CPA Firms Look to the Future

This article is based on a webinar presented by Phil Whitman and David Wolfskehl of Whitman Business Advisors, and hosted by CPA Leadership Institute.

What will the accounting firm of the future look like? Here are a few of the changes happening in the marketplace. CPA firms are:

1. Increasingly accepting WFH (work from home).
2. More open to WFA (work from anywhere).
3. Staffing creatively, including hiring remote workers as well as hiring as needed for the busy seasons.
4. Growing more comfortable with the virtual work experience, and leading clients to be more comfortable with it as well.
5. Offering more advisory services.
6. Owned by non-CPAs—CEOs uniquely positioned to lead firms in advisory and other capacities.

As firms transition toward the future, new competitors are on the rise. Here are a few examples.

1. Wealth management firms are not just partnering with CPA firms, they are buying CPA firms. These firms can outprice CPA firms on tax returns because they make their money on wealth management, not on tax services.
2. There is an ongoing need to keep up with technology. Some firms may even choose a merger to remain competitive in their technology offerings.
3. Private equity is stepping back into the CPA firm merger and acquisition arena and rolling up CPA firms.
4. Vendors such as Quickbooks may serve as a support to your firm but also as competition for your clients.
5. Do-it-yourself tax software such as Turbo Tax are competitors. Younger clients may be inclined to go with this type of relatively fast and inexpensive option.
6. Specialty tax firms offer niche competition.

Firms that are preparing for the future should consider the following changes:

1. Take more risks. If your firm has traditionally made decisions slowly and avoided risk, it might be time to consider a faster pace of decision-making and a willingness to take reasonable risks to stay relevant and competitive.
2. Compensate your partners according to their work rather than according to the amount of the firm they own. Incentivize and reward behaviors and allow room for the managing partner’s discretion.
3. Treat everyone in your firm as a professional and pay them accordingly, including administrative staff members.
4. Offer more advisory services.
5. Adopt leading edge technology.
6. Create a clear sales and marketing processes. Bring in a business advisor to accomplish this if necessary.
7. Get rid of unproductive partners, such as a person that treats the staff badly or doesn’t bill clients regularly. Make sure you use a fair process. Communicate with the unproductive partner and give them a chance to change.

The new business model is CPA firms transitioning into advisory firms. How does that happen?

• The CPA firm stays central to the business and drives all other initiatives.
• CPAs or managing partners need to ask themselves whether they are accountants who do their clients’ taxes or business owners that help their clients.
• To maximize growth, firms should not replace every partner that leaves—especially if those partners are entering numbers into boxes. Technology can do that job.
• Advisory services should be embraced as a core part of the business, not considered ancillary.

What are possible advisory services a CPA firm can offer? Following are some options your firm can consider.

• Litigation support
• Employee benefits
• Internet/electronic commerce
• Business valuations
• Investment advisory services
• Lease vs. buy analysis
• Wealth management
• Life insurance
• Forensics/fraud
• Mortgage services
• Sales training
• Business management/high net worth
• M&A
• Personal financial planning
• Private equity services

If you’re still not convinced your firm can or should offer advisory services, here are some reasons why the advisory role could be a good choice for you and your firm.

• Clients are already coming to you for your services, and they trust you.
• Offering advisory services enables you to compete with larger firms.
• Adding advisory services often doesn’t require that you add staff but it does increase growth and profitability potential.

If you’re ready to offer advisory services, how do you get started?

• Create a vision for your firm and clients.
• Look at your clients’ needs and wants.
• Find areas where your clients are receiving poor service or a gap in service.
• Determine what advisory options you feel most comfortable with.
• Analyze your existing network. Who do you know? Who have you been referring business to? Who has been asking you for help?
• Just get started!