Four Ways Firm Growth Stalls—and How to Jump-Start It

CPA firms often stall out in a flat or negative growth pattern for the same four reasons—here’s how to overcome them. By Dan McMahon, CPA | Digital Exclusive - 2020

Almost every firm faces the same challenge at some point: Their growth stagnates. Firm partners tend to acquire a false sense of security that they are involved in sound businesses that will grow organically—with limited intervention of business development strategies and tactics—and eventually yield a healthy retirement payout. The reality is that highly successful firms are acutely aware of the work required for sustainable growth.

In my 25 years of working closely with professional services firms, I’ve observed the exact same roadblocks slowing growth to a crawl or even reversing it. Unfortunately, by the time firms pause to objectively look at their businesses, there’s often no clear path to sustainable growth. The cost of investing in the wrong path can be extensive. Even worse, some paths (we must merge; we must reduce staffing; we must react rather than attack) bear a cultural cost as much as a financial cost that drags the firm backward rather than forward.

Here are four common barriers to growth that impact virtually every CPA firm at some point in their evolution. More importantly, here are ideas, strategies, and tactics to overcome these challenges.

#1: Keeping Low-Value Clients

Let’s start by addressing a somewhat obvious roadblock to sustainable growth. Every firm I’ve ever worked with knows they should routinely purge low-value clients to improve profitability. However, time and again, I see them fail to follow through and actually dump those clients.

Conceptually, purging is simple. Highly effective firms evaluate their books regularly and rank their clients as A, B, C, or D based on risk and profitability. High-risk, low-profitability clients are let go. When kept around, these clients create problems, including burning out your employees, devaluing your firm’s services, and draining your resources.

Why do firms keep low-value clients? In my experience, it’s one of three things: A failure of time management (they don’t realize what a drain they are to resources), a lack of confidence (they’re afraid they won’t be able to replace them), or faulty firm culture (they feel a misplaced sense of loyalty). Because of these problems, firm leaders convince themselves that they’ll get to it later or hope the problem somehow takes care of itself.

But only by proactively purging your client roster can you build a foundation for sustainable growth. Here are some tried-and-true tactics for overcoming this roadblock:

• Regularly communicate a consistent vision for growth to all team members.
• Engage the team—make sure they understand why and how unfit clients can affect the firm and get their buy-in on the firm’s growth goals.
• Set budgets and use metrics to objectively determine how time and resources are being used.
• Clearly communicate issues to clients who might straddle the line—and if they don’t fix them, be prepared to end your relationship with those clients.
• Every billing cycle is an opportunity to purge that one client that doesn’t quite fit—commit to a regular, effective purging practice and follow through.
  
  

#2: Working Harder Instead of Smarter

CPA firms face unique challenges when it comes to time management. Urgent deadlines and overwhelming busy seasons are the norm, and CPAs can easily find themselves caught in a frenzy of cramming in the busy months then vacation and catch-up work in the offseason. It can be difficult to take a step back and work smarter and more strategically with multiple important deadlines around the corner—even more difficult to step back and take a look at the big picture when caught in the minutiae of busy season.

It’s incumbent upon the leadership of a firm to take that step back and build effective strategies even in the most crushing of busy seasons. Many firms act like clients and prospects disappear from April to January every year—and they eventually reap the consequences in stagnant growth and a clogged pipeline of new business opportunities. Firms that can remain nimble and responsive year-round will have an enormous strategic advantage.

Obviously, regularly purging clients is a big step toward working smarter instead of harder. Here are some more tactics to change your mindset:

• Manage firm time effectively: Spend time working on tasks and projects that are aligned with the broader strategy and goals of the firm.
• Use tools, metrics, and other methods to analyze and optimize processes. Don’t use guesswork to make changes—do your homework.
• Accelerate tasks to the earliest possible point—staying ahead of the game leaves room for an unexpected new business opportunity.
• If you’re a firm leader, it’s your responsibility to see the big picture and ensure that smart strategies are in place in both busy and slow times—but every team member should own the challenge of working toward the broader strategy of the firm.
• When opportunity knocks, no matter how busy you are, answer the door immediately, confidently, and with a sense of urgency!
  
  

#3: Dismissing or Misunderstanding Culture

Everyone agrees that a firm’s culture is incredibly important, but few have a good definition of what culture actually is. Firms try to recruit new talent with talk of their culture and the M&A marketplace is full of jargon about organizations being culturally aligned. So, what is culture and why is it important?

Generally speaking, a firm’s culture is its personality and the values it deems important. Culture is an essential part of any growing CPA firm. Culture is what makes people want to work for you and with you—or leave your firm forever. A firm’s culture can be toxic in a variety of different ways that are incredibly detrimental to its long-term growth and daily operations. On the other hand, a healthy, team-oriented culture can result in exponential growth.

A firm’s culture is a highly intangible attribute that’s subjective rather than scientific and exact. With that in mind, here are the cultural traits I’ve seen in successful, growth-minded firms:

• Every staff member on every level understands the importance of growth and profitability to the firm, as well as their responsibilities in reaching those goals.
• Every team member, from administrative staff to partners, is in sales—in one capacity or another.
• Every staff member is highly valued for the skills they possess.
• A high value is placed on teamwork, and the firm values the collective responsibility of all team members.
• The firm is open and highly communicative—they meet often to share and discuss opportunities and challenges.
• The firm celebrates victories of all kinds.
  
  

#4: Seeing Sales as a One-Time Event

CPA firms struggling to grow often treat new opportunities this way: a sales lead arrives and a rainmaker jumps on the prospect without effectively evaluating investment time, staff availability, or expertise needed. Instead of a process, firms treat sales as a one-time event. Given the process-oriented background of an accountant, it surprises me that their sales processes are not optimized for efficacy and efficiency.

This problem often stems from a lack of an organized business development process. In the absence of a solid sales process, firms spend money wining and dining prospects or clients or taking them for a round of golf, or they respond to requests for proposal without proper internal vetting or qualification of a lead. These are all faulty business practices that drain resources without generating high quality client prospects.

Building a strong process saves time and effort and leads to strong, profitable client relationships. Here are tips for improving or creating your sales process:

• Your sales and marketing process should be thorough, consistent, and designed to serve the firm’s strategic goals. The process should be aligned with the size, budget, and appetite of the firm.
• The sales process starts from the very first contact with a prospect and is open-ended.
• The first step of any sales process should be a thorough client qualification process. You don’t want to onboard clients who will end up draining firm resources and stalling growth until you’re forced to purge them.
• Golf, client dinners, and other activities are evaluated based on ROI—not used as a go-to sales strategy.
• Every staff member has a part in the sales process and understands both their specific responsibility and the whole process and what the end goal of that process is. Thoroughly and regularly communicate about the process with feedback from every team member.

I’ve seen these four challenges trip up firms time and time again. While any one of these challenges can be an enormous roadblock to growth, they also interact with each other: A firm without an effective sales process is likely to have a host of high-risk, low-profitability clients because of ineffective or nonexistent prospect vetting. This leads to the firm working harder instead of smarter and being less likely to purge those clients. This can lead to firm burnout, an enormous cultural toll, and high staff turnover.

In the same way, implementing these tactics to overcome roadblocks can pay exponential dividends. By creating and implementing an effective, firm-wide growth strategy, you will not only see an increase in firm profitability, but also a loyal and engaged team, reinvigorated firm culture, an improved reputation and, eventually, a long line of high-profitability, low-risk clients who are clamoring to work with you.

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Dan McMahon, CPA is the founder and managing partner of Integrated Growth Advisors.