OUTLOOK & ANALYSIS

Price Wars, Partner Layoffs, and Three More Things to Worry About

Will low-balling cause long-term damage?

Allan Koltin
Allan Koltin, CPA, CEO, PDI Global Inc. and a founding member of The Advisory Board

In an interview with CCH’s CPA Practice Management Forum, consultant Allan Koltin talks about price wars, partner layoffs, paltry raises, CPE cutbacks and shifting auditors to tax work.

Highlights:

  1. 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.
  2. 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.
  3. 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.
  4. PriceWaterhouseCoopers 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).
  5. 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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via CPA Leadership Institute

2 Responses to “Price Wars, Partner Layoffs, and Three More Things to Worry About”

  1. Kevin Phillips

    I agree with Allan’s assertion that price reduction is not a good strategy for a professional services firm. Cost should be a function of value from the perspective of the client.

    A value-creation problem exists in the accounting firm that confuses labor-centered production, with value-centered professional relationships.

    When the perspective shits from, “lets deliver high-value to clients” to “lets keep laborers employed,” the accountant has ceased to be a professional and has become a laborer. Cost gets established by production, and no longer by the client experience.

    Once an accounting firm makes that shift, it needs to reorganize its business model. It must become a big-box, high-volume shop, otherwise it is not sustainable. The client must understand she is getting what she is paying for: line production, not personal service.

    The humanity of professional service has fled the process. What remains is impersonal factory work.

    This creates an opportunity for the true professional who understands how value is created and learns to both market and deliver it.

    Let the anxious race to the bottom. There will always remains ample opportunity for professionals who care.

  2. ... mentioned on Twitter Linda Wedul, Geremy Cepin. Geremy Cepin said: PDI's Allan Koltin ...

    … mentioned on Twitter Linda Wedul, Geremy Cepin. Geremy Cepin said: PDI’s Allan Koltin …