Price Wars, Partner Layoffs, and Other Industry Trends

Source: CPA Practice Management Forum

In this interview, consultant Allan Koltin talks about some of the issues CPA firms have been dealing with this year and what to expect in the near future. Here are some of the highlights:

• Many firms are finding themselves embroiled in price wars as the Big Four return to the middle market. Some firms discount prices to keep their best talent busy during the off-season, although Koltin doesn't think that “lowballing” is a good long-term strategy. He'd rather see firms increase their commitment to growth and marketing. Koltin predicts that these price wars will continue even after the economy rebounds.
• As firms continue to look for ways to cut costs, the next tough decision many will make is whether to lay off underperforming partners and senior managers. Many firms are discovering that the next tier can handle the work.
• Firms are less concerned about being “the best place to work,” while staff today accept that they may have to produce more with less. Some firms are cutting back on leadership training and benefits, though Koltin thinks this may be short-sighted.
• PriceWaterhouseCoopers recently lifted its salary freeze, and many local and regional firms are following suit, though raises will generally be lower (two to three percent) than before the recession (five to eight percent).
• Many firms have improved profitability by reviewing their entire engagement process. To reduce inefficiencies associated with a “start-and-stop” mentality, for example, one firm set a policy that auditors can't return to the office until the audit is finished. Other firms have improved realization and efficiency by doing more with less, such as getting auditors more involved in tax return preparation.

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From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, July 2010, p. 19, “Midyear Review: What Strategy Makes Sense Moving Forward.”