Growth: The Difference between the Disruptor and the Disrupted?

Growing stacks of blocks with an arrow tracing upwardThe 5 key ingredients.

By Domenick J. Esposito
8 Steps to Great

I was recently asked, “Why is growth important?”

MORE ON STRATEGIC PLANNING: 6 Rocks in the Path to Growth | M&A Candidates: Valuations and Vetting | AI Likely to Accelerate Merger Mania | Get Your Money’s Worth from Non-Billable Time | Stay Independent But Keep Looking Upward | Ineffective Partners and How to Address Them
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My short answer was that it comes down to perspective – do you want your firm to be relevant and be a disruptor or do you want your firm to be irrelevant and be disrupted because, without growth, your firm will certainly be the latter.
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6 Rocks in the Path to Growth

Large rocks in roadAnd how to move them.

By Domenick J. Esposito
8 Steps to Great

"Tiger Woods did not always win majors with ease; after his narrow victory in the 1999 PGA, he slumped and sighed as if he'd been carrying rocks uphill all afternoon." – John Updike

MORE ON STRATEGIC PLANNING: M&A Candidates: Valuations and Vetting | M&A: Sometimes Bigger Is Better | What a Value Proposition Truly Is (and Isn’t) | Does Your Firm Need an Independent Executive Committee Member? | 10 Ways to Link Compensation and Strategy | Develop Home-Grown Future Leaders
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A CPA firm must move many rocks that are on the path to growth. If a firm doesn’t effectively address these rocks, it will not be able to grow at a satisfactory rate.
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M&A Candidates: Valuations and Vetting

Overhead view of people solving a large jigsaw puzzlePlus consultant fee structures and integration committees.

By Domenick J. Esposito
8 Steps to Great

Last year alone, over 200 firms merged up and this year is tracking the same. At this pace, a very large percentage of the approximately 14,000 multi-partner CPA firms (about 90 percent of which are under $10 million in revenue) will be looking at an upward merger in the next few years.

MORE ON STRATEGIC PLANNING: M&A: Sometimes Bigger Is Better | Use Compensation to Shape Partner Behavior | The Importance of M&A Culture Due Diligence | Are You Attracting the New Breed of Equity Partners? | Quality Work, Quality Service Not the Same Thing | Who Will Be the Next Category Killer? | Why Is Strategy Execution So Difficult?
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So let’s take a deep dive into what you need to know about merger combinations, which are as much about the addition of talent as they are about the addition of clients.
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Yes, Bigger Is Better

businessman hand holding puzzle piecesLike it or not, size sells.

By Domenick J. Esposito
8 Steps to Great

While conventional wisdom tells us that better is better, it's plain and simple nonsense when it comes to midsized CPA firms and a convenient excuse for a less than stellar growth by a firm’s partner group.

MORE ON STRATEGIC PLANNING: Use Compensation to Shape Partner Behavior | AI Likely to Accelerate Merger Mania | Get Your Money’s Worth from Non-Billable Time | Stay Independent But Keep Looking Upward | The Dangers of Low-Hanging Fruit
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Just look at "better" through the lens of the marketplace for both existing and prospective clients and talent.

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Use Compensation to Shape Partner Behavior

Do you have the right mix of partners?

By Domenick J. Esposito
8 Steps to Great

Visualize your partner group fitting into a bell curve.

MORE ON STRATEGIC PLANNING: AI Likely to Accelerate Merger Mania | What a Value Proposition Truly Is (and Isn’t) | Does Your Firm Need an Independent Executive Committee Member? | 10 Ways to Link Compensation and Strategy | Develop Home-Grown Future Leaders | How to Capitalize on the Trusted Business Advisor Opportunity | Leadership Must Be Persistent and Consistent
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In Quartile #1, you have the stallions – the very high performers who produce outstanding contributions to the firm year in and year out. These equity partners want to win and know how to do it.
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How Artificial Intelligence Will Drive the Next Wave of Merger Mania

Large fish eating medium fish eating small fishIt may be time to prepare a Plan B.

By Domenick J. Esposito
8 Steps to Great

We are halfway into the year 2017 and the frenzied pace of CPA firm mergers and acquisitions – when compared to the years 2015 and 2016 when there were over 100 and over 200 transactions, respectively – has not slowed down one bit.

MORE ON STRATEGIC PLANNING: What a Value Proposition Truly Is (and Isn’t) | The Importance of M&A Culture Due Diligence | Are You Attracting the New Breed of Equity Partners? | Quality Work, Quality Service Not the Same Thing | Who Will Be the Next Category Killer? | Why Is Strategy Execution So Difficult? | Time Running Out for Succession Planning | The Benefits of a Client Situation Review
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We continue to witness a perfect storm caused by:
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What a Value Proposition Truly Is (and Isn’t)

Words "customer" and "value" on interlocking gearsDo it right and win in 4 key areas.

By Domenick J. Esposito

It is a myth that pricing is the main reason a CPA firm loses clients or proposals.

MORE ON STRATEGIC PLANNING: The Importance of M&A Culture Due Diligence | Get Your Money’s Worth from Non-Billable Time | Stay Independent But Keep Looking Upward | Ineffective Partners and How to Address Them | The Dangers of Low-Hanging Fruit | 10 Common Leadership Traps | Expand Your National and Global Geographic Reach
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Price is a one-dimensional sales pitch – your firm is either the lowest price or you’re not – end of the story and end of the sales pitch.
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The Importance of M&A Culture Due Diligence

Woman and man shaking hands in office conference roomA 6-point blueprint.

By Domenick J. Esposito

Over the last several years, there have been over 200 merger, acquisition, alliance and joint venture announcements by the Top 100 and other fast-growing CPA firms. Every indication is that these combinations will continue at a very rapid rate as CPA firms are:

  • Facing an aging partner group that usually includes the most effective relationship and business development partners. Baby boomers have been a home run for CPA firms.
  • Finding organic growth very difficult to attain with little prospect that business is going to dramatically improve in the foreseeable future.
  • Realizing an inability to attract an adequate supply of high-quality talent to help perpetuate the firm.

MORE ON STRATEGIC PLANNING: Get Your Money’s Worth from Non-Billable Time | Stay Independent But Keep Looking Upward | Ineffective Partners and How to Address Them
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CPA firm CEOs and other senior management are very effective at financial and operational due diligence, tracking results and holding partners accountable for hitting timely targets. On its face, an observer would tend to conclude that these 200+ combinations are very accretive to partner profitability after an integration period of 18 to 24 months.
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Get Your Money’s Worth from Non-Billable Time

Time is money : clock hands on $100 billsBusiness development must be part of the firm DNA.

By Domenick J. Esposito
8 Steps to Great

Today, at many smaller firms, client service partners (defined as partners who devote 100 percent of their time on clients with no firm administration responsibilities), generate, on average, about 1,500 to 1,600 billable hours per annum.

MORE ON STRATEGIC PLANNING: Does Your Firm Need an Independent Executive Committee Member? | Are You Attracting the New Breed of Equity Partners? | Quality Work, Quality Service Not the Same Thing | Who Will Be the Next Category Killer? | Why Is Strategy Execution So Difficult? | Time Running Out for Succession Planning | The Benefits of a Client Situation Review | Capital Markets 101 | How to Implement Industry Practice Groups
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At most of the Top 100 CPA firms, client service partners generate about 1,200 billable hours per annum. That should be the absolute minimum at the Top 100 firms. Without breaking much of a sweat, client service partner billable hours at the Top 100 could and should easily reach 1,300 to 1,400 billable hours per annum.
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Does Your Firm Need an Independent Executive Committee Member?

Handshake at an office meeting7 benefits of an outside perspective.

By Domenick J. Esposito
8 Steps to Great

Managing partners and other senior management at small and mid-sized CPA firms are known for their entrepreneurial spirit, independent thinking and their desire to call their own shots. At the same time, firm leadership recognizes that they have developed their leadership and management skills from the school of hard knocks and their experiences at firms a good number of them joined directly upon graduation from college.

MORE ON STRATEGIC PLANNING: Are You Attracting the New Breed of Equity Partners? | Stay Independent But Keep Looking Upward | Ineffective Partners and How to Address Them | The Dangers of Low-Hanging Fruit | 10 Common Leadership Traps | Expand Your National and Global Geographic Reach | Show Clients How to Improve Working Capital
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While these skills are critically important, they are, in fact, limiting as they draw upon a very narrow knowledge base and don’t draw upon a much broader universe of knowledge that is out there. How often do you hear “I wonder how other firms do this or do that?”
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Are You Attracting the New Breed of Equity Partners?

Businesswoman shaking hands with someone out of view7 tactics to address the "new normal."

By Domenick J. Esposito
8 Steps to Great

There’s no argument within the accounting profession that today’s economy is anemic, margins are squeezed and talent, particularly tax talent, is very scarce.

MORE ON STRATEGIC PLANNING: Stay Independent But Keep Looking Upward | 10 Ways to Link Compensation and Strategy | Develop Home-Grown Future Leaders | How to Capitalize on the Trusted Business Advisor Opportunity | Leadership Must Be Persistent and Consistent
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On top of that:

  • The philosophies of: (a) finders, minders, grinders and (b) an accounting firm model (principally low-margin compliance services) are no longer sufficient and probably are counterproductive to the perpetuation of a firm.
  • Clients have the upper hand in their accounting firm relationships.
  • Technology will continue to create a lesser demand on lower-level staff.
  • It is widely believed that Google and Microsoft will soon become fierce competitors for certain compliance services.

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