Outsourcing the Practice Development Function

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Jeff PawlowOutsourcing the Practice Development Function
Presented by Jeff Pawlow
CEO, The Growth Partnership
Contact Jeff at [email protected]

March 27, 2001, 4:00-5:00 p.m. EST

Visit the AccountingWEB Workshop Calendar for upcoming sessions.


This is a summary of the topics that were covered in the workshop. You can read the full transcript below.

In many cases, a CPA firm may have marketing programs and personnel already in place. The workshop will cover areas of:

  • Strategic marketing assessments.
  • Client Development and Referral Development programs.
  • Client loyalty surveys.
  • Lost client and lost proposal interviews.
  • Marketing campaign development services.

March 27, 2001 Session Sponsored by Intacct

Intacct.com  Click Here

Full Transcript

Session Moderator: Welcome! Let me start by saying thank you to our sponsor, Intacct for making this session on "Outsourcing the Practice Development Function" possible. Please welcome our Presenter, Jeff Pawlow.

Jeff has spent part of his career as a Marketing Officer at one of the largest bank-holding corporations in the United States. As the founder of The Growth Partnership, Jeff is using his knowledge to help CPA firms realize their full practice development and client relations potential. His firsthand experience in both small and large firm environments makes him well suited to work with firms of all sizes on the successful development and implementation of a customized marketing program. Jeff, the floor is yours!

Jeffrey Pawlow: Good afternoon! Thanks for joining us during the busiest time of the year. Let's start out by establishing a foundation from which to operate. Is it safe to assume that the practice development function, while vital to an accounting firm's ultimate success, is not a core competency of the typical CPA? Successful organizations must focus their time, attention and resources on their "core competencies" - those activities that are at the center of their business.

In any CPA firm, there are many additional functions that, while essential from an operations standpoint, fall outside the scope of these core activities. These essential but "non-core" functions are ideal candidates for outsourcing. In today's competitive environment, CPAs and consultants can only maximize their earning potential by leveraging their personal technical abilities (core competencies), and complementing them with the abilities of other members of their firm.

In the future, the successful CPA must function as their clients' most trusted business advisor. This will require spending a greater amount of non-chargeable time developing deeper, more meaningful client relationships.

Additionally, successful CPAs will belong to firms that have an ability to offer a wide range of products and services that transcend the individual practitioner's level of expertise. These firms will effectively provide one-stop-shopping for all of their client's needs.

Because successful professionals must dedicate more time to developing deeper client relationships, they have less time for managing, directing or leading practice development initiatives within their firms.

Session Moderator: What do you mean one stop shopping?

Jeffrey Pawlow: The CPA is seen as the "quarterback" of the client relationship. Accordingly, it makes sense that a CPA firm serve as the gateway for an entire range of financial products and services. Look at the Vision Project. The 5 Core Services of the 21st century are a far cry from yesterday's accounting firm. When it comes to practice development activities, most CPA firms are confronted with a scarcity of resources (time and money) and are generally unfamiliar with the overall sales and marketing function.

At the same time, these firms have a tremendous need for a high-level practice development planning and execution in order to be successful and remain competitive, especially in the era of consolidation.

While there are several "tools" in the market to help CPAs grow their practices (e.g. boot camp, turnkey programs, associations, etc.), many of these tools ultimately "rust in the shed" because they are not implemented properly, if at all. Additionally, many of the tools that are used may not be a good fit, or in alignment with the overall strategic direction of the firm.

While CPAs need professional-level expertise in each of the functional practice development areas, hiring this expertise can be an economic impossibility, especially for small and medium sized firms with limited resources.

Engaging outside consultants for each functional area is one potential solution, but coordinating multiple outside contractors is often difficult and inefficient.

William Hubly: Define small to medium sized firms.

Jeffrey Pawlow: In terms of size, I would define small and medium size firms as those with annual revenues between $2M and $10M. Firms that are above $10M can often afford to bring a comprehensive marketing team "in-house".

Session Moderator: Jeff, why should a CPA firm consider outsourcing their practice development function? What are the benefits?

Jeffrey Pawlow: CPAs should consider outsourcing for the same reasons as other industries: outsourcing non-core functions makes strategic sense in today's highly competitive business climate. CPAs should consider outsourcing for the same reasons as other industries: outsourcing non-core functions makes strategic sense in today's highly competitive business climate.

Since the core competency of CPA firms is not marketing and sales, it makes sense to outsource those functions to other service providers who specialize in that area. In today's accounting environment, a firm must maximize the return on their marketing and sales investment to remain competitive. Core competencies are defined as the specific activities that a company competes on.

Doug Howser: What is meant by the term "Core Competency"?

Jeffrey Pawlow: In the case of a CPA firm, examples of core functions would be tax compliance and consulting, assurance services, and other specialized services lines supported by a particular firm (valuation, financial planning, technology consulting, etc.) In addition to these core activities, most organizations have other non-core functions that are essential to their operations, and therefore, ideal candidates for outsourcing.

Mike: Traditionally, the concept of outsourcing has been difficult - many firms don't even trust people down the hall from them when it comes to working on a firm client. How does outsourcing magnify this problem, and how should it be addressed internally?

Brian Falony: Isn't business development core to the business. Are there other industries that you know of that outsource sales & marketing and have no marketing staff?

Jeffrey Pawlow: I suggest that getting business in "vital" but not "core" to a healthy firm.

William Hubly: What is the cost of a comprehensive marketing team?

Session Moderator: Jeff, can you tell us all more about the concept of outsourcing?

Jeffrey Pawlow: Through outsourcing, buyers contract with outside suppliers to perform non-core, yet essential, business functions. The buyer gains significant value because of the economies of scale, process expertise, creative ideas and investment leverage the supplier brings to the table.

The key in the definition of outsourcing is that the buyer partners with the supplier and turns over the ownership, responsibility and control of a particular process to them.

While the buyer will determine what results it wants to achieve, the process of accomplishing those results is left to the supplier. In today's world of ever-increasing competition, companies are forced to look for new ways to generate value and profits.

The world has embraced the phenomenon of outsourcing and companies have adopted its principles to help them expand into other markets.

Doug Howser: Jeff, what are some examples of "non-core" functions?

Jeffrey Pawlow: The meal catering function of an airline is an example of an essential, yet non-core process. Within the CPA environment, the firm's telecommunications infrastructure, marketing and management functions, and internal finance and accounting operations are excellent examples of essential, yet non-core processes.

Kristi: What are the best practice development activities to outsource?

Doug Howser: Why would a CPA firm want to outsource their non-core functions?

Jeffrey Pawlow: "Core" activities are those that a firm competes on. The cost of a marketing team is really driven by the functional areas of marketing. You have to look at strategy, implementation, measurement, "marketing" and "sales". Each is a separate area of expertise. The challenge is to find top-notch expertise in each of these areas and a price point that is viable for the firm.

William Hubly: What is the cost of a comprehensive marketing team for a CPA firm? Assuming you are looking at all of these areas, what is a realistic annual budget for a $5 million dollar firm?

Jeffrey Pawlow: I generally recommend that a firm spend between 4-7% of total gross revenue to drive their marketing and sales programs. This figure should be all-inclusive - salaries, benefits, initiatives, etc. Everything. The figure is generally higher to begin with, and comes down as systems are developed and implemented.

Carrie Steffen: Does the 4-7% include professional service providers' time?

Jeffrey Pawlow: Absolutely. This should be all-inclusive.

D. Michelle Golden: Carrie, you don't mean the accountant's time, right?

Carrie Steffen: Should you compute it based on their salary or billing rates

Carrie Steffen: I'm talking about the accounts' time spent selling.

Jeffrey Pawlow: This should not include the professional provider's time. I thought you were referring to the outside consultant or outsourcing firm.

D. Michelle Golden: We don't include the "value" of accountants' time in the 4-7%

William Hubly: What type of cost savings can be associated with outsourcing?

Session Moderator: Are there other benefits to outsourcing our practice development function?

Jeffrey Pawlow: One of the biggest benefits of outsourcing your practice development function is the ability to leverage "best-practices" from other similar firms and tap into the wealth of experience that comes from working with other successful CPAs firms across the country. This leads to economies of scale. And the ability to learn from what others have tried before you.

Jeffrey Pawlow: There are three areas of the practice development function that are not typically outsourced:

1. Meeting with qualified prospects and closing the sales;

2. Meeting with existing clients to expand and strengthen
the current relationship; and

3. Maintaining regular contact with key referral sources

This is where the "rubber meets the road". The systems that support these actions are not the best use of the CPAs time.

William Hubly: How do you integrate the outsourced consultants into the firm on a day-to-day basis?

Carrie Steffen: Do you think it's typical that the price a firm would pay to outsource is less than the typical salary of a mid-level full time marketing person?

Jeffrey Pawlow: How would you define that salary range?

Carrie Steffen: $50,000 including benefits.

Jeffrey Pawlow: Using this range, I believe that it would be more efficient and cost effective to outsource the activities - again, depending on the size of the firm.

William Hubly: To me marketing and sales initiatives have to be constantly communicated and pushed within the firm, how do you achieve this with outsourcing?

Jeffrey Pawlow: Here's the key point: Does that marketing coordinator have an expert skill level in each of the functional areas I outlined earlier? If not, you can gain access to top level expertise in each of those areas by outsourcing. All at a level that meets your needs.

Session Moderator: Why would a CPA firm want to outsource their non core functions?

Jeff Pawlow: If you put a top-notch marketer into a small firm, it would be like trying to take a drink of water from a fire hydrant. Outsourcing allows you to control the level of expertise that you need, while expanding on the breadth of expertise that can be found in one person.

Outsourcing allows companies to focus on their core competencies, thereby increasing efficiency and competitive advantage. Wise leadership recognizes that a company can gain more value by outsourcing their non-core processes to others who are dedicated and expert in their fields than if they continue to implement them themselves.

William Hubly: Great point!

Jeffrey Pawlow: By outsourcing non-core functions, an organization is able to concentrate their time, energy and resources on those essential core functions that are vital to their success. In other words, you don't want me doing your tax return any more than I want you developing strategy and implementing your marketing program! Ha Ha

Carrie Steffen: Do you think the outsourcer needs to be local? How far away is too far to be practical?

Jeffrey Pawlow: Typically an outsourced provider does not need to be local, but they do need to visit the firm on a regular basis.

Session Moderator: Are there other questions or comments? Please share!

Ronald Hudson: Is there an association that you find marketers for a small firm.

Session Moderator: Great Question Ronald. Is anyone aware of any such site?

Lisa Huston: For those firms who have revenues over $10M, do you suggest they hire a professional for each of the marketing functions you mentioned earlier?

Jeffrey Pawlow: Generally you can hire more than one person who can bring a well-rounded skill set to the organization.

D. Michelle Golden: an example is the inefficiency of the typical small business owner trying to do their own CFO functions without an accounting degree.

Mike Heines: Jeff, You've said earlier that the CPA firm does not typically outsource 3 areas of practice development. If a CPA firm were to outsource their marketing functions what should they expect from the individuals that they do hire?

Jeffrey Pawlow: When I was the Director of Marketing at RBG&Co., I had a staff of four + myself.

Jeffrey Pawlow: Mike, the biggest expectation is the creation of a win-win agreement with the service provider. This document outlines the expectations on both sides of the equation and serves as a roadmap for the engagement.

Mike Heines: That seems very vague and sort of one of those warm fuzzies. Is the expectation to be to develop various marketing campaigns and bring them to fruition?

Jeffrey Pawlow: Generally the plan is divided into four disciplines.

Discipline One = Deepening, expanding and strengthening key client relationships.

Discipline Two = Building an effective referral network.

Discipline Three = Attracting new clients to the firm that
meet a specific profile.

Discipline Four = Support activities.

D. Michelle Golden: Mike, it is a critical component, though, to set expectations. We recommend CPA firms set similar expectations with their clients--expectations that can be MEASURED

Jeffrey Pawlow: Here's an interesting point: You can calculate ROMI for disciplines 1-3, not for discipline 4. The challenge is to create a plan where the return from1-3 is greater than your investment in all four. Discipline four can be a bottomless pit as far as draining firm resources. A balance is needed among all four disciplines, with only enough being spend on discipline four to support the first three.

Mike Heines: Yes Michelle, and in the end I would probably negotiate a contract based on performance against predetermined expectations.

D. Michelle Golden: Excellent, Mike!

Doug Howser: What is ROMI?

Jeffrey Pawlow: Return on Marketing Investment

Doug Howser: Thank you.

Jeffrey Pawlow: Often a firm will spend a majority of their resources on Discipline Four activities - the activities that don't lend themselves to a return on that investment.

Carrie Steffen: Can you give us some examples of activities in discipline four?

Jeffrey Pawlow: Discipline four activities would include brochure and Web site development, PR, etc. Everyone would agree that it's nice to have a great brochure - but can to track a return on that investment? I'm not suggesting that you don't invest in these areas, some investment is needed.

I am suggesting that you shouldn't invest in these activities at the expense of activities in 1-3.

Session Moderator: Does anyone else have ideas or comments?

Ronald Hudson: Where do you find these outsourcers?

Jeffrey Pawlow: A great resource is www.outsourcingjournal.com. Additionally, I'm partial to www.thegrowthpartnership.com!

Ronald Hudson: thanks.

How many people out there are in a position to tell me what your return on marketing investment was during 2000?

Lisa Huston: Where were you headed with your question regarding ROMI?

Jeffrey Pawlow: It all comes down to having accountability and measurement in place for your practice development program. As partners, I'd want to know what return I was getting for the dollars invested in marketing and sales.

Lisa Huston: I agree, but the measurement part is the most difficult to define.

William Hubly: Speaking of accountability, how do you make your partners accountable for implementation of the plan?

Session Moderator: Anyone have an answer to that one? Ha Ha.

Jeffrey Pawlow: I'm almost embarrassed to say this, but a client has referred to me as the highest paid babysitter of all time!

Mike Heines: Ha Ha Ha Ha Ha.......

Jeffrey Pawlow: We work extensively with our clients to ensure they are actively participating in their practice development program. At the same time, we also ask them to get involved where the rubber meets the road.

Lisa Huston: Can you give an example?

Jeffrey Pawlow: No busy work. We'll get you down to the five, and block and tackle the rest of the way.

Brian Falony: Complete buy-in and peer pressure work better than most anything else.

Lisa Huston: You've hit the nail on the head when you say that buy-in is key.

Session Moderator: Everyone has to be involved in the process, not just the partners.

D. Michelle Golden: Excellent point, moderator. Marketing includes customer service, which means that EVERYONE is a big part of it. Something to add is that the partners should strive to be a shining example of what they want their team to do/be.

Jeffrey Pawlow: Agreed, the partners have to lead the efforts.

William Hubly: What is the best way to get people committed to the project, you know no involvement, no commitment.

Jeffrey Pawlow: In our engagements, we go through a three-stage process to develop buy-in to the plan. Everyone has a kick at the cat - an ability to provide input to the final result.

Holli McKay: Ensure that your team is aware of the project that you are committed too!!

Jeffrey Pawlow: Team is a great word. Successful implementation is a team effort. Also, in a perfect world, participation in practice development should be tied to compensation at some level.

William Hubly: The team needs to be involved in the process up front in order to win team commitment. What are the other two stages of the three-stage process?

Jeffrey Pawlow: Stage Two is the development of the actual plan and budget, along with ROMI projections.

Stage Three is implementation of the plan.

William Hubly: Thanks

Session Moderator: We will be wrapping up shortly, any more questions?

Session Moderator: I want to thank everyone for participating in this informative session today. Jeff, you did an awesome job.

Jeffrey Pawlow: You bet. It's been a pleasure. I'm ready to give my fingers a rest! :-)

Jeffrey Pawlow: Thank you for your participation everyone. If I didn't get to your specific question, please feel free to contact me directly at the email address above. Thanks again for your participation in a busy time of year.

Session Moderator: If anyone would like to continue on with the discussion, feel free.

Jeffrey Pawlow: I'm happy to stay on and answer questions for a while.

Session Moderator: You can continue with this at your own pace.

Mike Heines: Thanks for your time Jeff

[email protected]: good job, Jeff

Session Moderator: Good night!

Jeffrey Pawlow: Good luck with the rest of tax season everyone!

alioune badara: Hi Jeff I just get here , I will read the transcript.


Spending the initial part of his career as a Marketing Officer at one of the largest bank-holding corporations in the United States, Jeff began working in the accounting profession when he joined Smith & Gesteland, a local firm based in Madison, Wisconsin. During his tenure as their Director of Marketing, Jeff's efforts were recognized with the "Best of Show" award at the annual Association of Accounting Marketing (AAM) conference. He also won a 1st place award in the advertising category for a direct mail campaign that yielded a 500% return on marketing investment, and a second place award for the S&G newsletter, Footnotes.

Jeff took on additional responsibilities when he joined St. Louis based RBG&CO in early 1997. As the Director of Marketing Consulting for this "Top-50" firm, Jeff again spearheaded the implementation and development of a successful marketing program and was again recognized for marketing excellence by AAM. At the 1998 conference, Jeff's efforts led to four first-place finishes in the categories of: firm identity, firm newsletter, firm brochure, and statistical surveys. Additionally, Jeff was again recognized with the Best of Show award for overall marketing excellence. This was the second consecutive year that he had captured the top award at the AAM Marketing Achievement Award competition.

As the founder of The Growth Partnership, Jeff is using his knowledge to help CPA firms realize their full practice development and client relations potential. His firsthand experience in both small and large firm environments makes him well suited to work with firms of all sizes on the successful development and implementation of a customized marketing program.

e-mail: [email protected]
Web site: www.thegrowthpartnership.com

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