profitability is just part of the picture.
by matt rampe
the rosenberg map survey
over the next 12 months, three big disruptions will shake the accounting industry.
more: firms must choose best workplace model | tech, capital will drive accounting profession growth | ‘great shakeup’ in cpa firms on the way | pe, consolidations to keep impacting accounting profession
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fortunately, there are at least three ways that firms can prevail.
the big disruptions are coming in:
- the staffing crisis will continue. the industry needs to rebrand (and increase compensation) to reverse this, but it won’t be a one-year turnaround.
- technology will accelerate and continue to automate more work.
- private equity investments will continue at large- to midsized cpa firms. investors will make their capital deployed productive by transforming their portfolio companies (e.g., acquisitions, technology, hiring), putting greater pressure on traditional firms to compete.
but the strategies for success will be:
- create a shared vision of success. independence is not a guarantee. partners must have hard, intentional conversations to plan their firm’s long-term viable future. get input from multiple levels of leaders and consider that what got you here may not bring you success in the next 5–10 years.
- focus on profitability. it feels good to bring in more revenue, but quality currently trumps quantity. manage your client mix assertively. remember that profitable firms can pay more to attract and keep great staff!
- learn faster. technology, private equity and regulation changes aren’t going away. learning faster may be the only sustainable competitive advantage.
“staffing, staffing, staffing.”
staffing was a red-hot challenge cited by almost all the firms i worked with in the past 12 months. impacts of the staffing crisis:
- slowed revenue growth: many firms had to slow (or stop) taking on new clients because of capacity constraints.
- succession woes: with many baby boomers retiring and not enough qualified successors, firms faced the challenge of figuring out how to transition clients and buy out partners while sustaining the firm.
- rising staff costs: soaring staff compensation (along with recruiter fees) pressured profitability.
firms that did well in 2023:
- invested in being a destination firm. they built a firm that people genuinely want to be a part of. this included both strong compensation and strong culture where people create positive relationships.
- allowed options to work differently. firms that allowed hybrid and remote work and flexible career paths (e.g. non-cpa track, non-equity partner, fixed 40 hours year-round, etc.) were more successful at attracting and keeping staff.
- pushed back on clients. this included raising rates, being clear on who their ideal clients are and regularly culling the worst clients. this protected profitability and reduced staff burnout.
- tried other capacity solutions. strategies that firms found success with this year included leveraging more technology, outsourcing, and hiring non-accountants to help boost capacity.