how to be different in a changing market.
by steven e. sacks
the new fundamentals
your firm conducts audits, prepares tax returns and offers some consulting services. yours is one of 42,000 non-big 4 firms in this country, a large majority of which offer the same three packages. firms in the same geographic market may not serve the same slate of industries, but through hiring niche expertise or merging in a firm can make inroads into the same markets.
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this happens frequently, making a competitive market even more crowded. the challenge that your firm faces is how do you show a real value-added distinction from the firms you compete against? differentiation does not mean a relaxed dress-code policy.
claims that your firm’s audits or tax preparation are better are empty representations, considering that both areas must comply with rules and regulations. even with consulting services, there are services that have become commoditized, such as business valuation and cost segregation. once the market becomes replete with “experts” in these and other areas, it becomes more difficult to show separation from the pack.
you need to gain perspective from your clients, staff and counterparts you trust from other firms to give you feedback on how your firm is viewed. this process can range from a set of five to 10 established questions or a more in-depth study conducted by an outside consultant who specializes in brand identity and awareness.
fact-finding mission
to begin the process of discovering how your firm is viewed, there are usually two phases in which the firm must engage.
the first phase involves a study of the marketplace trends in your area that may complement or conflict with your firm’s basic value proposition (your firm should already have one in place) and its strategic direction. if there is a conflict, then the value proposition should be carefully considered, changed, agreed to and clearly articulated to the entire staff before moving on to the next steps.
“the company accountant is shy and retiring. he’s shy a quarter of a million dollars. that’s why he’s retiring.” – milton berle
the second phase involves an environmental scan to show what your competitors are offering by way of value-added services and industry expertise – and most important, how they develop business. compare this with how your firm’s own processes approach this, if at all. you can uncover your untapped advantages or mitigate your apparent weaknesses involving service value. you can go beyond what the initial engagement requires and make recommendations to clients that will result in additional services that benefit them, all while improving your firm’s image and reputation.
of course, all of this is a nice exercise, but is meaningless, especially if image enhancement is not one of your top two or three priorities. and if you and your partner group will be retiring in the next three to five years and you have not started a serious approach to succession planning, then you face an even greater competitive disadvantage.
the most likely result is your firm will be part of the ongoing consolidation movement in the profession, and you won’t have to worry about differentiation. this will be on the head of the firm’s managing partner that acquired yours.
going forward
in reality, no firm, irrespective of size, is immune from the differentiation challenge. the big 4 have the global brand that accompanies their monopoly on multinational and listed companies. name recognition is their advantage, but competition has appeared from large regional firms, which claim their client relationship to be stronger because of more “touch points” throughout the year.
the mid-tier firms are battling it out to win over small and mid-size businesses, but they, too, are having difficulties in showing how they are different. to resolve this, they buy industry practices, such as health care, franchising or technology, or they purchase niche services, such as business valuations, forensic/fraud services, employee benefits or payroll processing.
finally, the small firms will continue to attract small family-owned businesses and promote the “personal, hands-on” nature of their service delivery. but what happens when the business owner needs more advanced assistance in the form of market penetration or product-line expansion?
we know that technology will automate the current human intervention on many of the elements of the audit. tax software has disintermediated clients from their accountants by the do-it-yourself programs. a computer can perform data analysis and scenario planning.
these and other factors make it more difficult to claim to be different from other firms. and on top of this, this question must be asked: will it be necessary to be a cpa in the future if other types of business advisors possess the requisite knowledge, education and tools to successfully compete?
now that i think of it, the question of differentiation really goes beyond the individual firm and speaks to the profession as a whole. we are seeing a convergence of demographic shifts, globalization, technology innovation and a battle for talent.
will the cpa profession be able to gain a solid foothold on these and other agents of change in the future?
this cannot be easily answered. but it must be asked.