Will You Be Ready for the Next Boom?
New tax and regulatory changes could spark a new growth surge for the profession. A few savvy firms are getting ready to leverage the new boom into transformational change. Other firms could get left behind. Will you be ready? And what can you learn from an old lipstick salesman? E-mail comments to Rick Telberg here.
September 27, 2010
As state and federal governments struggle against an ailing economy, many accountants are bracing for a new surge of work from new tax and regulatory changes. But all that new work for CPAs may not be a good thing, according to one of the profession's most outspoken iconoclasts.
"Regulatory revenue windfalls have a way of driving profits too much," says CPA Ron Baker, perhaps the profession's leading evangelist for burying the billable-hour business model.
The expected flood of new business, he says, "will distract us from what's really important. The important things won't get done. People will become complacent again."
"One of the lessons of the new normal has been a real focus on client service," Baker says. Baker cites an AICPA estimate that it costs 11 times more to acquire a new customer than keep an old one. By his own estimates, top CPA firms generate 25 percent to 40 percent of new business from sales to existing customers. But with the recession, some firms are learning how to stretch that to 50 percent to 80 percent through drive and innovation.
"We're learning that we don't live in a vacuum when it comes to client service," he says. "The client compares us to everyone else they deal with. And they're dealing with places like Zappos, Ritz-Carlton and Disney. They're not going to accept what most accounting firms have been dishing out."
In the same way that firms may become distracted from advancing in client service, Baker fears too that they may stall other innovations in delivering value and nurturing talent.
Baker distinguishes, for example, between efficiency and effectiveness. Too many firms — and too many partner-compensation plans, he believes — are based on improving efficiency — doing things faster, cheaper, better. But that doesn't change some of the fundamental problems with the traditional accounting firm business model — billing for time, instead of for value; or focusing on deliverables instead of relationships.
In Baker's view, only by embracing effectiveness over efficiency will firms be able to make fundamental change. "We can grind down workflows ad infinitum," he says. "But that just means we're getting better at producing the same old thing. All the efficiency in the world wouldn't have saved the buggy whip."
Too many accounting firms, he says, are stuck on the idea that they sell products or services. "But people don't buy products or services," he says. "They buy solutions to problems. They buy new opportunities. They buy value."
Baker seems to say that it all depends on how you look at it. And if accountants could look at it more often from the clients' perspectives, they would be more successful and less likely to fall to obsolescence.
To illustrate the difference between how a customer so often sees things differently from the merchant, Baker quotes cosmetics pioneer Charles Revson: "In our factory, we make lipstick. In our advertising, we sell hope."
Customers, Baker says, aren't buying tax or regulatory compliance alone. They are seeking to build a stronger business for themselves and a better life for themselves.
WHAT DO YOU THINK? Can CPAs learn from a lipstick salesman? E-mail your comments, rants, raves, ideas or questions to Rick Telberg here.
Rick Telberg is president and chief executive of Bay Street Group LLC, advisors in marketing, management and strategy.
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