guest post: econ 101 for the so-called “staffing shortage”

why do so many cpas seem to not grasp that the most basic economic concept of supply and demand applies to our practices?

joseph t. eckelkamp
president
eckelkamp & associates, cpas

instead of continually lamenting shortages of qualified staff, we should recognize that upward shifts in demand curves (client needs) when supply curves (qualified accounting staff) remain constant/fall; or supply curves drop while demand remains constant/grows means prices should increase!!!

profitability, not staff size, is the goal. if we don’t increase prices, we damage ourselves and the profession by chasing (and paying more for) staff to meet higher demand for our services. if your “factory” is operating at capacity, start charging more. price increases yield pure profit while increasing billings by hiring more staff only fractionally increases profit while adding organizational risk.

firms need to grow or they wither and die, but adding staff is not the only way to grow!!! i would much rather generate $200,000 of revenue using one person to serve 15 clients than i would using two people to serve 35 clients.

editor’s note: this post first appeared as a comment, but it seems so trenchant and important that we are highlighting it as a guest post. — rick telberg

posted on october 28, 2008