most<\/em> talent.<\/p>\nas difficult as recruitment has been over the last few years for cpa firms, it will only get worse \u2013 unless firms re-think their ownership model.\u00a0 firms now must consider alternate ownership structures, such as phantom stock, esops, or other non-conventional models to provide their top talent with ownership-like models without actual partnership.\u00a0 a pe-invested firm can provide greater and quicker value creation for its talented professionals when compared to the traditional cpa firm model of work-hard-make-partner and wait for retirement to get full value.<\/p>\n
firms need to rethink their governance structures and provide a seat at the table for non-partners. firms need to be creative and offer ownership like benefits and profit-sharing models that will give talent the same potential access to value creation that a pe-invested firm might provide.<\/p>\n
it is not easy and there are many aspects to think through, but if cpa firms continue to live within the traditional partnership model, they will lose the battle for talent every time.<\/p>\n
the battle for clients<\/strong><\/p>\nachieving organic growth is a constant challenge and firms that have pe investments can and will be aggressive competitors, particularly within the mid-market. they will be able to offer so much more in terms of services, solutions, and talent.\u00a0 this will provide existing clients a strong reason to jump ship, particularly if the current firm is simply compliance-focused.<\/p>\n
partners have often found comfort in their long-standing relationships with their clients. and the strength of those relationships may defer the timing of a client’s decision to move to a pe-invested firm.\u00a0 but only defer,<\/em> as current client ceos and shareholders are aging out, just like many accounting firm partners.<\/p>\nwhether the client\u2019s eventual exit is via a sale or a next-gen succession, the fact is pe-invested firms will be knocking on the door, promoting the attest firm with the strong differentiator of the pe-backed advisory services. and they will win more than they will lose.<\/p>\n
the right strategy<\/strong><\/p>\nso, what should your strategic response be to ensure that your firm continues to be successful? the answer depends on the overarching strategic decision regarding how your firm is positioned for a pe investor or not.<\/p>\n
regardless of which fork in the road you take, the first and most critical step is to develop the strategic roadmap that will drive your firm\u2019s success.\u00a0 what do you need to do to make your firm attractive to private equity\u00a0 what strategies do you need to grow without a pe investment in your future?<\/p>\n
the first step is developing a sound, advisory-focused three- to five-year strategic plan, regardless of the road you choose.<\/p>\n
whether your firm’s decision is to position for a future pe investment or not, the need to address and develop a long-term strategy focused on building a robust advisory practice is the same.\u00a0 pe firms will not be interested in a firm that does not have a robust advisory practice.\u00a0 firms that are not interested in a future pe investment need a robust advisory practice in order to compete successfully for talent and clients.<\/p>\n
but launching and building a robust advisory practice is a huge challenge for many firms<\/p>\n
first, the firm must break away from the compliance-focused mindset, even though it may have been successful in the past.\u00a0 then, firm leaders must come to grips with the changes required in culture, talent, motivation, career, compensation, and leadership \u2013 all while maintaining one-firm culture.<\/p>\n
the bottom line is: you can\u2019t build a successful strategic plan to launch and grow a robust advisory practice by following the old accounting firm compliance model. it just does not work.<\/p>\n
re-tooling the firm’s dna<\/strong><\/p>\nthe final challenge is the short-term focus in so many firms that fails to embrace the new investments in advisory leadership, technology, and talent that have a longer return-on-investment than most firms are willing to accept.<\/p>\n
the strategic plan must re-tool the entire firm\u2019s dna to position it for success regardless of what the long-term objective is \u2013 pe investment or not.\u00a0 the key to a strategic plan that will position the firm for success regardless of a future pe investment or not is that firms must deliver on value and not just talk about it on their website.<\/p>\n
\n- firms must get the talent necessary to build a truly client-centric firm that actually delivers on the value promise to clients.<\/li>\n
- firms must understand that their focus must be on helping their clients be more successful, which in turn will make the firm more successful.<\/li>\n<\/ul>\n
building a strong advisory practice must strategically complement the firm\u2019s compliance services so that value is delivered in every aspect of the firm\u2019s service delivery.<\/p>\n
adding value can\u2019t be something extra \u2013 it must be lived within the core of everything the firm does if the firm is going to be able to successfully compete for talent and clients.<\/p>\n
the strategic plan must address growth, ownership, technology, governance, talent, internal processes, client engagement, service delivery and finally leadership \u2013 every aspect of the firm\u2019s dna.<\/p>\n
so, prepare yourself for the impact of pe on your firms.\u00a0long-term strategic planning is no longer an optional exercise for firms that want a future.<\/p>\n
even if your firm has a strategic plan, the time is now to re-think that plan in light of the disruption in our profession:<\/p>\n