As more and more CPA firms venture into consulting services, they will be faced with the question of how they should expand their non-traditional services. Some of the more common service areas include technology, wealth management and specialized consulting services for a niche or industry. As firms look to these affiliated service lines and entities to be part of their growth, the move often presents some major challenges. Here are a few tips to help avoid or address some of the most common challenges.
- Find the right people. Most affiliated services or entities start because a member of the firm expressed an interest or passion and the firm viewed it as a strategic opportunity. Technology is a great example. While the idea may have started with a CPA firm member, most firms often find that CPAs aren’t the best people to run that part of the business. There are many reasons for this, but it really boils down to not having the right training or mindset. CPAs are trained to do something very particular and much of a firm’s consulting services and affiliated entities will ask CPAs to go against all their training. Finding the right people to lead and deliver services is critical to its success. When you study the firms that are diversifying successfully, they don’t usually have CPAs running their groups.
- Manage it differently. Probably the number one challenge I see and hear revolves around management clashes between the affiliated service line or entity and the firm. Firms wants to manage these groups in the same way they manage their CPA firm, but that model won’t always work. CPA firms are often highly leveraged. In some fields that works, but in other areas, like consulting, it doesn’t. While some leverage is possible, it cannot be nearly as leveraged as most accounting firms. Recognize that you may have to manage this area differently. It doesn’t mean you can’t expect results and profitability, it simply means the normal key performance indicators and benchmarks might be different.
- Pricing. In almost all cases, pricing must be more transparent. Time and billing rarely go over well in non-traditional areas. How you price your work will change and the firm must come up with a standardized approach to the way it bills its time. Check out our blogs on pricing here and here, and our webinar on How to Build a Consulting Practice for more on this topic.
- Selling. Many of the services being provided are either not recurring or are only partially recurring. The primary exception might be wealth management services. Selling is going to be an important part of your growth. Referrals alone won’t be enough because you will constantly need to replace revenue, especially when you start consulting. Having dedicated sales professional or a mix of people comfortable in more proactive sales efforts will be important.
- Marketing. How you market and where you market may also change depending on your marketing. Customized approaches should be taken to understand your markets. For example, how and when someone buys technology services is different than how and when they buy tax or audit services.
While none of these are fail-safe considerations, we’ve identified that these areas as the ones making the biggest impact in firms that have thriving, affiliated entities and services versus ones that are struggling. If you need to talk to someone about how your firm can diversify their services, contact one of our growth professionals today!