.
Who should be involved in strategic planning?
While it may be unwieldy to include all members of the staff in the core strategic planning group, everyone should have input, through focus groups, surveys and team meetings. Getting input from all areas of the practice helps ensure everyone feels ownership in the finished product and all areas of the operation are considered.
Strategic planning process
A strategic plan helps the practice define where it wants to go and what its priorities are. It gives everyone in the company a shared vision so they can tailor their work toward accomplishing its aims.
A good starting point for a strategic plan is the company's mission and vision statements. The mission statement should convey what the practice does, e.g., "Smith, Brown, & Jones, CPAs offers its clients the ultimate in accurate, timely and insightful accounting services." The vision statement should paint a picture of how the practice wants to be seen, e.g., "Smith, Brown, & Jones, CPAs will be the most highly trusted accounting practice in the Tri-State area."
SWOT analysis
The next step is to carry out a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
- Strengths include those activities that the practice does well, such as "maintains excellent client communications," "has a high client retention rate," or "offers advising services not available from other CPAs in the area."
- Opportunities represent potential areas for growth or more effective competition, e.g., "the owner of a local CPA practice is looking to sell their practice," or "new investments in AI would allow existing staff to serve more clients."
- Weaknesses might include "technology is not up to date," or "staff turnover has been higher than ideal."
- Threats could range from "a regional CPA practice just moved into the area and could take away clients" to "our technology is outdated and could be hacked."
Setting goals
With a completed SWOT analysis, the team can develop a set of goals to help address weaknesses and threats while capitalizing on strengths and opportunities. It's important to keep the list of goals to a manageable size (maybe three or four) and to prioritize them so everyone will know which goals to pursue in case two or more conflict.
For the above examples, a practice might make the following goals:
- Invest in technology upgrades to make use of AI and to improve cybersecurity.
- Acquire a retiring competitor's practice to better compete with the new regional practice.
- Intentionally incorporate the practice's good communications methods into staff training.
How to go from plan to reality
Once the goals are set, it's important for each one to be assigned a lead who is responsible for progress on it. The plan should be revisited regularly and updated to reflect new conditions, and incentive compensation for management and employees should then be tied to achieving the goals.
For larger-scale goals, such as carrying out an acquisition, it's important to bring in outside experts who can keep the project on track and alert the team to any potential problems. A legal advisor and a trusted lending partner should join the practice's own accounting team. Together, they can help bring a deal to a successful conclusion.
