where on the spectrum of accounting firms do you want to operate?
by alan anderson, cpa
transforming audit for the future
many firms limit their consideration of businessmindedness to the narrow focus of growing their top line. however, generating sufficient revenue to cover costs and generate profit is only a baseline measure for businessmindedness.
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the inward component of businessmindedness concerns how the firm operates. this includes the kinds of projects and clients the firm takes on. to provide relevance, you need to consider whether your firm can deliver on relevance for a particular engagement or client and whether that work makes sense for your firm.
accepting the right clients and the right projects isn’t the only factor in building a successful firm. you also need to think about your firm as a business. are you monitoring the right metrics? does your business model make sense? what is your vision for the long haul?
the inward component also requires you to decide what kind of firm you want to create. when you look at the most successful businesses in any sector, they generally operate from a conception of what kind of business they want to be. walmart’s tagline is “save money. live better,” so they want to be the lowest-cost provider of a broad array of goods. rolex, on the other hand, is known for high-end watches. both are valid visions for a company, but they operate at nearly opposite ends of the spectrum.
the question you and the other members of your firm need to answer is, where on the spectrum of accounting firms do you want to operate? do you want to be more like a walmart and appeal to high volume and low cost? or do you want to take a more high-end approach like rolex and provide high-value services at a higher price point? this is probably the most foundational of decisions to make, so that is where we will begin our discussion of the inward focus and how to make your firm more successful as a business.
what kind of firm do you want to create?
to provide maximum value to clients – and to build a firm that empowers its staff – you must also have a keen understanding of what your firm is about. what is your mission? what are your people’s core competencies? what core competencies do you want to develop? what kind of firm do you want to be?
the biggest obstacle to developing businessmindedness in a firm is that few audit leaders take the time to think about what kind of firm they want to direct.
start by knowing who you are as a firm.
i spent some time working with the leadership at k·coe isom when they were building out their agriculture focus. they wanted to support the farmers, so they also wanted to be connected to the companies that support the farmers, which includes implement dealers and the cooperatives that sell the fertilizer.
they are now a great example of what i call an industry-focused firm that can audit as opposed to an audit firm that knows the industry. they took the time to know and connect to the agriculture industry. you could argue that it doesn’t make any difference which comes first – the industry focus or the audit focus – but they have built their firm around agriculture as an anchor.
at one point, a large cement manufacturer approached them to do their audit. now, making cement is sort of like farming in that both involve taking stuff out of the ground. and farmers have plenty of cement on their property. but in the end, jeff wald, who was (and still is) ceo, decided that cement wasn’t close enough to the ag community, so even though this would have been a big client, he took a pass.
the more you stick with your niche, the better your knowledge base will be, which will allow you to be more responsive and add value for clients.
get everyone on the same page.
whatever you decide to be, your whole firm needs to be on the same page. we were talking to a firm recently, and we asked the employees what kind of firm it was. they were enthusiastic about how family-friendly the firm was and how clients and employees alike were treated as part of an extended family. that’s the sense of the firm that the employees carried with them when they interacted with each other and with the outside world.
but when we talked to the firm’s leaders, they had a very different vision. they wanted to be a cutting-edge, technology-focused firm. both of those positions are great, but they are very different. the types of clients you want to work with and the kinds of employees you need to support those visions will not necessarily be the same.
start by figuring out what kind of firm you are or want to become, then keep or find the right clients and team members. think about the competencies and knowledge your team as a whole will need and start building that. not everyone needs to possess all of those skills. some skills, like building data analysis algorithms, may need to be outsourced until it makes sense to bring someone on board full-time.
does this work make sense for our firm?
once you have decided what kind of firm you want to create, then take that vision with you when you enter discussions to accept or continue an engagement. the decision to accept or reject a particular engagement is certainly much deeper than simply quoting a fee that you hope will be profitable. it requires taking the time to think about whether this project and this client will make sense for your business. this means considering these questions:
- do we have the industry expertise to do a good job?
- do we have the capacity and talent to take this on?
- will this be profitable?
- are we accepting and retaining the right clients?
remember, it’s okay to turn down potential clients if they aren’t the right fit, whether that’s because your firm lacks the industry expertise or the capacity and talent for the engagement, or if they aren’t the right clients or if the project wouldn’t be profitable.
in the words of steve jobs, “it’s only by saying no that you can concentrate on the things that are really important.”