growth: the difference between the disruptor and the disrupted?

the 5 key ingredients.

by domenick j. esposito
8 steps to great

i was recently asked, “why is growth important?”

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my short answer was that it comes down to perspective – do you want your firm to be relevant and be a disruptor or do you want your firm to be irrelevant and be disrupted because, without growth, your firm will certainly be the latter.

let me explain by sharing my personal experience.

“all businesses need to be young forever. if your customer base ages with you, you’re woolworths.” – jeff bezos

during my 47 years in the accounting profession, i was with two firms, cohnreznick and grant thornton, that, as i reflect on them, were clearly disruptors in the day.

in 2002 (when i joined j.h. cohn), the firm had three offices. revenues were $52 million and the firm was ranked #43 nationally. we were stuck in the middle like an oscar mayer sandwich as we were considered a small firm that lacked market permission to handle sophisticated clients. when clients wanted to raise capital, the investment banking community would say, “who is j.h. cohn?”

the firm’s leadership had a number of big thinkers who weren’t afraid to take calculated risks (not ranch bets) and wanted to be a marketplace disruptor:

we determined that the greatest opportunity for the firm was to become a much larger player.
the economy was beginning to show signs of fatigue and we were concerned about our earnings.
the profession, while doing well because of sox (a short-lived earnings pop that gave cpa firms some pricing power), was beginning to come to the realization that robust revenues and profits (pre-financial crisis) were not sustainable.
the giant eight had dwindled to the giant five (soon to become four because of arthur andersen’s demise) and it was obvious that the mid-market market was going to be underserved.

we wanted to be a top ten firm with more substantial clients, we wanted to attract better quality clients and we wanted to make more money. so, we set ourselves onto a path that required four key ingredients:

advisory ad consulting capabilities
industry specialization and distinctive service characteristics
mergers and acquisitions for geographic expansion
brand recognition including a national spokesperson

over the next 10 years, we:

grew our advisory and consulting practice to about 10 percent of firm revenues
got very serious with industry specialization
consummated 15 mergers/acquisitions
retained joe torre, who has done a marvelous job in raising marketplace awareness

together with organic growth, the firm went to $250 million in revenues and was ranked #22 nationally. most important, our bottom line began to get very healthy.

while proud of our accomplishments, we weren’t where we wanted to be – a top ten firm. we didn’t want to wait another 10 years to accomplish our goal, so we decided to explore a three-way merger that would disrupt the profession and leapfrog us over our competition. the three-firm deal eventually was reduced to two firms and cohnreznick was borne. today, ranked #11 nationally, revenues exceed $600 million with over 20 offices including one in india. if you ask me if the firm would do it all over again, the answer is a resounding yes! the firm is on the path of creating a national brand, has begun to move the client base uptown and has begun to attract better quality laterals. kudos to a disruptor!

grant thornton’s story was not much different except that, in the day, its disruption played out on much bigger stages – the u.s. and international markets. it had two key moves:

play internationally as one global brand (circa 1985)
capitalize on the unfortunate arthur andersen opportunity (circa 2001)

leadership at alexander grant saw a marketplace opportunity for an international network:

the firm tried to do a merger with both main hurdman and laventhol horwath – both firms had strong international associations and marquee clients.
unfortunately, the partners weren’t making market partner compensation.
the firm believed it could build off a strong national brand with about 40 u.s. offices.
the firm wanted more than an international association (tansley witt), which wasn’t driving much business.
the firm wanted to be a major attest, tax and advisory firm that could serve public companies.
the firm found a like-minded uk firm (thornton baker).

today, ranked #6 nationally, the firm has 59 offices and revenues exceed $1.7 billion. kudos to a disruptor!

in my opinions, there are eight steps to being a great firm:

a shared vision about the future and the strategies with accountability that will get the partners there
a sound economic model that rewards performance
first-class partners who understand how to build lasting relationships with clients and contacts
a growth and business development culture that includes everyone with their capacity and skill set
marquee clients
the ability to demonstrate that it is different, that it brings value to all clients that adds to their success
smart mergers and lateral hires that add to its strength, improve its weaknesses and expand its footprint
consistent and persistent leadership

so why is growth important? it is important because:

it creates investment dollars that are critically needed to plow back into the business.
it helps attract quality lateral hires.
it enables the firm to move “uptown” with the client base.
it continues to increase partner compensation.
and last, and certainly not least, growth is important because client perception is that bigger is better and therefore, bigger is in fact better. that’s not to suggest that better isn’t better (better is always a good thing), but if you are not getting bigger, you will have a challenge as size sells and because clients/prospects respect big and, more importantly, buy big known brands. the supposition is that if you are big, you must have clients and credentials that are impressive.

growth comes from five key ingredients. it comes from:

building a truly unique firm. an example would be building out a firm that becomes the mid-market resource for liquidity and capital markets consultation and access (which also feeds transaction advisory services).
creating a firm that provides value beyond comparison. the key here is industry specialization that includes deliverables such as suggestions for ebitda and working capital improvements.
cross-selling, which is the low-hanging fruit. hold annual client clinics to find pain points and how you can help.
originating new work. everyone has a role. some are rainmakers, some are “mistmakers” and others play a support role.
diversifying with advisory and consulting capabilities such as cybersecurity, due diligence, wealth management and bankruptcy/restructuring.
pursuing mergers and acquisitions for geographic expansion.

over the years, there have been a number of great cpa firms that were disruptors. top of mind are rothstein kass (hedge funds) and kenneth leventhal (real estate). these firms thought out of the box. they made a difference in the profession. growth was an integral part of their success.

while growth is easy to say, it is very difficult to achieve unless there is a commitment at the very top of the firm with goals and individual partner accountability.

posted on december 6, 2017

dom esposito

about the author

domenick j. esposito was the ceo of grant thornton, vice-chair of bdo, and national growth director at cohnreznick.

he is the author of "8 steps to great: the eight essential strategies driving success at the world's largest cpa firms. and how to apply the lessons at firms of all sizes," published by 卡塔尔世界杯常规比赛时间.

a life in public accounting

in 2016, esposito, then a former ceo of bdo, moved from a 46-year career in public accounting into the next phase of his professional life – consulting to cpa firms, launching a boutique advisory firm, esposito ceo2ceo, that provides advice to ceos, managing partners and other senior partners of cpa firms focused on the mid-market throughout the u.s.

with the launch, esposito authored “8 steps to great," a guide for ceos, managing partners, and other senior partners on how to move their firm to the next level.

cohnreznick national growth director

esposito was one of the most qualified individuals in the country to advise cpa firms on growth and profitability. through 2015, he was national practice & growth director and an executive board member of cohnreznick, llp, a mid-market sustainable brand and the tenth-largest cpa firm in the united states. he oversaw cohnreznick’s go-to-market industry specialization and consulting and advisory service lines. he was also intimately involved in the firm’s mergers and acquisitions and strategic and tactical activities for its public company and capital markets initiatives. dom joined the predecessor firm of j.h. cohn in 2002 as the chief operating officer and executive board member.

dom was also an independent director of ethan allen interiors inc. for several years (through 2014), dom was a member of the nasdaq listing and qualifications committee to the organization’s board of directors. he formerly served as the leader of the new york state society of cpas committee for large and medium-sized firms practice management. he also was an adjunct accounting professor at c.w. post/long island university.

bdo and grant thornton

through october 2002, dom was vice chairman at bdo, a mid-market sustainable brand and the seventh-largest international accounting and consulting firm in the u.s., with almost 50 offices and 3,400 employees. during his brief time with bdo, he was responsible for the alliance distribution network (at the time consisting of over 80 cpa firms, 10 law firms, and 25 consulting firms). he was also responsible for attracting and servicing a number of clients.

from 1979 through 2001, dom was with grant thornton, another mid-market sustainable brand and the sixth-largest international accounting and consulting firm in the u.s., with over 50 offices and 4,500 employees. he joined grant as an audit manager, became a partner in 1981, led the long island office from 1984 to 1986, became assistant managing partner of the new york office in 1986, and from 1988 to 1999, led the new york office. in 1999, esposito became a regional managing partner and for two years, through 2001, was the firm’s chief executive officer.

cpa, partner, mba, leader, influencer, media celebrity

between 1996 and 1998, and while he was ceo, esposito was on the partner board and was also on the board of grant thornton international – the worldwide umbrella organization. in these capacities, he developed strong experience in strategic thinking and execution, international relationships, corporate governance, partnership matters, branding, expense control, client relationships, and new business development.

as ceo, he took grant thornton to record earnings, consummated the largest line-of-business sale in the firm’s history, developed a major joint venture with axa financial, and made the largest practice acquisition in the firm’s history. from 1969 to 1979, esposito was with price waterhouse (now pwc), servicing ibm when he was promoted to manager in 1976.

dom was a cpa, has been quoted in national and local media, and has appeared on radio and cable tv.

esposito also testified before the securities and exchange commission.

he received his m.b.a. from st. john’s university and his b.s. from ferris state university. accountingtoday, one of the leading trade journals for the accounting profession, named esposito one of the most influential people in the profession for two consecutive years.

he passed away in 2021 at the age of 74.

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