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Archive for the ‘Professional Landscape’ Category

Structural Change in the US CPA Industry – Small Firm Challenges

August 1st, 2016

 

Because industry structure plays a major part in determining the way in which competition plays out in an industry it’s useful to take a look at how structure changes over time due to forces coming from outside the industry (e.g. regulatory changes, technology impacts) as well as shifts in the way firms within the industry respond to those forces, innovate and compete. Read more…

Collaborate and Grow Further and Faster

March 18th, 2015

I first started talking to accounting firms about growth strategies in 1982 when I was just a kid. One of the things I noticed even then was that multi-partner, multi-manager firms that embraced a “whole firm” approach to meeting client service needs seemed to grow further faster than those built on an “eat what you kill” approach. Read more…

Structuring Your Business for a New and Profitable Era

December 29th, 2014

This post is an updated version of an article I wrote for the 2014 Good, Bad and Ugly inter-firm comparison study done by the Australian firm, Business Fitness.

The accounting services industry has been around for long time and is likely to be around for a long time to come because people and organizations need their services. But as is the case with every industry, its structure will be largely shaped by outside forces that are beyond the immediate control of the firms in the industry today and those forces will create opportunities and challenges. The way in which firm leaders respond to those forces will determine the destiny of their firm. Read more…

Why technology is not necessarily the answer

November 29th, 2014

I had a conversation with a leader in the media recently during which he mentioned that a software vendor had told him his company’s product could help accountants perform in 15 minutes a task that typically would take 3 hours when done in a traditional manner. Read more…

Some Observations on Where Technology is Taking the Profession

August 18th, 2014

Recently I was writing a piece for inclusion in the 2014 Good, Bad and Ugly inter-firm comparison study being done by Business Fitness in Australia. I thought some of my readers might be interested in the thoughts I had back in March 2000 when I wrote this and the references to an earlier paper I wrote in 1998. Read more…

Private companies performing well: is it time to embrace into a growth mindset?

May 13th, 2014

Few people question the important role private companies play in contributing to the health and well-being of the nation. These businesses are responsible for more than 50% of non-farm GDP and 65% of new job creation so when they’re in good shape the nation is in good shape. The last 6 years have not been kind to small business but maybe things are getting better. Read more…

Become the Artistic Director of Your Firm: A Thought Experiment

April 30th, 2014

Alain Ducasse runs an empire of 20 Michelin level restaurants around the world. He’s undoubtedly a great chef. But I’m sure there are many chefs of his caliber who do not have 20 restaurants with collectively 19 Michelin stars. Why? Read more…

What are CPAs talking about

March 27th, 2014

Bill Sheridan always has interesting insights about our profession with an equally interesting angle that he posts on the MACPA blog. One that jumped of the page for me recently was one he called The Best Business Advice Ever: Be Willing to Change. As usual, Bill is right on the money so take a moment to read his thoughts. Read more…

Is a Consolidated Accounting Industry a Possibility?

August 23rd, 2013

The failure of the UK accounting firm consolidator RSM-Tenon Group sad though it is does not surprise me.  In the last 90’s early 2000’s all the buzz was about how the the profession is inevitably going to consolidate and there were some major players in the market including some big accounting firms, American Express and a handful of half-baked start-ups and a few well funded entities.

The prevailing idea was that it made sense to create big firms quickly through consolidation. This, they thought, would lead to management and marketing economies because accountants have always been seen as trusted advisers and gatekeepers to their clients so there was a view that with a “bit of training in cross selling” it would be possible to leverage sales in areas such as financial planning, insurance, legal, lending, HR, IT ….  you name it the list goes on.

When I first saw American Express get into the play my first reaction was “this could be the thin edge of the wedge.”  I thought when companies of that size got into the game with the resources they had available and the global distribution channel they had in place it could spell disaster for smaller firms.

At the time I was the CEO & President of Results Accountants’ Systems. We had the privileged of working with literally thousands of small to mid sized accounting firms around the world and we had created the world’s largest network of independent accounting firms called the Results Accountants’ Network (RAN). My first reaction prospect of a consolidating industry was that it would seriously threaten or network (in fact several of our member firms did sell to the consolidators in all the countries we had a presence.)

But then I thought deeply about what was happening and concluded that for fundamental economic reasons the industry would not and could not successfully consolidate. My views were set out in a White Paper titled The Challenges Faced By Consolidators are Going to be Huge. A summary of this was published as an article in the Australian Business magazine BRW at the time. I also distributed a copy of it to our member firms.

If this made long term economic sense—as opposed to the opportunity for short term entrepreneurial profit for the promoters—my own company would have done it two years ago when it started in the US with Century Business Services (Cbiz) and American Express Tax and Business Services.  We looked very seriously at doing a roll-up of the 3,000 firms in our global network and came to the conclusion that the concept of consolidation flies in the face of the fundamental economics of the industry and it will not work.

If you are interested in the more detailed explanation of why a consolidation will not engulf our profession you can download the original white paper. There may be a few things I would change if I were writing it today but not much. The paper also covers some interesting discussion on the keys to practice profitability.

I believe all this all happened before Tenon got going in the UK and some of the companies that were involved in the consolidation play in the US (CBIZ and American Express Tax & Business Services – now part of RSM McGladrey) and Australia (WHK) have managed to survive but in a dramatically different form to what was originally envisaged. But consolidation is a far cry from the tsunami of acquisition activity that some people had predicted.

My views about consolidation do not mean that I believe there will not continue to be active M&A activity in the profession. That will always take place but soon after a couple of large firms get together, a few partners or others inevitably go out and start their own firm with a handful of clients and some other clients of one or both of the merged firms take the opportunity to move somewhere else and another firm gets a little bigger and the game of musical chairs continues.

Your edge quickly becomes the margin

April 7th, 2012

The purpose of developing and implementing a competitive strategy is to achieve a sustainable competitive advantage.  Competitive advantage means the firm earns higher-than-average industry profit.  There are potentially as many successful strategies as there ideas for getting an edge.  However, some strategies are easily copied and the edge quickly becomes the margin.   Read more…