Most CPA firms miss 60% of their potential revenues. Here’s how to start fixing the problem.
By Sandi Smith, CPA
A Bay Street Group Affiliate
Accounting firms have done a great job adopting paperless office technologies, the web, and even cloud computing, so you may feel you have been doing all you can to streamline margins, become “client-centric,” as some consultants call it, and grow your practice. But I believe there is even more opportunity that very few, if any, in the accounting profession have fully identified or embraced.
I only bring this up because I believe most CPA firms are leaving about 60 percent of their potential revenue on the table (and I can prove it). Worse, they are not sharing their badly needed financial expertise with more businesses that could be greatly helped, especially now.
Much has changed since I passed my CPA exam in 1980. Up through the 1970’s, there were rules against advertising, which dictated the traditional accounting firm structure and protected our strict fiduciary duty to the public. We had little need (and strong dislike) for sales and marketing people and departments. But it was OK because everyone needed accountants thanks to compliance requirements of a little tax the government started in 1913.
Fast forward to the noisy how-can-we-get-our-message-heard 2011 age of the internet and social media. Many firms have added marketing departments, whether a marketing-slash-biz-dev person is hired or the function is handed off to “rainmaker” partner. Frequently, problems develop among the partners and the marketing person, and there are always partners who bring in more business than their peers, which sometimes cause political issues and create new compensation opportunities.
In the 30 years since I have been in the profession, I have not seen more than a baby’s handful of accounting firms redesign their organization chart to include a healthy, integrated, functioning, breathing marketing and sales department that works effectively, generates significant revenues with all revenue leaks plugged, and grows the firm for the future. If you’re a sole proprietor, it’s even harder to wear all the hats of CPA, tax person, marketing person, and sales person at once.
How do you design an accounting firm for 2011 and reclaim the revenue that is justly yours?
Here are the first few steps we suggest:
1. Create a realistic damage report of revenue leaks. You’ll have to get outside, experienced, objective help to do this thoroughly. It requires taking a look at the obvious such as client attrition as well as reviewing missing procedures and processes inside your operations departments to estimate lost opportunity costs.
2. Once you have the “damage” report, you can educate your senior leadership on the missing revenue opportunities available to them. Describe the impact on the bottom line profits and sales of the company if nothing is done to build out a fully functioning sales and marketing department.
3. Understand that training or culture change alone will not fix this revenue gap. No matter what kind of retreats, training, CPE, and conferences you send CPAs to, some of them will never be effective at selling.
4. Identify the systems, procedures, and people that need to be in place to create a 21st century accounting firm. Prepare a plan and budget to be presented to senior leadership, gain buy-in, and implement. Most firms will need outside help to do this step as well.
What’s telling is that I’ve seen hundreds of multi-million dollar home-based businesses that are more automated, more client-centric, and more marketing-centric than any firm I’ve seen in the accounting profession. These (mostly women) entrepreneurs are defining success on their own terms, working less, and having more fun than most accounting firms I know. And they are your competitors in 2011.
Busy season is just around the corner. You have a choice: you can continue to do what you’ve always done and struggle and lose accounts to your competitors, or you can learn to change and thrive in the new normal by leaving the model of our father’s CPA firms behind for good and reclaiming the 60 percent of revenues that is there for the taking. What will you do to make 2011 your best year ever?
Sandi Smith Leyva, CPA, is a marketing coach to CPA firms and small business entrepreneurs, and a Bay Street Group LLC affiliate. Click here to join her free teleseminar: “3 Strategies to Fill Your Accounting or QuickBooks Consulting Practice for 2011.”