Unfortunately, I hear too many times firms finding it impossible to scale value adding services, most are struggling to make it work efficiently and effectively and discovering it just not as profitable as they hoped.
Has the boiling frog concept played its role and now firms are playing catch-up? The demands of clients changed 5 years ago along with the introduction of cloud-based accounting software and accounting firms have been complacent about been on the front foot and have not innovated. Innovation of new service offerings, developing business improvement skills or remodeling their business structure to employ and roll out the services clients are demanding, like marketing, system automation and better ways to make money.
Instead, the industry has focused on what’s it’s always done and waited for others to step forward and provide. Now firms are experiencing;
- Growth of 20% plus is just not happening in multi- partner’s firms. True growth has stalled, that is compliance and advice are now bringing in less and the limited amount of business consulting skills firms have is only just filling the gap. Therefore, 1000’s of firms are experience a lower than expected growth.
- Profitability has reduced, boiling frog effect. Whilst turnover has stalled, costs continue to rise therefore most firms are experiencing lower profitability.
- Our people have limited skills thus failing to meet what clients are asking for and clients are simply looking elsewhere. Clients are looking outside the industry for true business advice through coaching, consultants, and other providers.
- Partners are pig headed about reducing fees despite automation reducing the cost of compliance, thus clients are questioning value.
- There is a lack of innovation. Therefore, people outside the industry are profiting from supplying tools and service platforms.
What are firms doing to combat complacency?
The big four and second-tier firms have already moved. They are already offering a broader range of services. In doing this they have transitioned their business model and started employing people with non-accounting skills in order to meet the demands of the business market, skill sets such as system engineers, computer analysis, and data management, and people with business operational and strategy expertise.
1-2 partner firms. These fit into 3 categories.
Millenials – these are accountants from mid and large firms who get fed up with the old model and leave these firms to set up Dynamic firms. Firms that offer a fresh innovative approach to clients, offering value adding service as the core offer and compliance is considered just part of the back office of what they do. Some have even chosen to drop compliance and only do bookkeeping. These firms are now 3 years running and are still experiencing massive growth 30% plus and profit of 40% plus after a partner’s salary.
The second category, the majority of firms, are accountants who have their heads stuck in the books and cannot see what’s happening. They’re too busy to do anything but what they have done forever. This group is the frogs sitting in the slowly boiling pot of water, profitability is eroding away and they are working harder to keep up.
The third category, the minority, are making decisions on which is the right business model for them and have started transitioning process to move to that model. These firms look similar to the millennials, only they understand their expertise lie within the experience they have, thus by drawing on that expertise they are setting up more dynamic offerings. This group is experiencing 30% plus growth and profitability have risen 40%-50% higher than the average firm.
3-20 partner firms. The remained of the firms are PROCRASTINATING!! Because they are busy, comfortable, and static.
These firms are too busy serving client demands and trying to keep on top of everything, simply because it’s just too hard to get everyone to agree, let alone decide about moving forward. Complacency is so deep, they refuse to recognise they have a problem. After all, currently they are busier than ever, whilst profitability is falling, it’s still enough to keep the family, live a good life and put the kids through private schools. Hench, they feel comfortable and have become complacent!
Worse, these are the people complaining about the lack of innovation in the industry, because they are too busy to stop and make something work themselves.
On the whole, the majority of the industry is complacent and not willing to do what it takes to step up and lead.
If something doesn’t change now, the accounting firm of tomorrow will be owned by non-accountants.
TwentySix Group Business Accelerator Session
A one-on-one Online discussion that identifies the drivers that will determine your one critical decision, which model is right for your Firm of Tomorrow. Facilitating this process, it is important that you and your partners understand how your firm sits in the market now and how it should sit in the future. Even more critical is to know, how clients will determine the value to them and their business. You will walk away with a plan on how to bridge that gap that exists between where you are now and your desired firm of tomorrow.
Coverage of the Program:
- Focus – Identify your target client
- Clarity – Understand your Unfair Advantage
- Confidence – Know the gap between where you are now and the firm of tomorrow