Where are the growth opportunities in your firm? Today, most firm leaders recognize that growth in revenue and profits will come from consulting and advisory services, but they’re not sure where to start.
Leaders must strategically leverage various aspects of their operations to foster growth and long-term sustainability. The question is, which lever(s) do you pull to make it happen?
Let’s explore five essential levers that managing partners can utilize to drive growth: pricing, packaging of services, process management, revenue per full-time equivalent (FTE) and mindset.
1. Pricing: Targeting the right clients
One of the most impactful levers for driving growth in a CPA firm is pricing, specifically targeting the right clients. Many firms undercharge for their services. Some even give away their highest-value service: strategic advice.
Pricing isn’t a one-size-fits-all strategy. You need to tailor it to your client's needs and value perceptions. You can command higher fees and improve profitability by identifying and targeting high-value clients.
Key pricing strategies
Value-based pricing. Charge clients based on the perceived value of services rather than the hours you spend delivering them.
Segmented pricing. Differentiate pricing for different client segments to maximize revenue.
Premium pricing for premium services. Offer higher-end services at a premium price to clients who seek and value such offerings.
According to an AICPA study cited by the International Federation of Accountants, firm revenues using value pricing were up 10% among small firms, and half of these firms’ total revenues were from value pricing. Among medium-sized firms, fees doubled for firms using value pricing compared to traditional hourly pricing.
2. Packaging of services: Offering a menu of options
Packaging services into comprehensive, easy-to-understand bundles can enhance a firm's appeal and increase wallet share. By offering clients a menu of options, firms can cater to various needs, preferences and budgets to drive growth through increased client satisfaction and loyalty.
Key service packaging strategies
Service bundles. Create packages that combine multiple services. Bundle the traditional transactional and compliance services that clients need, like bookkeeping and tax, with higher value advisory services they want, like budgeting, strategic planning, cash flow management, key performance indicators (KPIs) and metrics, and wealth management.
Tiered offerings. Offer different levels of service (basic, standard, premium) to appeal to a broader range of clients.
Change orders. Some firm leaders fear value pricing because the scope of work can change after the client signs an agreement. However, you can handle these requests for additional services or changes to existing services with change orders. Train your team members to recognize changes in the scope of work and address them proactively with clients.
This approach simplifies decision-making for clients and promotes cross-selling and upselling opportunities, leading to higher overall revenue per client.
3. Process management: Embracing automation
Effective process management, particularly through automation, helps firms reduce costs and increase efficiency. By automating routine and repetitive tasks, you can free up valuable time for your staff to focus on higher-value activities, thus driving growth.
Key process management strategies
Workflow automation. Implement software solutions to automate transactional services, including tax preparation, bookkeeping and other routine tasks.
Client portals. Use client portals and other digital tools for document exchange and communication to streamline processes and expand your potential client base.
Data analytics. Use data analytics tools to gain insights and continuously improve your processes.
A Deloitte study found that firms adopting intelligent automation achieved an average cost reduction of 32% and an average revenue increase of 24%.
4. Revenue per FTE: A New Metric for Growth
Traditional metrics such as realization, utilization, and profits still have a place in a modern firm, but many firms find it helpful to focus on revenue per full-time equivalent (FTE), which provides a more granular view of productivity and efficiency.
Revenue per FTE helps firms understand how effectively they utilize their human resources to generate income.
Key revenue per FTE strategies
Performance benchmarking. Regularly compare revenue per FTE against industry benchmarks to identify areas for improvement. An analysis of Accounting Today’s Top 100 firms data found that the average revenue per FTE across the top 100 firms is about $230,000.
Skill development. Invest in training and development to enhance your staff's capabilities. High-quality training and professional development opportunities increase efficiency and innovation, increasing your team’s revenue-generating potential.
Resource allocation. Optimize your human resources by delegating work to the proper levels. When people spend their time working at their unique ability level, your firm is on a profitable path.
5. Mindset: Cultivating a growth-oriented culture
Arguably the most challenging lever to pull is mindset. Every partner in your firm may have different attitudes toward growth, investment and profitability. Cultivating a growth-oriented mindset across the firm is crucial for long-term success.
Key growth mindset strategies
Leadership development. Encourage and develop growth-minded leaders within the firm.
Cultural alignment. Foster a culture that values innovation, continuous improvement and client-centricity.
Goal setting. Set ambitious, achievable growth targets and align them with individual and team incentives.
The Harvard Business Review notes that employees in companies with a strong growth mindset culture are:
47% likelier to trust their colleagues
34% likelier to feel a strong sense of ownership and commitment to the company
65% likelier to say the company supports risk-taking
49% likelier to sat the company fosters innovation
Pulling multiple levers for optimal growth
While each of these levers—pricing, packaging of services, process management, tracking revenue per FTE and mindset—can drive growth individually, there is no silver bullet. A holistic approach that integrates these elements will yield the best results, and the most successful managing partners will pull multiple levers simultaneously.
We recommend adopting an "upside-down budget" approach. First, determine your desired profit and then backtrack to identify the necessary revenue to get you there. This strategy can be a game-changer, encouraging proactive planning and strategic decision-making.
By effectively leveraging these five levers, you can navigate the complexities of running a modern firm and drive sustainable growth.
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.
L. Gary Boomer, Visionary & Strategist of Boomer Consulting, Inc., is recognized in the accounting profession as the leading authority on technology and firm management. He consults and speaks around the globe on several topics including strategic and technology planning; mindset, skillsets and toolsets for the future; change management and developing a training and learning culture. He also acts as a planning facilitator and coach to some of the accounting profession's top firms.
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