Reprinted with permission from Accounting Today.
A client recently shared a story about a magical desert oasis where apricot trees flourished and merchants harvested the abundant, low-hanging fruit, weighing down the low tree branches. One day a new merchant appeared. He was an ambitious young man who started climbing the trees, seeking and harvesting the higher apricots.
The older merchants mocked him, wondering why he worked so hard when there was so much fruit down below. Before long a draught devastated the apricot crop and the low-hanging fruit disappeared. The older merchants grew distressed. Soon the young man was the only remaining apricot merchant in town. He became successful and wealthy, while his competitors stopped trying and eventually disappeared.
The parable is highly relevant to the current environment in public accounting. In order to achieve lasting success, the young merchant had to climb higher and reach further than his counterparts to get to the high-hanging fruit. Reaping the apricots within arm’s reach wasn’t enough. The same applies to our firms, especially in light of current market conditions.
Fat Cat Perspective
As a long-time student of mid-market accounting firms—their behavior, attitudes and patterns—I can attest that, like any market, ours is subject to product lifecycles. The go-go days of easy growth are over—the period brilliantly characterized by consultant Sam Allred as so great that all one had to do was to “sit back and aggressively wait for the phone to ring!”
Today we find ourselves in the “fat cat,” or mature market stage, with core services characterized by significant pricing pressures, low margins and minimal innovation. Leading-edge firms are aware of and plan for this, creating strategies to reach the apricots at the tops of the trees, or wherever they are to be found.
But for other firms—too many in my experience—the years of ideal market conditions have resulted in complacency and, frankly, some laziness. They’ve taken the easy way out. Partners have put money in their own pockets rather than investing in their firms. And they’ve refused to embrace firm-wide growth strategies, relying instead on a couple of robust rainmakers to carry the day.
Adding to the conundrum is the obvious fact that those rainmaker Boomer-age partners are retiring in record numbers. Unfortunately, many are unable to teach younger partners their craft because their approach no longer fits challenging market conditions. Add to that technology-enabled capabilities such as cloud-based accounting, data analytics, artificial intelligence, cyber and blockchain knocking at our doors, traditional banker breakfasts and lawyer lunches cannot be considered a strategy for sustainable growth.
So Now What?
How then, in an environment characterized by sluggish core offerings, an approaching tsunami of new technology and partner attrition can an ambitious firm pursue meaningful growth? The answer can be found back at the oasis. Like the young apricot merchant, practitioners will need to climb higher—to become students of growth willing to pursue strategic, rather than tactical solutions. What does that look like?
- They have fully developed specialized industry and service lines and assign segment leaders responsible for the financial direction and health of those specialties. Those leaders embrace the difficult task of eliminating the clients that need pruning. The firm instead invests resources in clarifying and implementing technology-related strategies – for example advanced pricing, data analytics training, industry-unique early adopter projects.
- They pursue distribution channels (how buyers find us in great qualities), by aligning interests with other entities, rather than one-off referral sources (i.e., Bob the Banker or Lucy the Lawyer).
- They look at the market from the outside in, aligning their services to the needs of the market, rather than from the inside out, by presenting offerings and hoping the market will embrace them. An example would be identifying which industries care most about which technology enabler, producing great clarity around what business problem needs to be solved.
- They routinely conduct Research CallSM interviews to learn everything possible about market needs and conditions, then adjust their strategy accordingly.
- They constantly assess and innovate services in keeping with the principles of product management, much as consumer goods businesses must do to remain relevant.
Don’t make the mistake of branding your firm and calling it a growth strategy. Aggressively waiting for the phone to ring is not only old school. It’s simply not going to work in the mature market, and technology-driven world we live in. It’s a world with plenty of fruit to harvest. But it’s not low-hanging. And it’s going to take a sophisticated approach to shake it loose.