{"id":51616,"date":"2017-03-31t05:00:40","date_gmt":"2017-03-31t09:00:40","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=51616"},"modified":"2022-01-10t13:51:34","modified_gmt":"2022-01-10t18:51:34","slug":"3-reasons-small-firms-stay-small","status":"publish","type":"post","link":"\/\/www.g005e.com\/2017\/03\/31\/3-reasons-small-firms-stay-small\/","title":{"rendered":"3 reasons small firms stay small"},"content":{"rendered":"
<\/a>plus 5 common situations. do you see yourself? by hitendra patil<\/i> when firms want to grow but can\u2019t, the problem is neither economy nor resources.<\/p>\n more on entrepreneurial strategy:<\/b> how job titles can rebrand your firm<\/a> | your clients hold a secret key to your practice growth<\/a> | seven lessons for accountants from self-driving cars<\/a> | you don\u2019t think technology helps get new clients?<\/a> | tax season management: multi-tasking is a myth<\/a> <\/p>\n over the last 12 years, i have been interacting day in, day out with accounting practice owners and helping those who want achieve growth develop their accounting practices. the first couple of discussions with them revolve around revisiting the core purpose why they had entered into public practice. in that state of introspection, many of them become sensitively honest with themselves. they recognize that their current practice situation, which is not what they had actually dreamed about, is because of the actions they have<\/p>\n in that state of introspection, many of them become sensitively honest with themselves. they recognize that their current practice situation, which is not what they had actually dreamed about, is because of the actions they have and<\/em> haven\u2019t taken repetitively.<\/p>\n and then comes the make-or-break point. the moment of truth.<\/p>\n to stay small yet happy. or to stay small and unhappy. or to grow. some of them retreat, instead of stepping up and dreaming afresh. and that is perfectly ok when it is their choice. but, many times, there are those who want to grow, yet retreat.<\/p>\n there is no bigger and stronger reason why firms stay small, than this inaction at the moment of truth<\/em>.<\/p>\n they make one of the two choices:<\/p>\n invariably, the educated mind finds many justifications (excuses) for maintaining the status quo. the strongest of them all is the perception of causing risk to the existing comfort. and that is the fundamental trait of the human brain, rather, the uncommon trait that causes the inaction \u2013 the lack of or inadequacy of the entrepreneurial spirit<\/em>. the size of a practice is usually a result of the owner\u2019s wants, needs and belief system.<\/p>\n if you feel<\/em> you are an accountant<\/em>, you practice will most likely stay small. if, however, you feel are an accountaneur \u00ad\u2013 an entrepreneurial accountant \u2013 your practice will more likely be the one you dreamed of when you started.<\/p>\n this is not a philosophical post. let me come to specifics, with real-life examples:<\/p>\n 1. small firms are woefully underprepared to grab growth opportunities.<\/strong><\/p>\n have you ever lost or declined to take on a profitable project because you did not have enough resources? specifically, can you process and deliver four years\u2019 books in one week?<\/p>\n right in the peak of the tax season, the owner of a predominantly tax services practice that had one more staff member, emailed me. his new prospect had received an irs notice. it was a small business owner who had no accounting data at all \u2013 and a few \u201cshoeboxes\u201d full of receipts, invoices and statements. the cpa firm had accounting software installed on a local computer at the firm\u2019s office. it did not have a multiuser license. the internet connection was not as fast as we would have wanted it to be. it was virtually impossible to work remotely. there was no high-speed scanner to quickly scan four years\u2019 documents. there was no document management system or portal.<\/p>\n the business owner was willing to pay the entire fee for bookkeeping up front. the cpa quoted $8,000 for the books and separately for the tax returns. the time was short. a shared team could have processed it all in 2-3 days, if it had fast enough remote access with multiuser license, provided documents were scanned in on the same day and transmitted via online temporary portal.<\/p>\n the cpa gave up and declined to take the project, even when only on the accounting work alone he could have made a profit of at least $4,000 within a week. he never contacted me again for similar projects. i met him at one of the trade shows. he revealed that he doesn\u2019t entertain such opportunities anymore!<\/p>\n 2. small firms are not adequately equipped to manage growth.<\/strong><\/p>\n have you ever declined to take new clients because you and your team are already too overworked and overwhelmed?<\/p>\n when a restaurant chain signed up with this cpa, the firm did some great work for the first 2-3 stores. impressed with the work, more stores started signing up with the firm. the process of producing the work was mostly manual, with plenty of analysis done in excel sheets.<\/p>\n restaurants are transaction-heavy. they have multiple pay types, shift hours and staff doing multiple types of jobs. the work done when the volume was small was easier to manage. but, the volume growth meant a cash flow problem \u2013 because the incremental revenue from more stores was not enough to provide for the costs of hiring another person to manage growth.<\/p>\n this is symptomatic of two major challenges small firms face when managing growth:<\/p>\n depending only on referrals means unpredictable work volume peaks and troughs. it almost always results in overwork and overwhelm at times, and more often than not underwork and underwhelm. it results in challenges of attracting and retaining talent. the quality of service and the consistency of delivery turnaround becomes inconsistent. and that leads to unhappy clients, damage to reputation, etc.<\/p>\n while the intent to deliver great quality service is highly respected, when firms go slow and decline new clients instead of planning and managing the growth, it becomes a default business action. it is unfortunate for the people who deserve help from competent and experienced accountants but can\u2019t get it because firms are not equipped to manage growth.<\/p>\n 3. small firms defeat the true spirit of partnership. <\/strong><\/p>\n have you ever lost your big client to a larger firm?<\/p>\n a cpa firm from chicago, who was my client for many years, lost a big account. it constituted nearly 30 percent of the firm\u2019s annual revenue. the reason? because the client\u2019s business grew so big that they needed specialist services. this small firm did not have the expertise or experience to service the complexities. the client went to a larger firm. the smaller firm, which had<\/p>\n the smaller firm, which had an excellent relationship with the client for quite some time, could have \u201cborrowed\u201d expertise if it had developed a referral partnership with the local larger firms. it could have simply referred in the business to share the future revenue. ironically, many small firms have \u201cpartners\u201d who work \u201ctogether\u201d to run the firm. but the small firms hardly create mutually beneficial partnerships with peers or even competitors.<\/p>\n collaborative servicing of the same client by multiple entities is a difficult concept for many small firms. there is no harm in \u201cbuying\u201d a service for your client and making some money on it. most likely, the other firm will give you great pricing because they save marketing money in any case. the client engagement letters must provide for this kind of \u201ctrading\u201d arrangement.<\/p>\n 4. small<\/span> firms themselves commoditize their own value.<\/strong><\/p>\n have you ever felt very uncomfortable and fearful that if you quote more, the prospect will run away?<\/p>\n \u201ci saved this client over $120,000 in irs demand settlement. i fought tooth and nail with the irs because i believed that the client had integrity,\u201d a certified tax resolution professional who runs a very small firm told me. the satisfaction of helping a client in trouble was priceless. but the \u201cprice\u201d was commoditized by this tax pro. for many hours<\/em> of work, all that this person got paid was not even 1 percent of the value that was created. the client was charged by the hour!<\/p>\n giving away free advice on phone calls and emails does not earn return on value delivered. many small firms simply do not have a consulting\/advisory services \u201cproduct\u201d to be charged differently. focusing on cost optimization and increasing utilization to increase profit has one physical limitation \u2013 the constraint of time. if someone else can do the same thing \u2013 transforming an input into an output \u2013 cheaper and faster than you \u2013 and someone else will \u2013 you are just commoditizing your practice.<\/p>\n 5. small firm owners are not as visible in the marketplace.<\/strong><\/p>\n do you get your new clients mostly by word of mouth?<\/p>\n nothing wrong in that. except when you feel that your practice should have grown bigger but it hasn\u2019t.<\/p>\n \u201cnowadays, cpe is also available online. so i don\u2019t get out of the office much,\u201d a<\/em> small practice owner from new jersey told me at a trade show. he felt uncomfortable going to local networking events. he wasn\u2019t investing in any formal marketing plan. \u201cif somebody could manage my office, i would love to go out there and get new clients.\u201d i felt this was a familiar sentiment expressed by many.<\/p>\n growth by referrals is unpredictable, inconsistent and inadequate. mostly, small firm owners are busy producing and delivering the work, rather than being visible in the marketplace. the discomfort of losing control over client work and its quality is representative of process weaknesses \u2013 delegation, and hence replication, is difficult.<\/p>\n clients come to accounting firms not because of the technology or office location alone; they sign up because they trust the firm\u2019s owner\u2019s capabilities. if the firm\u2019s owner is not visible and available to more prospects, growth is inevitably stunted.<\/p>\n escape the gravitational force to launch your practice into higher orbit<\/strong><\/p>\n when we work with clients on their <\/em>practice development, it all starts with a deep, open-hearted conversation about the practice owner\u2019s dreams, fears, aspirations, mindset and current level of conviction about their own talent. if we somehow feel that there is a self-depreciated viewpoint, it is mainly because of not considering leverage.<\/p>\n time is a constraint and when one tries to limit oneself in that constraint, growth is very difficult to achieve beyond certain limits. leveraging technology, leveraging other people\u2019s time, leveraging resources of others \u2013 even of competitors \u2013 and leveraging your processes are the ways to escape the gravitational force of status quo.<\/p>\n most importantly, if you genuinely believe that your expertise, your wisdom and your experience can positively impact the lives of many more people, you are doing them \u2013 and your practice \u2013 a disservice by not escaping into higher orbit.<\/p>\n","protected":false},"excerpt":{"rendered":"
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