Growth in an Unsettled Market

Reprinted with permission from Accounting Today

Thoughts for Managing Partners

On email, during live video presentations and (imagine it!) via phone, I’m getting questions from firms about growth. Lots of questions. Among those asking are managing partners who want to know, “Gale, what would you do if you were in my shoes?”

The questions are understandable. Given the challenges of managing a remote or hybrid workforce, significant employee distractions, and infrastructure challenges, MPs have little-to-no mindshare left over for strategizing about firm growth. Do they need to?

From There to Here

Many firms look fairly flush at the moment, even though organic growth overall trended down slightly in 2020 versus 2019, and is holding at about the same level in 2021. It may have looked like a top-line increase, but peel it back and it was more about net income. However, helping clients navigate PPP, tax deadline extensions, and pandemic-related advisory work fueled revenue growth over the past nearly 18 months, even with clients struggling financially. Combined with lower expenses (remember out-of-town conferences and costly client dinners?) the result has been increased profits. But unless firms act to chart a course for post-pandemic revenue growth, this temporary condition will remain just that.  And the risk of bone-dry opportunity pipelines will become an unwelcome reality.

Why do I say this? Because a graph of the last 30 years of annual organic growth among the top firms looks like a roller-coaster. Most firms ride market conditions, focused mainly on what’s right in front of them. Suddenly their revenue is on the way down and it becomes a queasy ride.

Years ago, firms grew because they did good work and word spread through referrals. As time went on, we came to rely on talented rainmaker partners who assumed business development duties for their firms. Way back in the 1970s, our efforts at growth were aided by regulatory changes that finally allowed firms to use traditional marketing methods to reach their targets.

Today, rainmakers are aging out, but younger firm members are not rushing in to fill the void. Traditional communication channels have given way to digital marketing. Strategy – the way to sustain growth– is critical. And your current opportunity pipeline is a reflection of the strategy you employed in the past.

If I Were Managing Partner

If I were a managing partner with an eye on growing my firm, I would focus on four areas of activity.

First. Study and monitor emerging new opportunities, including the following:

ESG—environmental, social and governance. This expanding area encompasses corporate sustainability reporting in areas ranging from carbon footprint to diversity.

• Digital assets, aka crypto currency. As this specialty area moves closer to mainstream, accounting firms will increasingly be called on to audit and provide tax obligation calculations on digital assets.
• Sweeping changes in the last election are throwing open the floodgates, with cannabis-related regulators, operators and financers rushing in.
• With every headline-grabbing ransomware attack, the need for accounting expertise in this specialty area continues to grow.

Second. Ensure that firm members who are in line to lead industry and service lines areas are in an appropriate state of readiness. In other words, able to take responsibility for the strategic direction and financial health of each segment. These leaders, who essentially serve as presidents of their business units, often are not crystal clear about their role. Make sure they share the understanding that leading a service line or industry is a leader-driven team sport (think football not golf), and that it’s a big step up from managing one’s own book of business. It’s also an opportunity for you to evaluate if they’ve got what it takes to be future leaders in the firm.

Third. Prune the client base, with an eye to eliminating clients that exhaust your team and whose work yields sometimes 50 cents on the dollar! Discerning firms (and gardeners) know that constant pruning keeps things growing by making way for the newer, larger, better – whatever adjective you use. Leaders who prune have the confidence in their strategy to continually fill the pipeline and aren’t reluctant to cut out the underbrush. Industry and service line leaders can be effective catalysts for pruning.

Fourth. Move as quickly as possible into project and retainer-based consulting. This includes acquiring technology-centric business consulting companies. Based on research calls and other market intelligence, identify market hotspots, focus resources there, and identify early adopters to confirm strategic directions. I hear a great deal of chatter on the subject of consulting, but don’t see enough action. Yet, it’s an imperative for future growth.

It’s Grow Time!

A full plate in 2020 and 2021 has certainly been fortuitous for firms that questioned where they would land when businesses started closing down in March of 2020.  Generally, it isn’t the result of a long-term strategy, but rather excellent market conditions. Growth strategies are exactly what will be required if we are to remain sustainable in a post-pandemic environment. Time to get on it!