As a CPA firm leader, you know that your firm must embrace a consulting mindset. You are watching your tax and audit margins erode and competition intensify for clients and for recruiting and retaining top talent. You recognize the profit potential in providing consulting services to your clients and prospective clients. But recognizing a solution to a problem is not the same as knowing how to execute it.
So how can you catalyze a shift in your firm from compliance to consulting? Following are some of the key steps that we see working in CPA firms around the country.
1: They don’t try to run their consulting divisions like a compliance practice.
Leaders in successful CPA and consulting firms recognize that they cannot attempt to run their consulting service lines like they do their tax and audit lines. Consulting requires different types of people, governance and infrastructure investment. Consulting practices use different KPIs. Instead of billable hours and utilization, they focus on revenue growth. When they are on a project, their realization should be close to 100%. But these projects must be resold each year—or even multiple times per year, depending on the type of service. Keeping the pipeline full requires a much heavier investment in sales and marketing to drive those enviable profitability and growth rates.
Bottom line: Don’t expect your consultants to fill out a time sheet.
2: They bring their ‘stealth’ consulting practice into the light.
Many CPA firms believe they are already consultants because they sit down with clients to offer advice and insight when they deliver a tax return or financial attestation. This compliance-based advisory is valuable to clients. But too many firms are leaving money on the table because they fail to package and price that advice in a way that captures the value they deliver.
Successful CPA consulting firms clarify the value proposition of the consulting service and craft a specific go-to-market plan for each target audience. Then they make sure that message is delivered consistently both within the firm and externally.
3: They loosen the grip of gatekeeper partners with structures and systems.
The primary roadblock for most CPA firms struggling to launch a consulting practice is the “gatekeeper” partner. These partners hold their client relationships close for a few reasons. For one, they don’t understand the service and the value it can provide to their clients. The clear and consistent communication of the value proposition can help educate those partners. But what will make the most difference is sharing stories about how the firm solved a client’s problems and generated positive financial results for the client and for the firm. In many cases, the revenues generated by a consulting service are many times what the firm was making from delivery of audit or tax compliance services.
Of course, in firms that continue to pay partners based on their book of business, those gatekeepers will continue to cling to their clients. The most successful firms are redesigning compensation systems to recognize the contributions of multiple people in bringing a consulting project across the finish line—from the originator of lead to the client relationship manager. By “spreading the love,” these firms reduce the incentive for partners to hold onto compliance work at the expense of more profitable consulting work.
The journey from a compliance-focused CPA firm to one that leads with a consulting mentality can be a long one. But the payoff is a firm that will remain strong, resilient and growing for decades to come.
To learn more, click here to receive our forthcoming white paper, “How to Beat the Robots: The Accounting Industry’s Big Shift from Compliance to Consulting.” Also, check out our 2017 panel discussion on the growth of consulting services in the CPA profession.