How Smaller Accounting Firms Can Excel In Today’s Hyper-Competitive Environment

By: Russ Alan Prince, Forbes Contributor

Generally speaking, smaller firms need to add value-added advisory capabilities and do a good job of communicating their expertise to targeted audiences. Doing so will enable them to remain competitive and excel in an increasingly difficult marketplace.

The accounting industry is comprised of a number of colossuses, many mid-tier firms and thousands of small firms. In a bustling economy – think pre-2008 – most smaller firms were able to do quite well. At that time, compliance services were in high demand, and it was relatively easy to cultivate new clients. Those days are long gone.

According to Joe Tarasco, CEO of Accountants Advisory Group, “One of the keys to success for small accounting firms is being able to provide integrated solutions. While continuing to deliver compliance services, small firms need to develop and highlight value-added advisory capabilities. They have to use these advisory capabilities to differentiate themselves. Many of the larger firms are growing because of their advisory services, and this approach can be duplicated by smaller firms.”

At the same time, smaller firms would usually be well served by identifying and focusing on certain niches and specialties. For example, one of the biggest growth opportunities for smaller firms is the family office practice. “By bundling a variety of capabilities often including tax planning, compliance and bill paying, the accountant becomes a trusted advisor to high-net worth clients,” says Tarasco. “What’s more is that well managed family office practices can readily generate margins reaching 75%. It is unquestionably one of the most lucrative types of practices for an accounting firm. It also can be a very effective way to generate business for the other practices in the firm.”

Presently, smaller firms must become disciplined, agile and business development oriented. They have to develop high margin value-added advisory capabilities such as family office practices. Very importantly, they must communicate to potential clients and centers of influence the depth, breath and level of their expertise. Failing to do so makes them “hidden talents,” who fall way short of their business potential.

Combining high caliber value-added advisory capabilities with effective outreach – think thought leadership – smaller accounting firms can be extremely successful. Failing to do so can result in a slow demise or – the more common consequence – being adsorbed by larger accounting firms.