Would you sign on with a cardiologist who also dabbled in podiatry?
Being spread too thin can be a natural consequence of having never clearly defined a focus area. This creates a vacuum that inevitably leads to a practice that specializes in everything, but has mastery in none.
May 21, 2012
It’s a common pitfall. All too often in public practice, well-meaning owners try to be too many things to too many people. There are good intentions behind every scenario, and the scenarios always begin innocently enough. Usually, a few clients express a need for this service or that. Accustomed to being of professional assistance, the practice owner responds, and the effort is appreciated. Before long, the owner and, indeed, the practice is off-message. In other cases, being spread too thin is simply a natural consequence of having never clearly defined a focus area. This creates a vacuum that inevitably leads to a practice that specializes in everything but has mastery in none.
It’s a tall order to stay proficient in just one area of a profession that is as necessarily complex as accounting. It is rare for one person to be exceptional at two or more. Would you sign on with a cardiologist who also dabbled in podiatry? Not likely. Even the legendary Michael Jordan couldn’t play baseball very well.
This is not to say that a practice can’t be built on several different specialties. It can, but in those cases, it’s critical to have the right team in place—to have an expert in each area. In larger firms, this happens almost instinctively as partners develop specific expertise. There are plenty of options: audit, governmental audit, benefit administration, financial planning, litigation support, and business valuation, to name a few.
I’ve seen far too many owners take on adjunct lines of business, whether in the name of diversification or in hopes of increasing revenues, only to find themselves frustrated. In more cases than not, the secondary line of work ends up representing a small portion of fees—and an incommensurate drain on firm resources. The amount of time required to do the second area justice is often not considered in measuring the bottom line of that business segment. Most owners do not itemize non-chargeable time to different service areas. If they did, they would see that they are losing money on the add-on and hurting the core.
In contrast, the benefits of focus are many. If you want to excel in a specific area, just do it—and do a lot of it. There’s truth to the old saying “practice makes perfect.” Whatever is your chosen specialty, depth of experience is what will make you better at it. It will also enhance your efficiency and, therefore, make your business more profitable. And by choosing a specialty area that you enjoy, your own sense of satisfaction will be increased.
You’ll be adding more value for your clients and, as a result, creating more wealth for yourself. The division of labor is a cornerstone of business theory. Many of the advances in emerging economies that are taking place today are based on these fundamental ideas. These concepts go back to the earliest days of manufacturing. I am including here the story of the Pin Factory from Adam Smith’s seminal 1776 treatise, Wealth of Nations. This is a wonderful illustration of the potential of specialization and division of labor—in other words, the power of focus!
To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business … nor acquainted with the use of the machinery employed in it … could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make 20. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about 18 distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind where 10 men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about 12lbs of pins in a day. There are in a pound upwards of 4,000 pins of a middling size.
Those 10 persons, therefore, could make among them upwards of 48,000 pins in a day. Each person, therefore, making a 10th part of 48,000 pins, might be considered as making 4,800 pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made 20, perhaps not one pin in a day; that is, certainly, not the 240th, perhaps not the 4,800th part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.
Today’s payroll companies are a great example of successfully focused businesses. The accuracy, efficiency, and economy provided by large payroll providers are very impressive and difficult to compete with. They’ve found their niche and mastered the art of it to the benefit of their clients and their corporate balance sheet.
The key is to determine what aspects of your professional practice you most enjoy and then identify what you’re particularly good at doing. Here’s a hint: The two will generally go hand-in-hand. Pick an area that you are comfortable with and stick to it. Eliminate services that are not part of your practice’s core competency. Now, focus.
This article has been excerpted from Accountant’s Flight Plan: Best Practices for Today’s Firms. You can purchase the publications on CPA2Biz.com.
Brannon Poe, CPA, began his career in public accounting as an auditor with Ernst & Young before working for several years in auditing and tax preparation for the regional firm of Elliott, Davis & Company. Subsequently, Brannon became a shareholder in a privately held, family-owned business and a founding shareholder in a successful start-up manufacturing company. Quarterly business coaching classes and continually investing in consultative and team building skills have helped Poe and his team close over 100 transactions since 2003.