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Growth in A Professional Firm

Madhukar N Hiregange , Last updated: 10 May 2024  
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The world is changing dramatically, and if one is not aware of what the future is and what major changes are taking place in the future, one may not be able to sustain the practice. The users, needs of users, method of delivery, and form of delivery, among many others, would change. The speed of change is amazing. Yesterday, we were talking about what the millennials need today. We have started with Gen Z. Technology and automation are increasingly replacing the professional's routine jobs (reconciliations, filing, etc.) and even the basic information-level service. If one knows where to go, one may get much better advice for general issues or problems at the click of a button through Chat GPT, Copilot, etc. The quality of summarization and accuracy are far higher with automation, and therefore, clients would prefer that mode. The fees would also be reduced for such jobs as time gets crunched.

Growth in A Professional Firm

Clients may, in the shorter term, be MSME or SME for a decade or so, still like the professional's expertise in using IT to provide the services, though we have heard of software companies taking over our compliance function.

The general trend is to provide a broader range of services that add value. If the entire function itself can be outsourced, then it is even better. Smaller firms may find it difficult to grow unless they only focus on advisory or litigation. Even in that case, one needs to plan, as more people, more reach, and more geographies would need many aspects to be considered. The saying that one needs to put resources (capable or trained) in place considering the future. Firms that recruit when work comes would be found short on delivery timelines as well as quality. Plans today need a detailed operation plan (how the work would be done - resources needed), a technology upgrade plan, a visibility plan, a financial plan, and a business plan.

One can grow organically year on year with expansion in numbers, locations, and the number of collaborations and networked firms. Another option is to merge or take over another firm. This could bring in economies of scale, better branding and reach, and greater wisdom and knowledge sharing. Once one reaches some stage of, say, 100 employees, one can also look at international affiliations after careful research of cost vs. benefit, which can also be a way to take one to the next level of professional services. In this article, we have focused on organic growth, which we are familiar with.

Benefits of a Plan to Grow

There are many advantages to having a structured plan to grow. Growth has its own advantages, as below:

  1. It enables all in the firm to be proud of the firm and make a difference.
  2. Attracting more and more diverse types of work, which in turn adds to knowledge and confidence.
  3. Attracts and retains competent and committed individuals within the firm, enabling the capacity to take on more work or focus on new areas.
  4. The larger the firm, the more investments it makes in IT processes, which reduces overhead costs and helps it quote more competitively.
  5. In challenging times (like the pandemic), all eggs are not in one basket. Huge referral base of clients as well as collaborators. Networked professionals.
  6. Ability to provide high-quality services in new geographies, leading to overall benefit for the industry, profession, and, of course, the firm.
  7. Better utilization of the resources of the firm. In this age of the internet, even work for a few days can be shifted to locations or qualified people who are free.
  8. Once clients are assured of good-quality services delivered on time, the charge-out rates [fees] can also be increased.

Steps for Growth

Steps to ensure and enable growth with grace.

Step 1: Purpose, vision, mission, and core values

Excellence in quality as well as delivery on time is something the client expects.The individual partners may also make their own goals and then brainstorm on the common culture and way forward with an aligned purpose. Ideally, this could be a shared vision with at least all the partners and the key seniors who are in the leadership pipeline giving their views. It is important to bring out the value proposition and the differentiators for the firm in this plan. Differentiators could include problem-solving skills, cost reduction, service experience, communication, accessibility to the required level of expertise, specialization, etc. The client-centric focus areas of the firm of the firm would determine how successful they would be in growing. We need to remember and guard against being mediocre and superficial. Excellence in quality as well as delivery on time is something the client expects. Therefore, firms may have to have their own clear objectives. In chapter 1, we have looked at how to set inspiring goals and the structure to achieve them.

Where one wishes to be in 5 years' time frame needs to be agreed upon, and what is the gap presently identified? Against each of the goals, why (3-5 reasons) it is important should be noted. Against each of the goals, a 10-point action plan to reach the goals with yearly targets [number of branches, partners, qualified collaborations, networked professionals, quality levels, new service areas, targeted income in each income stream proposed to be added] The action plan should be further broken down into what is to be done daily, weekly, monthly, quarterly, and yearly. This could be said to be the professional development plan. If a larger firm is planned, then the SWOT needs to be prepared for the firm as a whole as well as for each service stream and all partners and key personnel. There may be a need to ensure that the organizational structure of the professional firm is laid out, giving emphasis to the key areas of training, HR, quality, service attraction, adopting IT, and standardization of service delivery. These need to be given enough time other than routine service provision. In my understanding, the minimum time set aside for these activities should be 20% of the total. This would include the implementation with change management top-down in time and regular monitoring where necessary. The plan should be SMART(google) and variances to be regularly corrected and plans tweaked to reality once in a year.

 

Step 2: Implementation of the plan

Good ideas remain so [consider: ideas without implementation are mere delusions] unless we put in place actions with monitoring the schedules and complete the small and big projects. This could be internal or a service to the clients. Our innate capability of understanding risks would help implement proper IS controls and general controls to detect, correct, and prevent errors.

Step 3: Building is needed. Expert knowledge and skills

The partners and key employees would make or break the firm's progress. It is critical to stay up to date on changes, standards, and judicial orders.

The earlier chapter on acquiring knowledge and skills may be useful. The importance of talent attraction and engagement needs to be emphasized. Their mentoring in spirit and professional coaching could be ways to strengthen connections within.

It is important to build leadership within the organization to retain competent. Among CSs, I have felt that we are cagey about delegation and giving independent authority to the juniors due to fear of poorer quality work or client retention. This can happen, but one needs to have overall control and a final touch with the client.

If not presently available, tie-ups (collaboration, networks) with experts or geographically for the time being could also be a fast-track solution. Merging with the specialist could also be an option.

Step 4: Customized One-to-One Service

SMPs have the advantage of being qualified partners themselves when interacting with clients. This major differentiator needs to be safeguarded to retain and attract new clients. The response time and personal attention in such cases, especially over a period of time, cannot be replaced. This could be offered to premium clients, with the qualified in-office person responsible for the delivery.

Step 5: Value Pricing

In the area chosen, one could have a different offering (packages) to suit the SME/big client needs. Today, there are many products, such as tax and cost optimization, that could lead to value where a professional can quote a portion of the savings as the fee. Management consulting assignments can be directly linked to the benefit. This type of service would be very attractive for the clients, as it is certain to add to the profit with no fixed cost.

Step 6: Adopting IT/AI

Every professional firm today needs to use IT tools to verify a higher sample (100%) as well as analytical tools. In GST, a large number of economical utilities can support Recos++. Having a captive (networked) IT team would definitely add value and be fast at solving those issues. Clients would also expect us to guide them to such useful tools.

There could be some more steps to ensure that we grow. However, in our experience, unless there is an owner at the partner level who is passionate about implementing the change and making it work, initiatives lose steam and reach the backburner.

Step 7: Specialize in a Specific Industry or Stream

It could be a good idea for firms providing a big basket to also specialize in a subject or industry vertical to gain insights and recognition. This could also depend on the main industries of clients being serviced or targeted.

Step 8: Focus on Quality: Perception

Consistent quality work leads to client loyalty, and fee share increases. One needs to have some basic checklists, following applicable standards, peer review, and vetting by experienced people in place to ensure incorrect advice is never given. We have made a SOP for each stream, from the stage of inquiry to billing and final follow-up on the delivered assignment. This ensures some consistency in the work across locations. The final presentation today matters due to top management being busy. The use of infographics along with key insights could be a short PowerPoint with a detailed explanation provided to the finance team.

 

Continuation/ Succession

The traditional firms worked with a limited number of partners and employees. At that time, people would be with the firm for 30–40 years. Today, with global opportunities and new, diverse fields opening, the period has shrunk to a few years. Therefore, high salaries linked to income or a share of profit could be one way to ensure the long-term continuation of competent professionals. We have an average age of 34 for all partners of the firm as of date. Some of our younger partners, less than 30, would put a 50-year-old professional to shame, as they are open and fast; learning new concepts is a child's play for them. They have more energy and a hunger to prove themselves.

Many old CA firms have not been able to sustain themselves due to being closed in their thinking, fearing that the new blood would not be ethical, not being willing to share fairly the increased profits, and being unable to delegate. CAs of my time are looking at exit, and many have been steadily losing clients over the years. Obviously, clients are looking at firms that have more stability and today's needed competence. Many of us, like me, were proprietors for 15 years and then started a partnership. Therefore, the successors are much younger. In my understanding, if we had focused on succession 10 years earlier, it might have been better. However, due to my ICAI stint from 2010 to 2019 (with a break), this aspect was not emphasized, though discussed briefly. One of many failures was that when the next in line wished to leave, there was a vacuum. However, taking in young blood at regular intervals with some diversity of background and experience is beneficial for smooth continuation. Clients would also have more confidence when they saw a number of competent leaders in the pipeline. We need to ensure that we have enough millennials to take over the mantel of leadership in the firm in the next decade, as well as get Gen Z ready, who cannot believe life was possible without smart phones, and their capabilities are tied to what is needed to flourish, which may not include much general knowledge or a great memory.

Conclusion

Understanding that in today's fast-changing world, standing still would be a sure step to oblivion. The article looks at how growth needs to be focused on and possibly how one can go about doing it. The nine steps for organic growth above are only illustrative, and the subject of the management of an office is vast. IFAC-SMP publications that go into much detail could be referred to. All the ideas that have worked well do not need to be stopped. In fact, care must be taken to only tweak them to get the benefit of both theoretical understanding and applying it using common sense and intuition. Today, access to the best teachers and researchers in the world is possible for free or at a nominal cost, or if one does not mind doing a bit of research and listening to repeated concepts. Chat GPT, Copilot, Bard, etc. can access Netflix and YouTube, which have a treasure trove of documentaries, videos, and lessons on subjects like mastery, excellence, quality, communication, and management that come in summary form. More specific questions lead to more specific answers.

The author can also be reached at mnhire63@gmail.com or madhukar@hnaindia.com.

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Published by

Madhukar N Hiregange
(Chartered Accountant)
Category Professional Resource   Report

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