Most accounting firms offer pretty much the same work product as every other firm in the industry. Traditional compliance services have the character of commodities in the sense that customers find it difficult, if not impossible, to make a judgment as to the quality of the work product and must therefore form their value judgment on the basis of their experience with the firm.
In view of the fact that all firms utilize more or less the same technology, employ similarly qualified and skilled people, operate out of similar facilities and follow more or less the same work-flow it follows that the cost structure for firms of equivalent type and size is much the same. To put that another way, few firms have any demonstrable cost advantage over their competitors which means that if they attempt to use price as a competitive weapon to build market share they do so at the cost of margin and their bottom line inevitably reflects this.
There is no doubt that price can be used as a valid strategic differentiator but a necessary condition for its profitable deployment is always going to be possession of a cost leadership position and . If you do not have a cost leadership position that you can defend then using price for anything other than as a means to clear unwanted inventory or utilize genuinely surplus capacity makes n sense at all.
So given is what are you differentiation options? There are several.
- Product/service – bundle or unbundle, give it a sexy name e.g the ABC Business Management System or the XYZ Management Control Process. Partner with other service providers to add service features not typically found in a standard offering.
- Relationship – get closer to your clients. Send them unsolicited information including books that you know would interest them – calculate the lifetime value of a client then assess the cost of a book against that. Call them on their birthday or at least send them a SIGNED-BY-YOU birthday card, make sure your DOFI (Director of First Impressions) maintains a record of their preferences and relevant details e.g. how they like their coffee, childrens’ names etc. Visit them periodically – don’t pretend you don’t have time. This is the most important marketing initiative you can implement.
- Experience – WOW your client. Do something, anything, unexpected. Go the extra mile e.g. give them an umbrella when it’s raining, arrange for their car to be washed while they are visiting you. Brainstorm this with you team members. Notice service experiences you have that delight you then copy them.
- Work process – critically look at the process you use to get the job done and especially the client touch-points – these are the points where the client interfaces with you or your team members. May it as easy as possible for your client to deal with you e.g. do you have a client portal that enables them to communicate with you and upload, download and review documents securely?
- Communication technology – how do you communicate with your client. Do you know how to use text messaging? If you have any clients under 30 years of age it would be a good idea if you did. Does your firm have a Facebook presence, do you use Twitter, have you posted any YouTube videos that clients and prospects would consider to be useful e.g. how you can help people build shareholder value. Don’t tell me you’re sending out a Newsletter – that’s great but cut it up into smaller chunks and throw it onto your Facebook Wall.
- Brand – does your firm have a brand. What do you stand for? To be successful it needs to reflect direction (where you’re heading), breadth ( your range of service deliverables) and/or depth (your specialized deliverables and deep knowledge). Do you know what the difference is between a Core2Duo and a Celeron processor? I don’t, but I do know that a Core2Duo is better – how do I know that? because Intel told me! Do you get the message? What does your firm’s name reflect – is it a name or a sentence? One of my very good friends had an accounting practice called Igor Loutkovsky & Associates – he changed the name to Richfields and saw a dramatic increase in business. There’s a lot more in a name that you may think.
The big challenge most accounting practices face is their desire to be all things to all people. This seriously impacts their ability to differentiate. There is noting they can really hang their hat on that distinguishes them from the rest of the pack so they grab at things like “we’re a full service firm”, “we have been servicing Yourtown for 50 years”, “our partners have combined experience of 500 years (and it shows!)”, “we pride ourselves on client service”, “our business is your business”.
Let’s face it, not one of these platitudes has a “what’s in it for me” element. What you need to do is develop a business value proposition that is customer-centric and then use that as the basis for developing your firm’s business model. This includes, what processes you will use to deliver it, what resources you will require to implement those process and what your profit model looks like. This and many other strategies will be covered in the totally new Bootcamp that I’ll be running in the UK (June 15-18) and US (July 19-21). For way too long the profession has been focusing its attention on productivity improvements through technology implementation. This is a necessary, but not a sufficient, condition for long run growth and success. By far and away the most successful growth firms have been those that have embraced business model innovation but that will have to be the subject of another post.