Today's Technology for Tomorrow's Firm.
Issue link: https://cpapracticeadvisor.epubxp.com/i/411648
November 2014 • www.CPAPracticeAdvisor.com 19 FEATURE If you've been in the business for ten yea rs or more, you probably designed your frm using the tradi- tional assumptions. Tose assump- tions probably went something like this: • ASSUMPTION 1: Client does book- keeping in house, using desktop sof- ware with all accounting data stored on the client's internal desktops, LANs and servers. • ASSUMPTION 2: Most information transfer between client and the frm was on paper. Reports from the client's accounting systems, receipts, cleared checks, and bank statements. • ASSUMPTION 3: Client communica- tion was mostly in person and by phone, with some email, but most likely you didn't set up a web site with a client portal where your clients could log in, upload documentation, and share any of the bookkeeping tasks with you or your staf. • ASSUMPTION 4: Your primary revenue source was most likely designed around tax, while clients would do their own accounting. You probably decided this because there was not realistic, aford- able technology solution that allowed you to provide client accounting sys- tems proftably. A nd because you were diligent about building your frm to perfectly match these assumptions, you prob- ably a lso assumed that your f ir m would be viable for decades to come. Furthermore, you naturally assumed that when you do want to retire, the traditional valuation models all but prove that you'll be able to sell your frm for 1 times billings. Howe ver, g i ven t he d r a m at ic improvements in technology and the new wants of SM Bs, does it really m a k e s e n s e t o a s s u me t he f i r m designed to meet the assumptions above will have any where near the traditional value? Tere are many experts focused on helping frms value and sell their CPA firm, but what I find missing from most valuation calculations is any- thing about how the business and technology model afects the frm's value. In today's market, frms must contend w it h t he u nprecedented technology changes that dramatically impact what SMBs want from their accountant. And since so many frms have not done that, the true value may be close to zero when they get ready to sell. W ho would buy inefciency, low proftability, and services that do not match what SMBs want? I t 's n o t t h e f a u l t o f t h e f i r m fou nders, because t here was cer- tainly no way to know how quickly the technolog y landscape and cus- tomer adopt ion t rend s wou ld so dramatically fip to the online world, but here we a re . Un for t u n atel y, virtually all frms ten or more years old were built on obsolete assump- tions. Tose frms must completely rethink the business model. W h at i f you c ou ld s t a r t f rom scratch and design the most proft- able, high-value firm using today's market assumptions, focused on what SMBs really want? If you could, this might be your new assumptions: • DESIGN GOAL 1: Te frm requires all clients to have their accounting records in the cloud. • DESIGN GOAL 2: Te frm will not accept paper from clients. All client records, documents, and accounting data will be digital, and accessible via secure Internet connections. • DESIGN GOAL 3: Te frm will provide a web site portal where all clients can interact with the frm electronically. Te portal will allow them to access all of their fnancial information, interact with the frm staf, monitor the status of any work the frm is doing, access historical data, view their fnancial and tax records in real time via a "dashboard" that shows the full fnancial picture and allows the client to self-serve to drill deeper into the information for detailed reports. • DESIGN GOAL 4: Te frm will be paid by clients electronically, before services are performed, and using a value billing model that doesn't require detailed hourly timesheet logs to justify every service provided. • DESIGN GOAL 5: Te frm will hire the most highly skilled technicians com- bined with the most customer-centric partners and support staf. • DESIGN GOAL 6: Te frm will reward the best performers with high pay. • DESIGN GOAL 7: Te frm will provide fexible working hours, and the ability to work at any location. • DESIGN GOAL 8: Te frm will focus on developing its people so they can grow in their careers and eventually become owners allowing the founders to exit the business without disrupting the business. • DESIGN GOAL 9: Te frm revenue sources will be a healthy mix of client accounting services, including book- keeping, payroll, financial analysis services, tax planning, tax preparation, and strategic business consulting. • DESIGN GOAL 10: Te frm will con- tinually upgrade processes and use best of breed sofware solutions to improve efciency of the staf and value to cli- ents. • DESIGN GOAL 11: Te frm will invest heavily in tracking what SMBs want and how the changing needs of clients create new opportunities for the firm to develop new services and discontinue outdated ones. These design goals can help you think about the frm you have today and the frm you want for the future. Use them as a starting point and make your own adjustments to match your particular vision. W hatever you do, don't put it of, and make sure your goals create a frm that is leading edge today, and viable into the future. Your children will thank you. Redesigning Your Firm for the New World By Doug Sleeter W hat do SMBs want? Have you stopped to think about w h a t s m a l l b u s i n e s s e s really want when it comes t o h i r i n g o r s w i t c h i n g accountants? In March of 2014, we released the results of our second annual SMB study. Te study makes a clear case that accountants' "cheese is moving." Te question is what you should do about it?