(A continuing series for Top 100 Firms)
IN OUR OPINION,
April 25, 2016
ATTRACTING MARQUEE CLIENTS THROUGH SPECIALIZED SKILLS – IT’S A MARATHON NOT A SPRINT
In Our Opinion,
In our opinion, without marquee clients, your firm is destined to a client base that consists of small and mid-sized companies that have steady but low-margin fees today and steady but low-margin fees tomorrow. By definition, you will be stuck in gear as a merely good firm! On the other hand, a successful firm, a sustainable brand, is a firm that has “scale” and “market” or “brand” permission to service complex, sizeable clients with multiple locations and that raise private and public capital as they grow (i.e., marquee clients). Receiving “market” or “brand” permission enables your firm the ability to grow and prosper with clients over the long term.
Let’s Take A Look At The Four Quartiles
Quartile 4 clients are generally small and marginally profitable – sometimes they are tax-only clients. Clearly, these clients help by keeping skills sharp and by absorbing overheads. But we encourage firms to annually prune clients, the ones with decreasing margins, small fees and little, if any, hope for improvement.
Quartile 3 clients are good clients with good margins, but the services they require are rather routine and not very challenging. And while these clients cover overhead and help staff to learn, your firm will never develop into asustainable brand if these clients dominate your practice.
Clients in Quartile 2 are important to your firm as they have serious potential for growth and enhanced margins, and with that growth comes an increasing appetite for additional professional services. Some of these clients have the potential to be marquee, brand-builder clients as they break through and start experiencing serious growth.
Marquee clients usually are Quartile 1 clients. They are recognizable names in their industry sector and, most important, they are companies that are growing organically, consummating mergers and acquisitions and raising private and public capital. Again, as they grow, your services expand, margins improve and your firm grows. But the key is that they are credential builders that help attract both quality talent and additional marquee clients. Having them on your client list gives you instant credibility. The underlying assumption is that if you handle “Company X”, you must be highly qualified and you will be able to help a prospect with his/her business challenges.
Attracting Marquee Clients With Specialized Skills
So, how do you attract, develop and retain marquee clients? You do it by attracting, developing and retaining partners who have relationship and specialized skills (most importantly industry expertise) and impressive credentials. But remember, it’s a marathon, not a sprint.
In most situations, accounting and auditing partners are the principal relationship partners in a CPA firm. They generally have the ability to build relationships and are the key to becoming a sustainable brand. Tax partners, unfortunately, are generally very good technicians but poor relationship partners. Many of them see the accounting and auditing partners as their clients. While there certainly are exceptions, tax partners are essentially “order takers” from the accounting and auditing relationship partners. The typical scenario: the relationship partner meets with the clients, realizes that the client could benefit from an estate plan, goes back to the office, and gives the appropriate partner a “ticket” or an engagement to develop an estate plan for the client. Consulting partners, on the other hand, are a hybrid of accounting and auditing partners and tax partners. They know that they have to build relationships with clients (and in many cases do it effectively), but their relationships tend to be short-term as they tend to be project-oriented — in when a project starts and out when it’s completed (hopefully on time and on budget).
So how do accounting and auditing partners, the relationship partners, create value for clients? They do it principally through industry specialization that provides insightful and personalized accounting, tax and consulting to clients by understanding the nuances of their industry environment and tailoring their services to assist in meeting business objectives. Industry specialization also identifies “best practices” and benchmarks clients as they seek to improve.
What does it really mean to have industry specialization in your firm? In our view, the most effective way is to your partners and managers concentrate, if not dedicate themselves to one, maybe two, industry practice groups charged with meeting the following objectives:
Dom Esposito, CPA, is the CEO of ESPOSITO CEO2CEO, LLC — a boutique advisory firm consulting to small and midsized CPA and other professional services firms on strategy, practice management and mergers/acquisitions. Dom, voted as one of the most influential people in the profession for two consecutive years by Accounting Today, authored a book, published bywww.CPATrendlines.com, entitled “8 Steps to Great” which is a primer for CEOs, managing partners and other senior partners. In Our Opinion, is a continuing series for leading CPA firms where Dom shares perspectives and experiences that he hopes will be considered by firm leaders. Dom welcomes questions and can be contacted at email@example.com or 203.292.3277.