staying independent? be bold.
by allan koltin
rosenberg map survey
it amazes me that there are still firms out there unaware of the industry disruption and changes going on in the marketplace.
more: top three tips for 2020 success | 2020 outlook: where do you want to be? | 2020 outlook: dicey disruptions | 2020 outlook: upstream mergers | 2020 outlook: staffing gets creative
exclusively for pro members. log in here or 2022世界杯足球排名 today.
i am envisioning a scenario in which we will see major changes in associations, alliances, and networks from how we know them today.
i think you’re going to see more groups emerge where they, in essence, have a “big brother” who is providing much of the technology innovation, as well as many of the advisory, consulting and outsource services that the firm will need going forward. we are already seeing evidence of this trend in some groups where the one to two largest firms have stepped up and formalized their process of sharing their expertise with other member firms.
while disruption can be scary and often cause controversy, i believe the profession will be stronger once this wave of change takes place and, ultimately (as others have already said), we will evolve from that of the most trusted advisor to that of the most valuable advisor!
the typical partner retreat i facilitate often starts with me talking about the e factor. the e stands for “evaporation,” which is the evaporation of compliance services over the next five years. i ask the firms what their annual revenue is and what percentage of that is compliance (it doesn’t matter if it’s audit or tax). i then ask them to go through a “what if.” the “what if” is, “what if, in five years, 50 percent of their compliance revenue literally evaporated?” usually i need to support this by talking about specific examples in which firms have created bots and the hundred of working hours that will essentially be eliminated. once firms come to grips with this they are, for a split second, very optimistic as they simply think that the profit margins will be greater on compliance work until they realize it is a commodity service and either we (the accounting firms) or the marketplace will continue to drive the price down for these commodity type services.
this usually leads into my talking about the “go-go” years being over and the need for investing, not only in ai, but also converting the lost compliance revenues into consulting, advisory and outsourced services. we typically go through an exercise and it becomes apparent that the firm will need more capital to sustain itself if, in fact, it is going to make these investments. the output of this discussion has pretty much been the same. there’s a handful of choices available, as follows:
- increase partner capital requirements (write a check!)
- retain more of the profits (reduce partner compensation by creating an innovation fund)
- go to the bank and borrow more cash
- reduce retirement benefits/deferred compensation (reduction in overall firm value)
- reduce equity partner retirement age
- some of the above
- all of the above!
needless to say, this has created some interesting discussions and, in some firms that have an aav model of retirement (firm value increases as it grows – often independent of what is taking place with firm profitability), younger partners have definitely shown concern with locking in retirement payments on a revenue number that will, in fact, evaporate five years from today. it has also, i believe, raised the discussion level within top 200 firms about exploring an upstream merger. it’s a simple calculation – do we want to take current income and bet it on the future, or do we want the security of aligning with someone who has already made these investments and will have a much deeper pocket to continue making these investments?
my point to all the firms is there’s not a right or wrong, but you need to be crystal clear in terms of what your decision is. playing the middle and making cheap investments won’t cut it and will only weaken the firm. the message i typically leave them with is, “if you’re going to stay independent be bold, think like you’ve never thought before, and think big.”