Like it or not, private equity is quickly changing the landscape of the public accounting profession. Some observers estimate that in five years, 20% of CPA firms will be private equity–sponsored (Daniel Hood, “PE and accounting: The new formula,” Accounting Today, https://tinyurl.com/p7mhnrr5). That number is likely to increase quickly in a short amount of time, especially as private equity firms target CPA firms from $10 to $50 million in size.
Private equity sponsors expect lofty growth, so they will be fueling firms with cash to spend zealously on marketing, sales, and mergers and acquisitions (M&A). Therefore, even firms that don’t go the way of private equity will be impacted by its presence in the marketplace as competition for ideal clients becomes even greater.
Whether a firm and its partners is thinking about trying to attract private equity funding or prefers to be private equity–proof, marketing can help. Many of the same marketing strategies can help a firm either catch the eye of private equity or bolster the partnership model in an increasingly competitive market.
Efficiency Is Where It’s At
Finding efficiency within a CPA firm doesn’t mean stretching the team to the max or cutting out the “nice-to-haves,” like good coffee in the breakroom, firm outings, or summer Fridays. Rather, it’s about implementing tools and procedures that make the work easier and more consistent. Private equity firms want to see that a firm is adopting new technology that streamlines work and makes it easier to collaborate, and that processes have been standardized and don’t need to be constantly reinvented. Of course, these same improvements benefit partner-led firms as well. A CPA firm should have cloud-based customer relationship management (CRM) software that can dynamically manage contacts and integrate with the firm website to automate recruiting, marketing, and business development activities. This will provide the foundation for measurable, repeatable, and easily accessible growth-related activities, whatever a firm’s goals may be.
Recruiting and Retention
Recruiting and retention are critical for firms regardless of ownership structure. Conducting a study on a firm’s career brand by speaking with the team and clients can help synthesize and define what makes the workplace culture special and attractive. Collecting this data will help develop the language a firm needs to accurately represent the feel, values, and client-side perception of the firm, and steer it away from generalizations such as, “our people make the difference!”
If a firm is not already using web-based CRM with sales tools such as HubSpot, now is the time. A CRM’s automation tools can simplify contact management and recruiting activities. Not only will it make the recruiting process more data-driven and efficient; the firm will be able to filter, sort, and target the professionals in its database. Although maximizing the use and impact of a CRM for recruiting is outside the scope of this article, in short, CRMs are an essential tool for ensuring that every employment candidate receives timely communication at every stage of the recruiting process and that all prospects are being nurtured.
Niches are a Business Imperative
Whether a firm wants to attract private equity investment or survive the tidal wave, it’s time to niche. When a firm is highly specialized, serving a clearly defined ideal client base, and offering sophisticated services to help companies achieve their goals, it is well on its way to reaching its goals. Even large firms that may be able to serve more than one ideal client type will still benefit from a clear identity and well-articulated client journey. Having a niche is inherently efficient, because staff time is being used in ways that will benefit many clients, and developing their knowledge and experience will only add to the value provided, leading to increased fees and increased profits. From there, a firm’s marketing, business development, and sales strategies will have a clear and distinct focus that will bolster its brand.
Put Advisory Services Front and Center
Client accounting services (CAS) is the fastest growing service area in accounting firms for good reasons. These services provide a great deal of value to clients, require specialized knowledge, and command higher prices. When clients can turn to a firm to support their business holistically, these advisors become even more essential to their success. Offering strategically selected advisory services for a firm’s niche will help it stand out from the competition with a clear identity and target market; marketing to a firm’s ideal client becomes easier, and better referrals will result. In addition, many business advisory services do not need to be done by a CPA, so the hiring pool increases as the diversity of roles within the organization expands. Plus, experienced advisors won’t be replaced by AI anytime soon.
Packages and Pricing
As a firm streamlines its processes, defines its niches, and develops services designed for its ideal clients, it will also need to update its pricing. Hourly billing has its limits and is not directly tied to the value provided to clients. Subscription-based pricing models, tiered packages, and pricing projects based on value can help improve profitability; reduce burn-out; and indicate to clients, prospects, and investors that the firm is not a commodity service provider. Clearly defined packages and project scopes are also tied to the efficiency that private equity investors are looking for. Client work can be executed with greater ease when every client doesn’t have a unique engagement, the components of the project are transparent, and team members have an easy way to upsell additional services if the client asks for something out of scope. This is all part of running efficiently and profitably as the firm grows.
Riding the Wave
There are reasons why CPA firms have become a popular investment for private equity: Individuals and businesses rely on their accountants in good times and bad, clients are extremely loyal, and the breadth of services CPA firms can offer continues to grow. Whether you want to “beat ’em or join ’em,” forward-looking CPA firms with clearly defined identities and modern sensibilities will survive and thrive.
