Last November, the editor of a national accounting firm publication asked what I thought the future would hold for accounting firms regarding issues and trends.
This is what I told him:
1) Succession problems mount. Unprepared, under-trained or uninterested “future partners” leave current owners wishing for more and better options. “Easy” solutions that aren’t expensive or time-consuming do not exist. And 99% of firms simply aren’t making the grooming of successors the priority it ought to be. Good leadership training programs will be more widely sought and lots more options – geared specifically to professional service providers – will become available. To further complicate the issue, lots of viable owner candidates aren’t terribly interested in becoming owners under the current business model most firms operate within.
2) Most of these firms will simply fold or merge within the next decade because it is just easier and time will “run out” for funding currently retiring partners.
As this plays out, increased client attrition and market confusion will make this a lucrative time for firms that have their acts together and are poised to compete for the work with compelling pitches and the infrastructure to deliver on them.
As a result of all this, surviving firms (and the ones that see this coming now) will (and a few have already) modify the way retirements are funded so this problem won’t repeat with the next generation of owners.
3) Additionally, as firms turn-over to a new generation of leadership, much more corporate-based business models will emerge to replace the “partnership” model.
Streamlined channels of management and decision-making, with owners as divisional “VPs” bearing greater responsibility for the performance of their areas, be they market sectors or product lines (e.g. “VP of Autodealer Services” or “VP of ERISA audits”), will emerge as a workable solution to firms’ current compensation woes and pay-for-performance confusion.
4) The gap between great service firms (who provide value added services to clients and who contribute to the industries they serve) and those who merely “do audit and tax work” will continue to widen. The firms who scrape by just getting the scheduled work done—without giving the client the extra touches their competitors happily and strategically offer—will watch with frustration and astonishment in the coming years as their client bases erode.
Frankly, “just an audit” is no longer enough to appease the big dollars businesses are now paying for compliance. Clients want more value out of their audits and other compliance services and some firms make a point of providing it. These firms will harm the firms who don’t by gradually luring their business away.
Lastly, two things that wise firms will realize they need to step up in 2005:
Commit to SOMEthing; start NOW to see results TWO YEARS from now: in 2007. It really does take that long. The buying cycle for accounting services is very slow. The move to change accountants is probably only one step less painful than changing long-time physicians! To some people, starting over by sharing deeply personal financial information with someone new is every bit as intimate as sharing their medical history and physical quirks!
Stop letting your practice run you! A partner I talked to today put it perfectly: you can’t sell something if it isn’t on the shelf! Quit waiting until you have "too much business" to hire the additional staff. If you have them, you’ll fill their time and reap the rewards of production because of it. I honestly cannot think of a mid-sized or smaller firm I’ve known that has had an actual layoff because of lack of work.