Operating and growing in a down economy
By Michelle Golden, President, Golden Marketing Inc.
So far, CPA firms seem to be feeling limited impact from the economic downturn. Some firms are seeing a bump in "average days in A/R" as business clientele slow their payments due, in turn, to their dipping receipts. Other firms report the heartbreaking scenario of trying to assist vulnerable clients take measures to remain solvent—scaling back, if not ceasing, operations.
This work is both emotionally draining and urgent, yet often gets billed lower than average because CPAs tend to be caring people who don't want to add significantly to the client's financial burden. Sadly, any bump in revenue for this consulting potentially precedes loss of the recurring work.
The bigger impact for CPAs probably still looms as more businesses will fold, especially in hard-hit fields such as restaurants and hospitality, construction, and real estate. Presently, it's mostly in the form of clients choosing to spend less. "Extra" services perceived as non-urgent or preventative such as estate or succession plans and internal control review procedures aren't hot sellers right now.
Mark Bailey & Co serves both public and privately-held companies. Managing partner Mark Bailey says: "In this economic environment clients are tightening their belts, and trying to control cost. We're dealing with it every day with every client. It's going to continue for some time." Bailey has created a competitive advantage discussed later.
What's a firm to do to assure as much stability as possible with revenues so unpredictable?
As AccountingWEB readers are pros at cost controls, cash flow management, and other tactics to mind the bottom line, we won't address those here. Instead, we'll talk about your relationships with your clients, and how you work with them. Using any of these approaches can help sustain any size firm through a rocky time.
Strategies to Sustain
Protect your client relationships with vigor and gusto. Be ultra-sensitive to your service quality. Look for indicators that you're not meeting expectations. Look for ways to endear yourself to your clients.
A/R Behavior Changes
Slower A/R may be a sign of a service problem. Even in a great economy, slow-pay clients might be telling you something. Even if you suspect your client is just having cash-flow issues, reach out — it's an opportunity to help. You might say:
"Bill, I'm concerned. We noticed your payments are slower than before...my first worry is if you're feeling a pinch due to the economy that we haven't talked about and, if so, there are things we can do to help. Or, less serious, but of sincere concern to me, also: are we not meeting your expectations?"
Either way, you have to know. Watch A/R like a hawk and be proactive when you see changes. Fix service issues promptly, and thank the client for their candor. And, if you help them stave off their own crises, even if it's simply a conversation or two about "what's keeping them up at night," or offering a more flexible payment arrangement on your part, they'll be glad you cared enough to ask.
Certainty in Pricing
To clients' delight, Mark Bailey & Co. promotes the competitive advantage they created: pricing. As opposed to billing (done after the fact) pricing occurs in advance, with established parameters, and gives client control in choosing what they buy before you do the work. In this economy, this is even more important. Bailey says:
"'Pricing' is being recognized as preferable more and more by clients, and the providers who do it have a distinct advantage. It's a key discussion point in our written proposals. It's inevitably met with great praise by our clients and potential clients."
Carve Out a New Product
As you gain knowledge regarding how the recession is affecting your clients, particularly within certain niche groups, you develop a unique perspective (read: expertise) be it geographical, demographic or industry-based. If possible, repackage some services you've offered for years, presenting them as relevant for this economy.
Start by giving: Arm clients with information. If you have several clients within a niche or group, bring them together and deliver preventative steps to safeguard their finances. Whether family limited partnerships, retailers, or single moms, everyone needs help. Teach them how to self-monitor for fraud (which obviously increases in tough times, but for which clients are less apt to pay for extensive procedures). Advise manufacturers and health care clients that personal injury claims can rise in hard times, and urge all clients to be cautious in extending credit or over-borrowing. Anything to help heighten their awareness of legitimate vulnerabilities will help endear you to them.
With limited resources, focus is key. Whether you have a general practice, or established niche, market selectively. It's no time to do broad general advertising or unfocused networking. Instead, be where the most fruitful opportunities are.
Identify one healthy sector in which to invest marketing time and money. Be willing to ramp up on that industry or group's needs. Your goal is 'recognition' through development of a solid reputation and network in that group. Generalists, fear not. When you've nailed it in that sector, add another.
Migrate your marketing materials and communications to the Web. Printing is costlier than ever now, and no one minds you going green. You've probably gone paperless with audit or tax, why not with marketing? Using the Web is cheaper, more easily updated, and, arguably, much more effective.
You can also move a lot of your traditional marketing activities such as networking (the cocktail party schmooze), article publication, presentations, and press activity to the Internet. Journalists hunt the Web for article fodder, and blogging and podcasts are modern versions of writing articles and giving seminars.
Positive Messaging (Yet No Gloating)
No matter what, this isn't the time to broadcast boastful messages about your firm's success and growth. Don't rub salt in the wound of those who are struggling to survive, much less grow. Be there for folks that need it, and convey how you're ready to help. Avoid using fear to sell anything right now. Stay positive.
Every conversation with a client is marketing. Your goal should be to leave the person you've spoken with feeling better for having interacted with you. Make sure everyone in the firm maintains an attitude that reflects how much your firm values its clients and each client's business.
When clients are happy, ask for referrals. When you know a client is pleased, especially through an unsolicited compliment, it's the perfect time to ask them to refer a friend. Since referrals come from current and past clients, do keep in touch.
Now is the time to re-earn your clients' loyalty and become more valuable to them than ever before. Adopting some of these ideas will help ensure your sustainability in the rough months ahead.
About the author
Michelle Golden is a nationally recognized advisor to CPAs and financial advisors. With a focus on tying operational activities to practice growth, her blog Golden Practices is widely read, and is well-respected by the profession’s thought leaders. Michelle is also a proud member of AccountingWEB's Bloggers Crew.