TFYW#055: Three Steps To Future Proof Your Firm

Sep 29, 2023

Today, I am getting into the biggest opportunity for modern firms.

Trends Now = Opportunities Tomorrow

I ran a webinar with Giles Pearson from Accountests two weeks ago. His company offers easily deployed personality and skills tests during the hiring process. He is an ex-PwC partner and is very connected with firms across the US, Australia and New Zealand.

He speaks with dozens of firms monthly and has consolidated accounting skills data for 1000s of people across many roles.

His team has collected important data, giving him a unique vantage point.

I asked about the talent crunch and the number of graduates entering the profession.

Giles mentioned that the new graduates are less prepared than in prior years. Covid has played a part, but overall, there is a decrease in what he calls business readiness.

“… [we’re] getting people coming through to a CPA level potentially without having an awful lot of practical experience. And I think where you look at where the profession is going, advice is going to be everything. Technical knowledge is still important but in a practical sense.”

He alluded that the education system is preparing people entering the profession like it did 20 years ago – either for a career in tax or audit.

Advising businesses is not on many graduate’s radar.

On the surface, it makes sense to feed the compliance machine.

At the moment, there aren’t enough professionals to process the 213.4M (Individual, Biz, Corp) tax returns in the US.

There are also 33M+ US businesses that need bookkeeping, financial accounting, and audits.

There is a lot of work to be done.

Even with AI and offshore talent, there is still be a lot of opportunity.

It is hard to disagree that compliance-focused firms have an opportunity.

There is ample demand for a decreasing supply of preparers.

However, I don’t think the compliance opportunity is the biggest one facing our profession.

For me, the real opportunity is triggered by the loss of the business acumen and leadership.

The AICPA estimated that 75% of CPAs reached retirement age in 2020.

Even though we are losing 75% of bodies in the next decade, we are probably losing closer to 90% of the seasoned, strategic expertise our profession offers.

 

If you don’t remember anything else from this week’s newsletter, remember this:

 

The shrinking accounting body will never again offer the collective level of business knowledge that exists today.

 

That’s a sobering thought.

However, this situation offers an incredible opportunity for small firms to offer high-value, high-impact work that they can do on their terms.

We must focus on repositioning our firms to avoid competing with AI and leverage what we know instead of what we do.

Reposition Your Firm

1. Niche and Expert Firms

I am bullish on niches and becoming an expert firm.

I feel this is the first thing we need to do.

Historically, only big firms could be expert firms with niches. They would leverage networks over large geographies to develop expertise. They could service many businesses in the same industry but in different locations.

Small firms were left with a local, random client assortments. Becoming an expert in one industry was impossible.

Technology now enables any size firm to become an expert. You can efficiently market and deliver high-value solutions from anywhere worldwide to a single segment or client type.

However, as you look for a niche, I don’t recommend focusing on one industry but rather becoming an expert at a particular problem.

Expertise is not knowing how to calculate general or industry-specific metrics and KPIs for financial statements.

Expertise is an intimate knowledge of how a business will overcome its current constraints because you have seen them many times before.

Expertise is less about knowledge and intelligence and more about pattern matching and problem recognition.

Business problems are multi-disciplined with unfixed variables. We’ll need to learn and identify how accounting interfaces with operations, marketing and HR to solve these problems.

We’ll need to go narrow with our service offering instead of wide.

2. New Skills

I know we’ve completed a lot of education.

On top of that, we have continuing education requirements every year.

The idea of learning new skills seems annoying, but repositioning your firm depends entirely on what skills you possess.

Many firm owners have learned that tax preparer skills don’t translate to firm running skills.

Repositioning your firm will again take new skills.

The key skills for repositioning are:

Sales – I keep seeing a situation – business coaches stealing advisory work from accountants. They do this because they know how to talk and sell to people.

We tense up when we think of selling, but sales is very similar to advising clients. Both take a discovery phase and an education process to move someone to action.

Clients will continue to look for business acumen and strategy elsewhere as long as we shy away from selling our clients on our value.

Team building and leadership – Firms are missing incredible opportunities due to not investing enough in their teams. New professionals need good leadership more than ever. Good firm leaders share their responsibility and decentralize operations as much as possible.

Repositioning our firms includes high-grading our time and giving everything else to other team members.

We can’t lock up our expertise in preparing engagement letters and sending invoices.

System building – A decade ago, a firm’s technology strategy was only part of its business strategy. Now, they have to be entirely intertwined.

Systems and technology have to be a key pillar for your strategic plans.

Adding skills, not credentials, will be what moves our firms forward.

3. Develop An Advisory Offer

I put this step third because the first two are necessary before we can offer advisory services.

Well, some might say you can start offering cash flow projections tomorrow – which is what many firms do – however, a cash flow projection is only a low-value incremental step past compliance work.

You might respond, “Hey, Mark, but cash flow issues are common and impact many businesses.” I get it, but cash flow issues are symptoms of underlying issues.

Instead, develop an offer that addresses those underlying symptoms.

An offer could be project-based: “I fix messy inventory systems for brick-and-mortar stores that are selling more online than in person.”

Or more long-term: “I help construction companies with cost control and estimating with multiple crews.”

Either way, the first thing you come up with won’t be the best solution.

I’ve found that the best Advisory Offers evolve over time. We start by offering one thing (usually generic – maybe a cash flow and monthly reporting), but as we dive into an industry and its problems, we start to refine what we do.

For me, a significant shift in my thinking was that an offer would take years to develop and polish, not weeks. We help a client with a break through and feed those learnings back into our offer. We repeat this again and again.

We develop templates and approaches to get past superficial business issues.

Then, we create tailored tools and frameworks to advise on the true problems and constraints.

Many progressive advisory firms have adopted existing frameworks to assist with their offer development and execution.

A popular one is EOS Entrepreneurial Operating System.

One that I used as a controller for three years is the Scaling Up program. It was a framework to confront and attack our unique business constraints.

A multi-discipline framework anchored by a financial leader can be transformational for a business.

And one of the most powerful tools we can use in our selling process is a framework that addresses our prospect’s problem.

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I hope I have given you value today to help take advantage of the transition our profession is knee-deep in.

Build The Firm You Want.

Mark

P.S. Email Mark@FirmNexus.com with something that you want me to talk about. I’ll add it to the list. 

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