Embracing a new business model for CPA firms
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Embracing a new business model for CPA firms

2 months ago · 3 min read

For generations, the dominant business model in accounting has been built on two pillars: (1) providing clients with compliance-based deliverables such as tax returns, financial statements and attestation, and (2) providing CPAs with a career path climbing from the staff room to the owner’s box.

But as Bob Dylan first sang nearly 60 years ago, the times they are a changin’. Many practitioners are implementing a new model that can broaden opportunities to build stronger relationships with clients and provide greater challenges for staff, all while increasing firm productivity and profitability. Here’s a look at what has changed, some of the advantages of a new model, and how to get started.

An evolving landscape

During and since the height of the pandemic, several factors have converged to drive the need for a new firm business model. They include:

  • Technology advancements: Wider adoption of the cloud, the continued development of artificial intelligence, wider applications of data analytics and automation technology. These all have changed how firms work with clients, how they perform services and how firm members work together. CPAs are better able to collaborate with clients in real time and to offer staff greater work flexibility.

  • Evolving client expectations: During the worst days of the pandemic, many clients realized that their firms could go beyond compliance to become a strategic partner. They got used to consulting their CPA advisers regularly on critical business concerns. As a result, clients have now begun to see compliance services as byproducts of the firm’s core offerings.

  • Changing staff needs: Remote work gave staff a level of mobility that many now consider normal practice. At the same time, many staff members who helped clients during the disruptions of the pandemic prefer to continue those relationships rather than focus on tax return due dates. In addition, fewer staff people are looking to advance to become partners or firm owners, meaning firms will need to rethink their leadership structure and consider abandoning the old pyramid-shaped hierarchy.

With so much in transformation, accounting’s old business model can’t remain the same. Among other things, it was not built to offer holistic advisory services to clients. Billing based on hours spent or annual deliverables is not conducive to a consultative client relationship. Multi-partner firms may find it necessary to change compensation models. If partners were previously paid based on a book of business, firms might now switch to a corporate model without partners. Client relationships would be "owned" by the organization rather than a partner, and all firm members would work together to provide advisory and related services to a range of clients.

The benefits of transformation

There are some clear benefits to making a change.

  • Busy season has always been hectic, and recent problems at the IRS have only exacerbated the problem. A shift to advisory services evens out the busy season crunch and also makes it possible to maintain a profitable practice while everyone works 40 hours a week all year.

  • A new business model may help address staffing issues. The number of new accountants entering the profession and becoming CPAs is declining. Such staff may be easier to recruit and retain if they can work fewer hours performing duties that are more challenging and varied than those offered by other firms.

  • Adoption of a modernized business model could help firms with succession issues. Firm sales have emerged as often the best option to fund partner retirement. The value of a firm rises when it becomes more efficient and better able to provide the advisory services clients demand. As a result, buyers will place more value on potential purchase or merger candidates that have updated their models.

A roadmap to transformation

The journey to a new business model starts with a few important steps.

  • Identify the clients you want to serve. The best approach usually is to focus on a small number of niches. You can then recruit and develop deep expertise in the industry, or industries, that best fit the firm’s resources and passion.

  • Ensure your people are ready. Change the firm mindset to see staff not as data entry workers but as professionals who interact with and help your clients. Then consider what upskilling staff may need to fulfil that role. Areas of focus for training may be technology, soft skills and the fundamentals of providing advisory services.

  • Reconsider your billing protocol. Value or subscription pricing is best suited for the ongoing interaction and consultations associated with advisory services.

  • Pump up your technology tools. They are at the heart of a client advisory practice. If firms fail to use innovative tools to create a sustainable firm, their opportunities and value will decline.

Finally, keep an eye out for a series of resources PCPS is developing to help firms develop and deploy new business models. Many of these resources will be geared toward small firms.

Transforming your business model is an ongoing process. It won’t happen overnight, but those that make this shift and stay on top of new technologies and innovations will be able to enjoy the benefits.

Have questions for Carl? Contact him directly at carl.peterson@aicpa-cima.com or 651-252-4618. And be sure to sign up for Carl’s Small Firm Update webcasts. The next one will take place on Dec. 8 from 2pm until 3pm ET.

Carl Peterson, CPA, CGMA

Carl Peterson, CPA, is Vice President of Small Firms at the Association of International Certified Professional Accountants.

In this capacity, he meets with small CPA firms regularly to understand their issues and represent these firms from an advocacy and firm development perspective. Peterson serves as the voice of small firms within the AICPA on standard-setting, regulatory and small business issues. He is responsible for ensuring AICPA initiatives continue to meet the needs of small firms.

Carl is a licensed CPA, and previously served as a managing partner at Peterson, Peterson & Associates, PLC, in Minneapolis/St. Paul, where he built its service and client base.

Carl has a history volunteering within the profession, including having served as a member of AICPA Council and as a member of the AICPA’s Accounting and Review Services Committee. In addition, he has served the Minnesota Society of CPAs as Chairman of the Board of Directors, as well as Chairman of the Political Action and Legislative Affairs committees. In 2013, he was honored by the Society with their Distinguished Service Award.

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