Ten Things Small Firms Can Do to Compete
Great turbulence in the accounting profession, as well as in the business world itself, makes these difficult and unusual times. Public outcry against the misdeeds of a few accounting firms, corporations, investment bankers and others in government and the business community is tarring the innocent as well as the guilty. In the meantime, the loss of Arthur Andersen and the consolidation of the now Big Five can alter the competitive landscape for firms of any size. It’s likely that the major firms will accelerate a long standing practice of reaching into the low end of the market – the very market of the smaller firms. For the smaller firm, competition will come from unaccustomed quarters.
Can the small firm successfully compete? History says yes, if the firm follows at least some of the following points...
- Don’t be sanguine about the health of your firm. You may feel that you’re in good shape today, that you have a substantial share of a specific industry, that your reputation will sustain you from assault by competitors, that you are immune from competition. In a rapidly changing world, this is when you are most vulnerable. Changing economic conditions, new regulations, an undercurrent of skepticism about the profession that, unwarranted as it may be, is still fostered by the Arthur Andersen situation – all these and more require that you be ever alert in your marketplace.
- Save your current clients. Your current client base is your first line of defense in a highly competitive environment, in which your best clients are coveted by larger firms. Examine your work with each client frequently, to assure that you are satisfactorily meeting your client’s current needs. Be sure you understand the client’s industry, as well as his or her business. Be sure your person-to-person relationship is in good shape. And above all, pay strict attention to the quality of your own work.
- Seek new business from existing clients. In the average mid-sized firm, there should be a 20% annual growth in business from existing clients, even in slow economic times. This is accomplished by frequent conversations with the client about his or her business (not yours). In any in-depth discussion about the client’s business, if you listen carefully you’re likely to hear some new problem about which you can say, “I can help you with that.” Remember, your client’s business may not be static, but instead, changing as the client’s own markets and business change. Without a client relationship that keeps you in touch, you can depend upon two things – that your business for that client will remain static, and that sooner or later somebody will hold that discussion, and you’ll lose the client.
- Organize for productivity. The future, in difficult times, lies with the lean, mean machine. That’s the one with full control of process, expenditures and business practices. Don’t be afraid, though, to invest in technology that works for you, such as extranets that tie your system to your clients’. Be sure your technology is equal in capability to your clients’, and compatible in ways that count. Manage your firm for profit first, and comfort second. If you’re profitable, you’ll be comfortable.
- Focus on business. Know what business you’re in, and carefully consider any changes in your business model or the services you offer. Know what skills you have, and work to sharpen them. In these times of changing regulation and technology, continuing professional education is a necessity, not a luxury. The competitive edge is not necessarily very large, but is rather an incremental edge.
- Modify your culture. For generations, the accounting profession has always relied on a concept of professionalism that was rooted in the fact that, as professionals, the clients needed the profession more than the other way around. After all, nobody wakes up in the morning and says, “What I really need today is a good audit.” Business comes to accountants because it has to. The accountant keeps the books in an orderly manner. The accountant audits the company because the government or a lender or the company’s investors demand it. But is your firm always the one that business comes to for these professional services? Or does it go to your competitors? Today, the demand is for more competitive services, and for services that not only attest, but help. This means that to compete, the culture of the accounting firm must shift from an abstract professionalism to an aggressive market-centered orientation. Once, before the Bates decision that eliminated the strictures on professional firm marketing, firms could rely on their professionalism alone to attract clients. Not today. With competition being served by sophisticated marketers and marketing methods, the option to market is gone. To survive, compete. To compete, change the firm culture to serve the demands of competition.
- Market. Your survival in this new environment depends upon your understanding and using the skills of professional services marketing. Marketing is itself a profession, and marketing an accounting firm is very different from marketing a product. But while the professional marketer has skills and experience that are not necessarily within the realm the accountant’s own experience and skills, there is still a great deal you can learn to do. Certainly, you should know enough to allow you to deal comfortably with a professional marketer. You should know how to define the market for your services. You should know how to look at your firm and services in terms of the needs of that market. You should understand the tools and vehicles of marketing that are needed to project your services and capabilities to your market. You should know how to manage the effort, even if it’s done by professional marketers. And should you believe that the need for you to market is precluded by your current success or your reputation, realize that you’ve lost the option to market or not, simply because your competitors are doing it …and they are after your clients and prospective clients.
- Challenge yourself. Today’s business world is more dynamic than ever before. More innovation, more competition, globalization that touches even the smallest firm – all demand more of the accountant. The successful accountant today is the one who constantly searches for new ways to meet the new challenges. The successful accountant, in today’s environment, is the one who demands more of him or herself. Ask the question – as frequently as possible – “This is the way I did it yesterday. Is there a better way, or a good reason, to do it differently today?" This is a sure fire way to keep from getting stale, and to keep your clients from going to someone else who isn’t.
- Learn. Continuing education programs are important and necessary to keep up with changes in the skills of accounting and the new regulations and laws that affect the profession. But the world of the professional accountant is no longer limited by just the skills of the profession. Today’s successful accountant understands more about business, about government, about globalization, about technology, about relationships, than was necessary in the past. Today’s successful accountant is an individual well aware of the larger world in which he or she functions, and is constantly learning about context, as well as skills.
- Think increments. A secret of success in business is to understand that to succeed, you don’t have to be substantially better than your competitor. It takes only the smallest increment to be the best. A slightly better understanding of your market. An article or two more in your client’s industry publications. A touch more visibility in your market place. A little bit more active in your networking organizations. It’s amazing how little difference there is between firm number one and firm number two. If you think about that small difference you can make in your own practice, then you’ll be number one in your area and market.
You have to be a better professional today to succeed in a highly competitive market.