how a great managing partner impacts firm growth

eight ways that firms benefit.

by marc rosenberg
the rosenberg practice management library

there are two cases for heavy managing partner oversight in practice development.

first case. cpa firms are very top-line-oriented businesses. expenses are largely fixed because most are for personnel compensation and benefits, so opportunities for increasing profits from cost-cutting are greatly limited. as a result, increases to the revenue or top line often fall directly to the bottom line. it’s easy to see why, far and away, increasing revenue is the most effective way to increase profitability. because the managing partner is (or should be) responsible for the firm’s profits, it makes total sense for the managing partner to play a major role in the firm’s growth.

more: 10 ways to hold partners accountable | five ways to evaluate partners | manage partners with goal setting | overarching authority that managing partners must have | herding cats: advice for managing partners
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second case. if a firm’s staff is its most important asset (or at least tied with clients), then revenue growth is the firm’s life-giving force. without revenue increases, firms become stagnant and die a slow death. therefore, revenue growth requires heavy involvement by the managing partner.

some managing partners are rainmakers. some are ok at bringing in business. some aren’t skilled in practice development at all. it makes no matter because, as we’ve said repeatedly, the managing partner’s #1 job is the overall management of the firm.

if a firm is blessed with a managing partner who is a rainmaker, it is fortunate. these rainmakers should not be unilaterally taken away from business development, but it may be a bigger part of the managing partner job than for those who are less skilled in business development. regardless of the individual business development skills of managing partners, their job is to make sure the firm is growing revenue.

how cpa firms benefit from revenue growth

the obvious: growth increases profitability. revenue growth often drops directly to the bottom line because to a great extent, firms don’t incur increased expenses every time revenue grows.

growth energizes the firm. new clients provide exciting opportunities for the staff and enrich their jobs. some of these opportunities lead to promotions, always a good thing. all of this boosts morale because everyone (even the partners!) likes being part of a healthy, growing organization.

it primes the pump. for decades, various pundits on growth have used a water pump as a metaphor when talking about bringing in business. before a pump will produce water, it must be primed. once the pump is primed, water flows freely, without much additional effort. firms that grow continuously find that regular future growth becomes easier.

it replenishes lost revenue. ask the audience at a conference if their firms ever lose clients. very few will raise their hands because no one likes to admit it, but clients leave firms all the time. revenues also decline from year to year as clients merge out of existence or close down and one-shot projects such as estate plans, irs audits and mergers occur. a reliable estimate is that firms lose 5-10 percent of their revenues each year because of these causes. so if the firm’s revenues are budgeted for a 7 percent increase, they really need an increase in new business of 12-17 percent to offset the 5-10 percent client loss. just to keep revenues even, the firm must bring in 5-10 percent new business.

it avoids stagnation. the reverse of priming the pump is stagnating. when a firm experiences periods of flat growth or even revenue declines, it’s very difficult to rev up that motor. just as revenue growth triggers many intangible benefits such as more challenges, opportunities and job enrichment, the opposite occurs at stagnating firms. who wants to work for a firm that is mired in mediocrity?

it clarifies the firm’s mission. bringing in business is the most critical duty of partners that is the most difficult. as legions of partners know, new clients aren’t dangling from trees ready to be plucked by whoever comes along. business development needs to be a high strategic priority of the firm.

it builds a critical mass. as growth and profits continue to rise, the firm builds a critical mass that enables greater sophistication in areas such as specializing, attracting larger clients, providing an edge in recruiting and launching more advanced firmwide marketing initiatives such as branding, promotion and hiring marketing professionals.

growth helps you avoid merging out of existence. the cpa firm industry has been in a merger frenzy since 2005 or so. baby boomers retiring in droves, a woefully short supply of qualified staff and ineffective succession planning are the catalysts sparking hyperactive merger activity. there are no signs of this abating. firms that grow continuously will be much better positioned to resist having to merge out of existence to provide an exit strategy for the partners.

how managing partners help the firm grow

1. make sure the firm’s personnel, especially the partners, are active in business development. the more at-bats, the more hits.

here are some tips from randy nail, managing partner of $50 million hogan taylor:

• • “on day #1, everyone is taught that they have a role in business development. we tell new people that everyone is different and we will find a role that suits them.”
  • “we have lots of ‘lunch and learns.’ these are lunches hosted by a partner with a small number of staff. at the lunch, the partners share stories about how to get business, how they landed certain clients, etc.”

2. oversee the creation and execution of a marketing plan. the managing partner should ensure that the best practices of cpa firm practice development (see the best practices list below) are incorporated into the marketing plan.
3. develop consulting services. the avalanche of technology changes in the cpa industry is expected to reduce compliance revenues, mainly in the audit and 1040 areas. more and more firms are ratcheting up their efforts to develop new consulting services to replace the anticipated compliance decline. many managing partners believe that consulting is the future of cpa firms. this may be the single most important way that managing partners can improve the future of their firms.
4. ensure that bringing in business is richly rewarded in the firm’s partner compensation system. caveat: don’t just “richly reward” business development while ignoring good performance in other major areas, such as staff development.
5. work with the pics of the firm’s major clients to maintain a role in nurturing these relationships.
6. champion the setting of aggressive (but not gouging) billing rates. partners often resist this because it puts pressure on them to retain and seek clients who will pay high fees.
7. bring in business (to the extent that the managing partner has this skill).

best practices for firm growth

these are generally listed in descending order of effectiveness. however, every firm is different. what works best for one firm may not work well for others.

1. have a vision for growth because it dictates the scope of your marketing activities. a marketing plan calling for 10 percent growth will need to be much more intense and aggressive than one for a firm content with 3 percent growth.
2. prime the pump. business development cannot be easily turned on and off as needed. continuous business development, even when you are busy with clients, is the only way to avoid the lengthy time it takes to ramp up. as alec baldwin persuasively stated in the movie “glengarry glen ross,” “always be closing.”
3. remember that business development is a contact sport; the more at-bats (pitches to decision-makers), the more hits (new clients).
4. getting new business is all about relationships. no marketing plan can ever replace the personal touch. people create growth, period.
5. the best source of new business is your existing clients:

• offer expanded services, cross-sell other firm services and receive referrals.
• proactively brainstorm with clients to make their businesses more successful and profitable.

6. clients are more likely to give you referrals if you provide them with world-class service. measure the quality of your service with tools such as the net promoter score index and client loyalty surveys.
7. focus your selling activities on the 20 percent or so of your biggest clients and do more for them. don’t ignore the other 80 percent, but make sure you focus on the best 20 percent.
8. manage your overall time to make business development proactive instead of something you do in your spare time.
9. develop services beyond a&a and tax to meet your clients’ needs and exploit cross-selling opportunities. remember that continuing advances in technology will gradually decrease compliance services. great examples:

• learn to find opportunities for your clients, not mistakes. understand that clients value advice for running their business more than compliance services.
• wealth management and other financial services.

10. develop industry niches and specialized services. this makes marketing and business development infinitely easier.
11. be a lower-volume/higher-price firm.
    
12. manage the pipeline. part of your marketing plan should be to continually feed your firm’s pipeline of sales leads by

• • identifying prospects and following up with them.
  • having every partner create an individual marketing plan.
  • networking.

13. be different from other cpa firms. truly different.
14. branding is a great way to get name recognition and to differentiate your firm from others. promote your firm actively and tastefully.
15. make sure you have a marketing champion. every firm needs someone who owns the firm’s marketing plan and coaches other firm members to be successful in their business development efforts.
16. provide training in business development.
17. mentor people in business development. training alone may not be effective.
18. offer bonuses for staff who bring in business. understand that they will not be successful unless you train them how to sell.
    
19. make all partners accountable for marketing. goal setting is an absolute must.
20. a big factor in allocating partner compensation should be bringing in business. you must provide incentives. in fact, bringing in business should be a criterion for making partner.
21. nurture referral sources; constantly create new ones. stage referral events.
22. make your marketing firm-centric, not partner-centric. rainmakers are always welcome, but create a firmwide marketing plan to drive all firm activity.
23. create blogs, newsletters and social media to enhance the firm’s name recognition and establish thought leadership.
24. follow up on marketing activities: seminars, blogs, newsletters, networking events, direct mail, etc.
25. partners should never go on a sales pitch alone. embrace team selling. (a) bring along a staff person to learn by watching and (b) bring along a senior firm member with a different area of expertise to show the diversity of your firm’s talent.
26. start staff as early as possible in business development.
27. polish your elevator speech (what you say to a person you have just met when you have only a minute or less to tell them what you do).
28. join a cpa association and/or aam to avoid living in a cocoon.
29. mergers are a great source of growth.

posted on march 27, 2021