Shifting client expectations, technological advancements and a surge in mergers and acquisitions (M&A) and private equity (PE) activity are transforming the accounting profession. This evolution challenges traditional business models, forcing firms to rethink how they deliver value, attract clients and sustain profitability.
Proactively addressing these changes positions your firm for success, whether you want to thrive in the advisory space or prepare for private equity involvement. In either scenario, transforming the business model is no longer optional—it’s essential.
Adding advisory to compliance services
Historically, firms operated primarily on a compliance-based model, focused on transactional services like tax preparation, audits and bookkeeping. But as technology automates routine tasks, the demand for advisory services—strategic guidance on growth, risk management and operational efficiencies—has surged.
According to the 2024 CPA.com and AICPA PCPS Client Advisory Services Benchmark Survey, firms that generate significant revenue from advisory services earn more than 30% higher monthly recurring revenue.
Why the shift? There are several reasons:
Client demand for value-added services. Clients increasingly expect their accountants to act as strategic advisors, not just number crunchers. Sage’s Practice of Now research report found that 82% of business owners want their accountants to provide proactive business advice and consultancy services.
Technology’s role. Cloud-based accounting platforms, artificial intelligence, automation and data analytics tools allow firms to offer real-time insights and sophisticated forecasting. Firms can leverage these technologies to expand their advisory services and deepen client relationships.
Higher margins. Advisory services tend to yield higher profit margins than compliance work, which is increasingly commoditized and price-sensitive. A value-based pricing model tied to outcomes rather than hours worked improves financial performance.
Private equity and M&A accelerate business model transformation
The influx of private equity capital into the accounting profession is another critical driver of change. PE firms see our profession as ripe for investment due to its recurring revenue streams, opportunities for consolidation and untapped potential for scaling advisory services.
However, private equity involvement forces a shift in the business model for several reasons:
Focus on profitability and scalability. PE investors prioritize scalable, high-margin services. This pushes firms to streamline operations and focus on growth areas like advisory and consulting.
Talent strategy overhaul. To deliver on PE-backed growth objectives, firms must be able to attract and retain talent—particularly those skilled in advisory and consulting. This shift requires firm leaders to reevaluate compensation structures and career paths to compete with other professional services firms.
Client segmentation and strategic focus. PE-backed firms usually take a more disciplined approach to client segmentation, focusing on high-value relationships and letting go of less profitable engagements.
If your firm is considering seeking PE investment, evolve your business model now. Building a strong foundation in these areas positions your firm for a higher valuation.
Strategies for a successful business model evolution
Whether your firm is moving toward advisory services, preparing for private equity or both, the following strategies can guide your transformation:
Adopt a client-centric mindset. Shift your focus from offering services to delivering outcomes. Understand your clients’ pain points and design solutions that address their broader business challenges.
Invest in technology. Implement tools that enable efficiency and insight, such as predictive analytics, customer relationship management (CRM) systems and automated workflows.
Upskill your workforce. Offer training programs that equip your team with the skills needed for advisory roles, such as financial modeling, strategic planning and industry-specific expertise.
Reevaluate pricing models. Move away from hourly billing to value-based pricing, aligning fees with the impact and results delivered to clients.
Develop succession plans. Build a leadership pipeline to sustain the firm’s new direction. Private equity involvement often requires changes in governance and leadership structure.
The work done to modernize your business model can pay dividends in multiple scenarios. If your firm stays independent, you’re poised for organic growth and higher client satisfaction. If you pursue M&A or private equity, your firm will stand out as a strategic and profitable acquisition target. But now is the time to act. Delaying change could mean falling behind competitors who are already aligning their business models with the future. Let the current trends be a catalyst for action—not a wake-up call once it’s too late.
Do you want to connect with other Managing Partners in the accounting profession to improve performance and grow your firm?
The Boomer Managing Partner Circle is a peer group of Managing Partners from successful and growing firms. Apply now to gain a network of trusted peers to call on as you shape your firm for the future.
Jim Boomer, CEO of Boomer Consulting, Inc., is an expert on managing technology within an accounting firm. He serves as the director of the Boomer Technology Circles, The Advisor Circle and the CIO Circle. He also acts as a strategic planning and technology consultant and firm adviser to CPA firms across the country. Accounting Today called him a “thought leader who can help accountants create next-generation firms.” Jim is a prolific writer with a monthly column in The CPA Practice Advisor and has been published in a number of industry publications including Accounting Today, Accounting Web, the International Group of Accounting Firms and several state society publications.
תגובות