Any accounting firm that wants to improve its fortunes needs a growth strategy. A robust growth strategy describes a firm’s target industries and clients, what services it will offer and how it will position and develop its brand. In spite of pressures such as increased competition, automation and the commoditization of services, this sets the pace to build the business and achieve goals.
If you have never developed such a strategy, don’t worry. This post will explain some of the most popular growth strategies you can pursue and the two primary vehicles you can use to put your chosen plan into effect.
Strategies for accounting firm growth
There are many strategies for growing a company and they all involve varying degrees of risk. They are frequently mentioned in strategic planning discussions — and yet they are also often misunderstood. Below, I describe three popular growth strategies:
Increase market penetration
In the world of consumer products, this approach means selling more products to the same consumer group. The math is simple: if it’s good to sell one laptop, selling several dozens is even better.
In the accounting world, a similar concept applies, but in this case, it means offering more services to the same clients. It’s relatively easy as strategies go, but it is not entirely without risk. For starters, you need to make sure clients understand your full range of services. Cross-selling unfamiliar services to existing clients can be challenging. You may have plenty of room to grow the business and get more revenue from existing clients. However, before you can do so, you first need to educate them about your full range of capabilities — which is by no means an easy task.
Open new markets
Another strategy is to offer your existing services in a new market, which is one of the most commonly-used growth strategies in the professional services sector. In fact, many firms go all in, by rolling out their services to any and every type of client. More potential buyers mean more sales, so what could go wrong?
Well … plenty. This strategy’s risks begin with the fact that it takes money and resources to educate and nurture new audiences — and underinvesting can lead to wasted effort and produce underwhelming results. There is also the very real risk of brand dilution. If people associate you with a particular market and you expand to compete in other markets, any advantage you had as a specialist could evaporate.
Introduce new services
Another strategy option is to develop an entirely new service offering. An accounting firm, for example, might decide to offer financial planning or internet security services on top of its traditional tax practice.
This growth strategy involves many risks. It can take a significant amount of time and effort to develop a new service. This could distract you from billable work, business development or other essential activities. There may also be regulatory obstacles.
However, perhaps the most dangerous risk in this strategy is that of watering down your brand. The expression, “jack-of-all-trades, master of none,” sums it up. By pursuing a broader recognition in the market, you could end up being known for nothing at all. The more extensive your service line becomes, the less focused you are in a core area of expertise. You could end up throwing away the one unique trait or strength that people associated with you, the one that made you memorable in your market.
You should also consider whether your market will accept that your firm can provide the new service you want to launch. Could it seem to create a conflict of interest? Alternatively, could it alienate or confuse some of your already existing referral sources? Is it fit a good for your brand? And, regardless of how capable you are of delivering the new service, will it be a natural complement to your other services? Or will it be an awkward add-on, raising questions in the minds of prospects?
Organic growth vs. merger and acquisition
Once you have selected the strategy for growth that makes the most sense, you have another major decision to make: how will you implement it?
Organic growth means winning business from new or existing clients. This is typically the healthiest road to growth, as it is more reliable and valuable than acquisition. This course requires that you research your target clients to determine their needs and interests. You can then use this research to develop a definite market niche and strong differentiators. From there, you can embark on a marketing program that combines digital and traditional efforts in order increase your ability to reach a wide range of potential clients and share your expertise with the marketplace.
Mergers and acquisitions (M&As)
Mergers and acquisitions (M&As) are another path to growth. They have several key advantages, but also some notable limitations. In a sense, you are buying growth — which in itself is not necessarily bad. M&As allow firms to quickly add new expertise and capabilities, helping organizations gain credibility in new markets or change the balance of power in an existing one. There are several ways that M&As can generate growth, such as addressing critical gaps in service offerings or clientele or bringing in new revenue streams and efficiencies
Be sure to vet any firm you consider merging with or acquiring fully. Poorly thought through mergers or acquisitions can be fraught with problems, including culture clashes, diluted brands, and confusion in the marketplace.
Each accounting firm needs to figure out its strategy for growth. While most firms begin with a small number of existing client relationships and referral sources that they can tap, they eventually outgrow these limited resources. Without a formal business growth strategy, firms tend to grow in fits and starts, if at all.
However, there is good news. Any of the approaches listed above can work — but the one you choose has to be a good fit for your resources, culture and risk tolerance.
Four ways to grow your practice
Building a successful practice goes beyond great client service. It’s equally important to spend time marketing, selling, and embracing efficiencies.