Can a CPA Firm Be Different in a Changing Market?
By Steven E. Sacks, CPA, CGMA, ABC
This is a tough question. Marketers, brand experts, strategists and PR professionals, among others, study this question daily. Reaching consensus is no walk in the park.
Alert: Real differentiation, by the way, does not mean instituting an “every day is jeans day” office policy. Office attire is not a panacea for success.
Your firm conduct audits, prepares tax returns and offers some consulting services. Yours is one of 42,000 non-Big 4 firms in this country, a large majority of which offer the same three packages. Firms in the same geographic market may not serve the same slate of industries, but through hiring niche expertise or merging in a firm can make inroads into the same markets.
This happens frequently, making a competitive market even more crowded. The challenge that your firm faces is how do you show a real value-added distinction from the firms you compete against?
Regulatory and compliance work in audit and tax and framed within a defined boundary of rules and laws, making the claim that your audits are better or tax return production empty representations. Even with consulting services, there are services that have become commoditized, such as business valuation and cost segregation. Once the market becomes replete with “experts” in these and other areas, it becomes more difficult to show separation from the pack.
You need to gain perspective from your clients, staff, and counterparts you trust from other firms to give you feedback on how your firm is viewed. This process can range from a set of five to ten established questions or a more in-depth study conducted by an outside consultant who specializes in brand identity and awareness.
Fact Finding Mission
To begin the process of discovering how your firm is viewed, there are usually two phases in which the firm must engage:
Phase #1: How we see ourselves and our marketplace. This is an internal perspective.
Phase #2: How we are seen by clients, non-clients and competitors. This is an external perspective.
The first phase involves a study of the marketplace trends in your area that may complement or conflict with your firm’s basic value proposition (your firm should already have one in place) and its strategic direction. If there is a conflict, then the value proposition should be carefully considered, changed, agreed to and clearly articulated to the entire staff before moving on to the next steps.
The second phase involves an environmental scan to show what your competitors are offering by way of value-added services and industry expertise — and most important, how they develop business. Compare this with how your firm’s own processes approach this, if at all. You can uncover your untapped advantages or mitigate your apparent weaknesses involving service value. You can go beyond what the initial engagement requires and make recommendations to clients that will result in additional services that benefit them, all while improving your firm’s image and reputation.
Of course, all of this is a nice exercise, but is meaningless, especially if image enhancement is not one of your top two or three priorities. And if you and your partner group will be retiring in the next three to five years and you have not started a serious approach to succession planning, then you face an even greater competitive disadvantage.
The most likely result is your firm will be part of the ongoing consolidation movement in the profession, and you won’t have to worry about differentiation. This will be on the head of the firm that acquired yours.
In reality, no firm, irrespective of size, is immune from the differentiation challenge. The Big 4 have the global brand that accompanies their monopoly on multinational and listed companies. Name recognition is their advantage, but competition has appeared from large regional firms, which claim their client relationship to be stronger because of more “touch points” throughout the year.
The mid-tier firms are battling it out to win over small and mid-size businesses, but they, too, are having difficulties in showing how they are different. To resolve this, they buy industry practices, such as healthcare, franchising or technology or purchase niche services, such as business valuations, forensic/fraud services, employee benefits or payroll processing.
Finally, the small firms will continue to attract small family-owned businesses and promote the “personal, hands-on” nature of their service delivery. But what happens when the business owner needs more advanced assistance in the form of market penetration or product line expansion?
We know that technology will automate the heretofore human intervention on many of the elements of the audit. Tax software has disintermediated clients from their accountants by the do-it-yourself programs. Data analysis and scenario planning can be done by a computer.
These and other factors make it more difficult to claim to be different from other firms. And on top of this, this question must be asked: Will it be necessary to be a CPA in the future if other types of business advisors possess the requisite knowledge, education and tools to successfully compete?
Now, that I think of it, the question of differentiation really goes beyond the individual firm and speaks to the profession as a whole. We are seeing a convergence of demographic shifts, globalization, technology innovation and a battle for talent.
Will the CPA profession be able to gain a solid foothold on these and other agents of change in the future?
This cannot be easily answered. But it must be asked.
Steven Sacks is the CEO of Solutions to Results, LLC, a consultancy that specializes in helping individuals, firms and organizations meet the challenges of communicating with clarity and purpose. Visit his website at www.solutions2results.com.