Topic: Leading Strategic Growth
Reprinted with permission from Inside Public Accounting
It’s Time to Kick It Into High Gear
Firms with no intention of selling part of their business to private equity can still compete, asserts consultant Gale Crosley, but it will take a concerted effort to reimagine growth.
The neighborhood is changing, she said. Private equity is flooding accounting firms with money, talent and best practices from the corporate world. “In a nutshell we have to be much more sophisticated about the way that we grow.”
Crosley, president of Crosley+Company, sat down with INSIDE Public Accounting Monthly to discuss what she’s learned over two years of meeting with private equity executives about the dramatically changing business landscape, how it impacts accounting firms, and how to progress within the new world if private equity isn’t in the cards.
A FASTER PACE
First off, firms are going to have to move faster to grow faster, she said. “We haven’t been on the shoulder of the road but we’ve been at a nice, leisurely right-hand-lane pace. They’re in the left-hand lane and they’re rolling down at 70-80 miles an hour.”
Because private equity firms are so transaction-oriented, decisions are made much more quickly and that means firms must adopt a more strategic approach to growth, driven by a growth leader guiding a team, not just individual rainmakers.
CATCHING ‘A FISH AT A TIME’ NOT GOOD ENOUGH
Crosley advises firms to appoint leaders responsible for growing service lines or industry groups. Based on the corporate model, the role is akin to a division president, with compensation tied to growth and profitability. “That’s not an extracurricular activity anymore with a few rainmakers — that’s core curriculum.” She likens the idea to throwing a net to capture an entire market rather than “one fish at a time.”
Guiding the individual growth leaders should be a chief growth officer leading and supporting the growth of the entire firm. “I use the concept of a three-legged stool where strategic growth is the seat of the stool, and that would be your chief growth officer, and they have marketing responsibility, they have sales leadership responsibility, and they have innovation — a.k.a. product management — responsibility.” The marketing function is well built-out in many firms, but not the sales and product management side.
CULL THE BOTTOM, BUT REMEMBER THE TOP
Over the last few years, firms have prioritized culling less profitable, more troublesome clients without focusing as intently on the top clients. Crosley says she’s not talking about just tactical cross-selling because revenue growth takes a deep understanding of the power and politics within the client organization and it involves completely different skills. She says she’s speaking of cordoning off the clients who represent the majority of revenue and strategically expanding services to that group. “We’re going to need that as well because these are the things that private equities are expecting and this is the world they came from.”
DON’T IMMEDIATELY REJECT PE OVERTURES
Crosley said firm leaders have told her they immediately delete email requests from private equity executives, but she suggests interviewing them as there’s much to be learned. Why reinvent the wheel when private equity has already done it? One day, firms may bid an audit for $75,000 only to find that a private equity-backed firm can use deep pockets and technology to bid it for $30,000, “and by the way it’s going to be more efficient and a more pleasant experience and they’re going to have much more than they ever anticipated in terms of extras.”
Firms that want to stay independent have a path forward, Crosley said. “The overarching theme is the neighborhood’s changing. You need to make decisions in your own way and with your own group but don’t be sitting there with the banker-breakfast- lawyer-lunch mindset anymore — it’s not going to fly.”
