There have long been stereotypes of accounting professionals and firms, but there can be significant differences among them. As firms and their leadership mature, it is common for many to develop practice specialties or services that distinguish their firm from others. This can be an unintentional result of gaining proficiency with certain client types and eventually becoming a hub specializing in serving those types of businesses, or it can be an intentionally developed strategy.
There have long been firms with niche client bases, of course. Some of the more common include firms with specialized experience serving medical practices, e-commerce vendors, franchisees, hospitality businesses, and those in the entertainment industry. Over time, as the result of natural interest, and intentional development of staff, these firms can become not only conversant in the language of those niches but can also develop and consult on growth strategies.
As firms across the profession continue to increase their business advisory services, this is leading to additional specialization, which can help to hedge against concerns that tax work is becoming commoditized or that former traditional bookkeeping functions are increasingly automated by new technologies. But is specializing or niche specializing the only path to profit as tax compliance work becomes commoditized?
The Center for Accounting Transformation, CPA Trendlines, researcher David Wood, Ph.D at the Brigham Young University Marriott School of Business, and Avalara recently collaborated to conduct the Accounting Advisory 360 Survey, with a goal of quantifying the real impact that advisory services have on both clients and firms.
In December, more than two dozen accounting profession thought leaders participated in the latest Accounting Meta Influencers roundtable event. The virtual round table discussion focused on the results of this survey, with participants offering their views on how firms can achieve greater success through integration of advisory services and firm specialization.
The Accounting Meta Influencers discussion is held quarterly and is hosted by Avalara, engaging thought leaders in a discussion of significant trends and issues facing the profession. Previous topics have included:
- How to Build a Firm Culture
- Business Model Transformation
- The Present & Future of CAS for Accounting Firms
- The Real Impact of AI on Accounting
- What Private Equity Means for the Profession
- Firm Workplace Best Practices
- Top Trends Impacting Firms
- How Firms Can Adopt or Optimize Advisory Services
[Readers can also check out the discussion on X by searching for the hashtag #accountingmetainfluencers]
The discussion started off with roundtable moderator Dan Hood of Accounting Today introducing the topic, then passed the speaking baton to Donny Shimamoto, CPA, CITP, CGMA, the founder of the Center for Accounting Transformation, and the founder of IntrapriseTechKnowlogies LLC. Shimamoto noted that the survey was initially inspired by an interest in what makes CPA firms successful, and wanting to quantify how much of a role, and level of importance, advisory services play in achieving that success.
Survey Results
“The number one thing we found that was important for firms being successful was the use of technology.” ~ Donny Shimamoto, CPA.
Shimamoto said the study they developed approached the primary question from two perspectives: First, what makes firms successful; and second, is there a difference between primarily compliance versus primarily advisory firms.
Survey participants ranked their own firms on several categories, including:
- We are growing faster than other organizations our size (Level of agreement)
- How likely are you to recommend your organization to other people as a place to work? (Rank 1-10)
- How successful is your accounting firm? (1-10)
- Our firm will operate successfully into the future (Level of agreement)
“The number one thing we found that was important for firms being successful was the use of technology,” he said. “The survey participants that ranked their firm as a 10 on its level of success, said that their use of technology was the primary thing that differentiated them.”
“The vast majority of firms that are reporting success are actually doing a balance of advisory and compliance services. ~ Donny Shimamoto, CPA.
Shimamoto added that the second most important correlation to the success of a firm was “having a distinct culture and a focus on the team rather than on individuals.” An additional aspect was that firms perceived as successful have a focus on continuous development of staff.
The survey partners are continuing the research, as well as broadening scope to include staff roles, as well as firm client input, to get a full-picture view of perceptions of these success rankings at different levels.
Shimamoto then shared that the results relating to firm success were nearly the same across firms, whether they had a strong or light vertical specialization, or no specialization. However, he noted that hyper-specialized firms seemed to have lower employee satisfaction.
As far as advisory or compliance, he said that data showed, “The vast majority of firms that are reporting success are actually doing a balance of advisory and compliance services.”
The Roundtable Discussion
After Shimamoto’s presentation of the survey findings, moderator Dan Hood noted that, in Accounting Today’s annual Year Ahead survey, participants have said they expect to increase their time on advisory services and expect to decrease time spent on administrative processes. However, he noted that in the last two years, these firms have reported actually spending a lot more time on compliance work, a little less time on advisory, and no change in administrative work time.
Hood then focused the group on addressing two areas: What each influencer thinks makes for success in advisory services, and in which kinds of firms and services they are seeing that success. And, how specialization factors into that success.
“The firms that do advisory right are ones that have structured the advisory service like a product.” ~ Rick Telberg.
“What makes strong advisory? Firms that know what advisory is. Start there,” said Rick Telberg, the founder of CPA Trendlines. “Alot of firms think they’re providing advisory services when they’re just having a conversation. The firms that do advisory right are ones that have structured their advisory service like a product. Thinking in terms of delivering products is a business habit that accountants are still learning.”
Diane Yetter said she was surprised by some of the survey results, particularly since she identifies her firm as a hyper-specialized advisory services practice. She is a CPA and president/founder of YETTER Tax, which focuses solely on sales tax issues. She is also the founder of the Sales Tax Institute.
As far as a firm’s success, she said, “A lot of it is mentality, and how the leadership and staff are trained to focus on pulling out what a client’s actual needs are. It’s important to get involved in your clients’ business and understanding it beyond the accounting. That’s what makes you a successful advisor.”
The depth of the firm-client relationship is also critical, said Jennifer Wilson, a cofounder and partner with ConvergenceCoaching, which provides leadership development, as well as management and strategic consulting to accounting firms.
“I don’t think most compliance professionals realize how much advice they give, and they don’t bill for it. They don’t capture that and don’t monetize it.” ~ Jennifer Wilson.
Wilson agreed with Yetter, saying “It’s hard to provide advice if you don’t have a deep background on the client and their environment. Vision is also crucial, the ability to look forward.” Firm staff should also have natural curiosity, allowing them to see beyond the deliverables.
“I view advisory as whole services that you can productize, such as litigation support, valuation, or client accounting services, and having consistency in product delivery, pricing and support,” Wilson added. “One big missing part of advisory, is that I don’t think most compliance professionals realize how much advice they give, and they don’t bill for it. They don’t capture that and don’t monetize it.”
What Makes a Great Advisor vs. What Makes a Great Firm
There are differences between what makes a great advisor and what makes a great firm, added Rob Brown, the founder of the podcast platform Accounting Influencers, and an accounting firm consultant in the U.K. “For firms, I love Rick Telberg’s perspective on productizing. Accountants don’t know how to position, price and package advisory. Some don’t even know how to deliver advisory, so it’s a new world for them.”
Brown added several factors that he thinks can hinder or help a firm’s level of success. “First of all, permission. Some firm leaders don’t give people permission to do advisory and want them to focus on compliance − it’s why they were hired. Some firms also don’t set a good enough example with people doing advisory that the other people at the firm can look at and say, ‘That’s legitimate, that’s worth doing. I’m going to follow that.’”
Brown also noted that many firms don’t have the compensation structure to do advisory, and many practitioners lack the commercial awareness to do advisory. “They’re very compliance focused, and all of their qualifications lead them down that ‘right or wrong, black or white’ mentality.” And that business savvy may be lacking. He added that there is often also a lack of knowledge of the advisory services on the part of clients. “They don’t know that they may need it, and so they don’t ask their compliance-focused advisors for guidance.”
Dan Hood noted that one of the issues that firms face when considering advisory services is that there is so much compliance work to be done.
“Compliance is holding on because there’s a lot of it,” he said. “It’s easy, it’s there. Clients need a ton of it. There’s more compliance work than you could ever do. And that’s an issue for firms that want to move to advisory − the crushing weight of all the compliance work that has to be done regardless.”
Shayna Chapman, CPA, principal of Shaynaco, an accounting and business advisory firm in Gallipolis, Ohio, agreed with her colleagues, noting that, “The key to being a really good advisory firm is to know exactly who you are,” she said. “Whether you’re hyper-specialized, vertical or horizontal, know what you can advise on and give your staff permission and resources to do it. Streamline those processes and provide the value that your clients are seeking. And set clear goals for your firm, your team, and for what you’re trying to do for your clients.”
“If you want to be a trusted advisor, you can’t just parachute in when somebody asks you a question. You need to be involved in the business on an ongoing basis.” ~ Yvonne Scott, CPA.
Productizing advisory services is one of the keys to firm success in this area, agreed Yvonne Scott, CPA, and founder of CIO Concierge, a business advisory firm. “We have to recognize that not every compliance person is going to be a good advisor. We need to find those who are good at it, invest in them, and give them something they can actually go to market with. If you want to be a trusted advisor, you can’t just parachute in when somebody asks you a question. You need to be involved in the business on an ongoing basis.”
Scott also noted that firms need to be involved in their clients’ critical business conversations, or they are missing an opportunity.
Defining Advisory
Geni Whitehouse noted that one problem is that there is no generally agreed upon definition of advisory. “I have mine, it is ‘helping the client move the needle forward in the direction of their dreams.’ If we’re not doing that, it isn’t advisory. But when you’re doing what we do, which is sit down with a client and find out what it is they’re trying to do and help them get there by metrics and measures and team training and education and other stuff, the revenue impact is going to show up.” Whitehouse is a CPA, author, consultant and current president of the Information Technology Alliance.
In addition to a standardized definition of advisory services, Whitehouse said the profession needs business process understanding. “We don’t need a standardized product thing that defines and decides what everybody needs, but a standardized approach to delivering those services.”
Rob Brown, the U.K. consultant, also noted that there are intangible benefits for the clients as a result of effective advisory services. Whitehouse agreed, suggesting better work-life balance for clients as well as reduced chaos, in addition to less tangible business aspects on the operational efficiency side.
“When you look at clients’ data …you can then really help them drive growth, efficiency and profitability.” ~ Sona Akmakjian, CPA.
Data is also a critical component of advisory services, in that it can help firms better understand clients’ businesses better and give them insight when they are part of key business decisions, said Sona Akmakjian, a CPA and global head of strategic accounting partnerships for Avalara.
“When you look at your clients’ data,” she said, “whether it’s part of their compliance or not, you’re getting all these insights into what their gaps are, their opportunities, what markets they need to enter, how they can improve their processes. You can then really help them drive growth, efficiency and profitability. And the Advisory 360 study is showing that combining compliance with advisory helped firms achieve greater success.”
Amy Vetter noted that when she consults with firms, she appraises them in their totality. Vetter is a CPA and CGMA, and is the CEO of the B3 Method Institute and Drishtiq Yoga.
“It’s not just because you have technology that you’re successful as an advisory firm, or just because you have culture. You have to invest in the whole thing. It is an entrepreneurial venture, and you have to be ready for the entrepreneurial spirit of it.”
But Whitehouse noted that it isn’t necessary for the firm or its staff to become experts in every aspect of their clients’ businesses. “That’s a misconception that holds many accountants back [from advisory services].” She said it isn’t bad that you may have to direct a client towards an expert in various areas. “I know all the experts on all the software for my clients and all the things they might need that I can’t help them fix. My contacts are a huge part of the value that I deliver.”
Is Advisory Necessary for All Firms?
The panel was then asked whether it was possible to have a long-term successful firm that just focuses on compliance work.
Dan Hood noted that, during the course of compliance tasks, firms will run into advisory work when clients have questions and need some guidance. If that is not an area of comfort for the firm, they can continue to direct them to trusted outside business advisors.
Wilson, of ConvergenceCoaching, said she does not think firms can still achieve long-term success by focusing solely on compliance work. “Most of us know firms that have made it at least one or multiple generations with very little advisory. But the introduction of AI and the shifting and automation of some of the mundane, repetitive aspects of compliance services poses a pretty big threat. If somebody asked me ‘Should I have an all-compliance strategy?’, I would say no.” She said it’s imperative for these practices to figure out how to go deeper in the services they provide clients.
Shimamoto, noting that he was playing devil’s advocate, suggested that small tax-focused practices could still be successful, depending on what their definition of success is. He noted two examples, with the firms not providing advisory services, but the principals of each firm feeling comfortable and personally successful, having built their firms around the workflows and the quality of the personal lives they wanted.
He added that consultants often gauge success by, “If the firm wants to grow, if the firm wants to be strategic, if the firm wants to be a leader, maybe they need to do a bunch of this stuff.” But to just be successful is a personal definition and varies by firm.
“I think many of the things we’re talking about are really different as you look at the different sizes of a firm,” said Yvonne Scott. “And Donny made this point: If I’m a sole proprietor I feel differently about just about everything this group talks about,” compared to multi-partner, multi-location, and really large firms. She also noted that the types of advisory services that can be offered at each level will vary, along with client needs, and that some smaller firms could actually be more capable of adopting changes because of their size and agility.
Scott agreed with Shimamoto that firms can still be successful providing primarily only compliance services, and that some staff and some clients will be drawn to those firms because of their size, their relationships and their inclinations.
Shayna Chapman also stressed that smaller firms, particularly those servicing small localized businesses or in specific niches, can still be very successful providing mostly compliance work. “For firms in smaller cities and towns, a lot of their success is in compliance, and helping clients with minor things.” They don’t necessarily care about the broader advisory services options, she said, they just want to stay in business. “Advisory is more about a growth mindset. With smaller clients, it’s enough to be providing compliance and helping them on the small things. A lot of these small mom and pops need small mom and pop accounting firms, and if that’s compliance with a little bit of advisory, these people are very happy with that.”
Hood suggested that there are really two levels of advisory. The first being a small firm compliance focused one, where the accounting firm will also do some hand-holding on business management and bookkeeping, and then there’s the next level of advisory involving a whole playbook of options for taking businesses through growth and transformation.
What Role Does Specialization Play in Firm Success?
Hood then directed the conversation toward specialization, noting that at the beginning of the discussion, one Advisory 360 survey chart showed roughly one third of firms in the survey identified themselves in each category: Specialized, Hyper-Specialized, or Non-Specialized. He also noted that this may reflect smaller firms from smaller communities, such as Chapman’s.
“Those firms may be very successful, but they’re not specialized because they can’t be,” Hood said. “The cloud aside, it’s hard to specialize if you’re in a small area. If you specialize in bakeries, and there’s only one bakery, it’s going to be difficult to specialize.”
“Is specialization that important? The pie chart showed that, for a third of firms, nope. They’re not specialized, but they say they’re doing great!” ~ Dan Hood.
After noting to the panel that firms have been told for many years that they need to get into advisory and need to specialize, by consultants and the accounting media, Hood asked them: “Is it all it’s cracked up to be? Is specialization that important? The pie chart showed that, for a third of firms, nope. They’re not specialized, but they say they’re doing great!”
The panel then discussed the value of specialization, and whether it mattered more for firms of different sizes.
Chapman, whose firm is in a town with a population of 3,000 and a county in southern Ohio with only 30,000 people, said she has a different perspective on firm management and the services her firm offers than many of the others in the discussion group.
“I’m from a small area and a small town … and you’re right, there’s only so many dentists in a small town, and so many attorneys,” she said. “And yes, I know there’s the cloud, and yes, we reach out into bigger areas. But what you find is that people still like the human touch, and they still like to come in and see you and drop by.”
She then suggested a different type of specialization. “Speaking as a small firm, sometimes it’s not a matter of niching down to a specific industry, but it’s a niche down to a specific client size. For me, it helps us streamline our processes to decide that we’re only going to have clients that make up to a certain amount of revenue, or we’re only going to have clients that use ‘this tech stack,’ or have ‘this many people’ on payroll.” Chapman added that she has professional relationships with outside experts that can assist on special tasking and services they don’t provide.
Rob Brown suggested three core aspects of client relationships when it comes to specialization or advisory: “Do you know my world? Do you speak my business language and vocabulary? Do you understand my problems? And the great advisors have to go deep in however you want to define a niche: A specialism, a community, a business, a size.” To understand these factors, he said you have to spend time with them in their business and spend non-billable discretionary time during conversations with them.
Diane Yetter credited specialization as core to her firm’s success. “If you’re going to specialize, you also have to have thought leadership. You have to be known for what you are specializing in, and be the person that people want to work with, whether clients or colleagues.”
Kelly Phillips Erb, aka @TaxGirl, a tax attorney and senior writer at Forbes, echoed Yetter’s comments. “I think there are two things we need to keep in mind: One, when people talk about specialization and size of firms … I think sometimes people are scared of referrals. People are scared to say, ‘I don’t know something, but I know somebody really great who does.’ They’re afraid of losing clients or looking incompetent,” she suggested. “That’s why it’s important to have people that you can trust. It’s good to be smart enough to understand what you don’t know, and also surround yourself with great people. I think the clients are grateful for that.”
“Professionals can be a specialist by being a generalist,” chimed in Michael Hsu, while Holding a copy of the book Positioning for Professionals, by Tim Williams. Hsu is the CEO of CFO Club, and the founder of DeepSky, one of the first cloud-based, outsourced accounting service companies.
“For a firm to break through… you pick one thing, and then you get narrower and narrower. It’s like a bullseye. And when you get there, you expand into other areas.”
Other Aspects of Specialization
Nearing the conclusion of the roundtable discussion, participants were asked if there were any unaddressed areas concerning niches or firm specialization, or areas where professionals might consider another way of thinking.
Diane Yetter noted that specialization can also be geographic, where nuances of how a policy or an agency in a specific state, county, province or foreign nation might work, can be of high value, as can personal contacts in those areas.
Niching, Specialization, and Your Firm
Hood noted that there is often not a lot of intentionality in specialization; that it often happens because a firm takes on tasks that clients need solved, and then develops a niche after becoming proficient at handling those situations more frequently. Which then becomes an unplanned, but very marketable specialty.
“Sometimes, these firm specialties just kind of happen,” Hood said. “But if thinking proactively, how can you decide what your niches should be, if you decide you want to do this? A first step can be looking at your firm’s client roster and noticing, “Wow, I’ve actually got a lot of clients in this space, for example entrepreneurs, or in specific industries.”
“What defines you, your personal brand, your brand as a firm, is what you say ‘no’ to, more than what you say ‘yes’ to.” ~ Rob Brown.
“It takes a lot of courage to niche,” said Rob Brown. “Because accountants are not good at saying no to stuff, as a breed. Work comes in and the answer is ‘Yes, what’s the question?’ So, what defines you, your personal brand, your brand as a firm, is what you say ‘no’ to, more than what you say ‘yes’ to.”
Also participating in the Avalara Accounting Meta Influencers panel discussion were Caleb Jenkins, EA, of RLJ Financial Services; Jenni Huotari, CPA, of Eide Bailly; Peter Wen, CPA, of Tallyfor; Nayo Carter-Gray, EA, of 1stStepAccounting; Blake Oliver, CPA, of the Accounting Podcast; Isaac O’Bannon, managing editor of CPA Practice Advisor, was an invited observer.
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Tags: Accounting, Advisory, CAS, Firm Management
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