21 questions to help unlock accelerated growth

there’s a downward spiral going on. follow the traditional model and your firm could get stuck in it.

by domenick j. esposito
8 steps to great

when it comes to growth, two of my core beliefs are:

size matters, and
service line diversification (the professional services model) is better than the traditional accounting firm model.

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the proof is in the pudding.

consider the following two data points (kudos to mike and kelly platt for publishing the ipa top 100, 200 and 300 firms each and every year; the statistics referenced here come from their 2017 analysis):

in 1997, three non-giant six firms in the ipa 100 (with annual revenue between $1.9 billion and $37.2 million) had annual revenue of at least $100 million. by 2007, 19 non-giant four firms were generating at least $100 million in revenue annually and in 2017, 38 non-giant four firms are generating at least $100 million in revenue annually.
at the ipa 100, audit, as a percentage of total revenue, continues a multiyear decline to 37 percent while non-traditional service lines have on average climbed to 27 percent.

“growth is never by mere chance; it is the result of forces working together.”

– james cash penney, entrepreneur

you may be wondering, what impact do these data points have on growth in revenue and profits? well, i believe they have significant impact. i encourage you to compare these statistics to what is happening at your firm when considering the following:

average organic revenue growth at the 38 largest non-giant four firms in the ipa 100 is 2 percent; with mergers, growth goes to 11.1 percent. other ipa 100 firms are experiencing average organic revenue growth of 6.2 percent; with mergers, growth goes to 8.5 percent. in contrast:
- average organic revenue growth at the ipa 200 (with annual revenue between $36.5 million and $16.8 million) of 7 percent; with mergers, growth goes to 8.2 percent.
- average organic revenue growth at the ipa 300 (with annual revenue between $16.7 million and $10 million) of 8 percent; with mergers, growth goes to 6.6 percent.
average organic net income growth at the 38 largest non-giant four firms is 9 percent, rising to 9.6 percent when factoring in mergers. other ipa 100 firms are experiencing average organic net income growth of 3.5 percent; with mergers, growth goes to 3.8 percent.

with this backdrop, i present to you 21 questions; your answers, and what you do about your answers, will unlock accelerated growth at your firm:

vision

what is your understanding of the future direction of the profession and how can your firm succeed in this new environment?
if there isn’t clarity about your firm’s vision, what do you believe it should be?

growth

are there opportunities for more effective leadership and governance at your firm?
what are the major obstacles to your firm achieving 8 percent organic growth yearly?
what strengths does your firm have that you believe are not being leveraged enough in the market?
if the firm could only work on three strategies to drive growth of revenue and profits, what would they be?
the most successful firms are changing from a traditional accounting firm model to a professional services firm model that broadens the menu of services. is this a direction that your firm should aggressively pursue? if yes, please identify advisory and consulting opportunities you believe might be particularly attractive to your firm.
should your firm hire a professional sales team? why or why not?
is your firm going to market with distinctive service capabilities that add value to business owners as they tackle their challenges?
is there a clear and convincing value proposition that distinguishes your firm from competitors and removes price as the main buying trigger for potential clients?
is geographic diversification an attractive strategy for your firm?
are mergers and acquisitions attractive strategies for your firm?
does your firm properly prepare for new client opportunities and assign the most effective sales team to the opportunity?
does leadership make it clear to all partners what is expected from them in terms of business development?
growth is negatively impacted by client losses – what does your firm do to maximize its “stickiness” with all major clients?

partner accountability

does your firm effectively align strategy with partner goal setting, accountability and partner compensation adjustments?
how do you believe that partner accountability should be established, managed and communicated?

talent

does your firm actively attempt to improve talent?
is your firm producing a sufficient number of potential partners who are capable of perpetuating the firm?
is there a comprehensive training process/program in place that prepares potential partners and newer partners on skills relating to effective networking and business development?

partner compensation plan

is your firm ready to move away from a “book of business” partner compensation plan to a methodology that aligns strategy, partner goals and partner performance?

in conclusion

the trend lines are compelling. in contrast to 1997, when only three firms were achieving annual revenues of $100 million or more, today there are 38 firms and those firms are experiencing organic revenue growth of 8.2 percent (11.1 percent when mergers are considered) and organic income growth of 7.9 percent (9.6 percent when mergers are considered).

not only are the largest firms getting bigger, they are also getting stronger with service line diversification. today audit is 37 percent, tax 27 percent and advisory 36 percent of annual revenues. unless market conditions change, it is pretty clear that audit will continue to shrink (because margins continue to shrink) and advisory will continue to expand (because that is where client demand is and demand translates to healthy margins).

for the ipa 100 firms, taken as a whole, average organic growth in net income of 4.8 percent has slowed to a pace not seen since 2011 when firms were climbing out of recession. there is no sign that indicates this downward spiral will not continue if your firm continues following the traditional accounting firm model as opposed to a professional services firm model with service line diversification.

if your firm is not demonstrating healthy trend lines, it is time to kick into high gear. accelerating growth isn’t brain surgery. it requires commitment, dedication, strong leadership and partner accountability. answering the questions above should jump start the growth journey for you. best of luck!

posted on december 20, 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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