How Two California Accounting Firms May Be Revealing the Future of the Profession
New business models break the mold.
Bruce W. Marcus
by Bruce W. Marcus
Professional Services Marketing 3.0
Of all the emerging changes in the world of Professional Services Marketing 3.0, few are as innovative as the accounting firms of Kellog & Andelson in Los Angeles and Seiler LLP in Silicon Valley’s Redwood City. Each substantially breaks the traditional mold of the accounting profession.
Kellogg & Andelson, Founded in the late 1930′s as a traditional accounting firm, is now run by Christian Payne, a former investment banker. Payne is not a CPA, but is now able to function as the head of an accounting firm under recent rules that allow partners who are not CPAs to be partners if they don’t own a majority of the firm.
Two things distinguish the contemporary K&A – they do no auditing, but function with captive operations in India, having a web-based firm of CPAs, under the banner of CPAFlex, and with acquired affiliates. K&A itself just does taxes and write-ups, neither of which have to be done by CPAs, and consulting by a highly experienced group of accountants and business specialists. They outsource their work to their captive Indian subsidiary, while retaining senior technical capability.
They partner as well with independent CPA firms, whose work is carefully managed by the parent company, but still allow the associated firms to function professionally. In addition to supervision that controls quality, they supply both intellectual and marketing services, staffing, technology, and training. Their Flexible Retirement Program, for example, allows accounting firm owners approaching retirement to continue running their practices, earning income based on billable hours while concurrently getting paid out of their practice.
Based in Southern California, they continue to acquire CPA firms in their CPAFlex subsidiary. Looking to the future, Payne, who has built the firm in large measure through carefully managed acquisitions, anticipates the possibility of ultimately taking the firm public, which is already being seriously discussed in Great Britain. While external sources of equity capital may be a long time coming for the professions, it may prove necessary when rapid growth – particularly through mergers and acquisition – require more capital than can be supplied by partners or banks and other lenders.
Gale Crosley, a thoughtful and pioneering CPA firm growth consultant, reports that one of the leading and innovative accounting firms she has encountered is a 53-year old firm that is on the leading edge of the profession — Redwood City, California-based Seiler LLP.
Traditionally specializing in real estate-oriented, multi-generational family enterprises, when it was struck by the real estate bubble in the late 1980s, managing partner Jim DeMartini responded by going after Silicon Valley high-tech companies, and restructuring the firm to streamline its competitive advantage. DiMartini, Crosley reports, is convinced that business development is a skill that can be learned, and demonstrated it by growing what is now a 15-partner $33 million firm. Its growth is entirely internal, rather than by acquisition.
Clients are served by carefully structured teams with technical expertise that includes tax and estate planning. Clients prefer teams with a blend of appropriate knowledge and skills to serve them, rather than by a single individual, according to DiMartini. Says Crosley, “Members are assessed on their long-term value to the organization, and not for their most recent acquisition of a promising client. Equity ownership is based on career performance as well.”
The rapidly growing firm has about 140 individuals in two locations – Redwood City and San Francisco. The firm functions with high levels of client satisfaction and very low rates of client and employee turnover. Building from within, says Crosley, helps ensure that the firm’s younger members will have a place to thrive.
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Bruce W. Marcus is a pioneer in professional services marketing and coauthor of “Client at the Core.” This is adapted from his new book, “Professional Services Marketing 3.0,” available for purchase here.
Copyright 2011. Used by permission.
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