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During a recent training session a client asked the following question:
Question: We are a mid-market firm and we compete against smaller and larger firms and the price is set by the other firms do we give them (the prospect/clients) the price they want?
Answer: Rarely does competing on price make sense.
It may be a frustrating answer however when you compete on price there is a higher likelihood that a client will leave based on price. Maybe there are exceptions to rules such as when you have a highly strategic situation where you move your price for competitive reasons (e.g. it’s a company with potential to be an anchor client in a strategic startup niche for the firm).
Being reactive and basing decisions on what your competition is doing, is also a destructive way to determine your price. The price YOU set (not the one determined by another firm) should be the one that makes the most sense for your firm from a profitability standpoint. The bottom line matters so ask yourself the question, can I make the money I need to cover staff, overhead, and create a good net margin at this price? If the answer is no then doing the work makes little sense.
You should also consider how those other firms are able to do it. Are they buying the work or do they have a much more efficient operation than you and are able to profitably deliver to the client? If they are buying work then it could be that it is a commodity service with little room to add value to the client thus likely it is not what you want to be doing. If you sense they may have a more efficient operation and this is the type of work your firm needs, you must find a better way to deliver.
Whenever you are in a proposal situation, whether you win or lose, find out why they made the decision they did. In a winning situation it is a great time to get feedback about your proposal, your differentiation factors, and how the competition is approaching the market. Make sure your services are being compared against the same services of the other firm. This is where you want to separate yourself from the competition as well, by doing things that set you apart. Specialized knowledge, delivery systems, and unique services specific to an industry are all value added things that many times other firms (even the large regional firms in your market) don’t have. As an example, we work with many well niched firms that devote more resources to their niche industry than the a Big 4 or larger regional firms in their local market.
There are three ways for you to compete: price, speed, and quality. Your firm needs to how you can win the market (or a good share of it) in two of the three. Your strategy can be based on a combination of price-speed, price-quality, or speed-quality. Trying to compete at all three levels (price, speed, quality) at the same time is not normally a winning strategy. Spend time considering your strategy and focus on where you can be different (better) than the rest and you will find your firm winning more proposal than losing them.
At the end of the day you will not win them all. If you are winning 60% or more of proposals sent out you are probably doing better than most. If you are not…research why!
The Rainmaker Companies
I had the pleasure this week of helping to host Mike Nall, who is the President of the Alliance of Merger & Acquisition Advisors (AM&AA), at our office in Nashville. Mike has grown his AM&AA group from 20 members to nearly one thousand since 1998 by focusing on his mission to connect companies to capital to create added value.
During our visit we had long discussions with Mike about the 300,000 business entities in the market looking for a buyer. Despite the enormous amount of capital available that is looking for opportunities, Mike tells us that 79 out of 80 deals don’t get done due to the shape the company is in when the owner is ready to sell. People with money just aren’t willing to part with it to pay business owners an often inflated price that the entrepreneur believes his company is worth.
This is a dilemma in the mid-market and Mike feels like CPAs are in the prime position to do something about it by helping these small and medium sized business owner get their house in order. Whether they decide to sell or pass on the business to the next generation, to be successful the management of the company needs to be sound.
Most accounting firms are working directly with these entrepreneurs who desperately need the help. It is imperative that as their CPAs you work to point them in the right direction. Have a look at your A and B clients and try to determine where their business is headed, brainstorm some ideas that may help, and then go visit them to unload your thoughts (and concerns if need be). Ask them questions about their goals for the business, what their plans are for retirement, and how they are developing leadership in the next generation of employees.
The CPAs ability to directly impact the economy of your community is terrific. These mid market companies are how this country’s economy was formed and grew to become the most powerful on earth. They hire most of the people, invest in most of the plant and equipment, and often are the ones that have the new, innovative ideas that are going to drive the economy forward. As a CPA, your role in this is critically important in helping them set up a management structure that will help them carry the business forward so that the people coming after them are able to reinvest in the economy of the community and move it forward.
If Mike’s role is connecting companies to capital, your role is connecting the companies’ capital to the right investment (e.g. products, systems, processes, people and equipment) that offer the greatest leverage.
The Rainmaker Companies
I have 3 children, ages 15, 13, and 1. As anyone with teenagers can attest, the idea of being seen as different is a bad one and conformity is king among these soon to be adults. Teenagers want to fit and ‘blend in’ to the population without calling attention to themselves.
My 1 year old on the other hand has no such hang ups about being different. She will happily set herself apart and gets agitated when she isn’t the center of attention….and she normally gets her way.
We somehow believe that the desire to conform leaves us as we move out of those awkward teenage years and into the our professional lives. Yet when working with most accounting firms I often hear that one of their greatest challenges is differentiation. Most CPAs avoid being different at all costs. They get into proposal situations and present themselves and their firm just like the other 2 firms before them. During a training just last week a group of CPAs talked about being on nonprofit boards that were interviewing accounting firms and everyone agreed there is never even the slightest difference between the firms that deliver these presentations. Yet if one of them would only step outside their comfort zone and be different they would find a great deal more success.
Something you need to know about the proposal process is that when you provide nothing to differentiate you and your firm, the prospective client is left with no choice but to choose an accounting firm based on price.
One of the nice things about developing a niche is it allows you to be different in several important ways: expertise, depth of subject matter, understanding of clients’ business, insight into unique industry situations, and valuable knowledge about future trends and how that impacts clients.
Start now by being different. If you don’t know how or where to start, here’s an idea. Have several people on your team schedule a series of meeting with your clients, referrals sources, and other centers of influence with the objective being to ask them what they need, how can you bring something else to the marketplace and have a real impact on peoples’ business.
Also, look inside your firm and find ways to zero in on the service delivery inside your firm. What areas can be improved and how can you do things differently to make your firm the leader in your market when it comes to delivering for clients.
Following the herd will take you somewhere …… the same watering hole as everyone else.
The Rainmaker Companies
I was talking recently with Bill Choler, a niche leader in his firm in Akron/Canton, Ohio about his manufacturing niche. Bill’s team has grown the niche to $6.5 million in a very competitive market that only has 100,000 population base. When I asked Bill if he could provide a few tips to someone who wanted to start a niche or even expand an existing one he named three things:
1. Find out the needs of your clients and prospects and based on those needs determine whether or not you have the resource internally to deliver them. You will never be able to offer the right services unless you know what people want. If you have the right resources then work on that and if you don’t, then find out how to get them. Sometimes you will need to go outside your firm to get the right people to serve your niche clients.
2. Train your people. Bill spends a great deal of time and money training his people to ensure they have what they need to deliver value to clients and the firm.
3. Educate staff and your Centers of Influence about what you are able to provide. Often an accounting firm’s own staff have little or no understanding of what the firm is capable of and the same goes for existing clients and other referral sources. Take the time to educate people on all aspects of your firm and you will soon have a team of people to leverage who are out there all the time helping you build the practice.
If you ask young people in Bill’s firm where they want to specialize, they invariably will tell you, manufacturing. When you have something that’s growing, you build excitement and young people see the best path for advancement in the part of the firm where growth and excitement intersect.
The Rainmaker Companies
That line was stolen (with permission) from my colleague Scott Bradbary with The Rainmaker Training Group who was encouraging a team of people who are working to launch a niche development strategy in their firm. The message is clear; nothing will change if people aren’t out talking to clients and prospects about business.
So many accountants are slaves to their desk and getting out of the office to have lunch, meet with client, or talk to a referral source is more than they want to do. There is a firm we are working with that has a formal program in place whereby each manager and Partner has a generous amount budgeted to spend on taking people out to lunch, dinner, a ballgame, etc. “No one has ever been questioned about this expense account” was the answer when someone asked what if I go over budget. Still the vast majority in the firm aren’t taking advantage of this gift.
Everyone knows that getting in front of people needs to be done yet we all get into the daily grind and simply don’t make a point to do it. Really the key to making it happen is being intentional about the activity by setting a target of scheduling one meeting per week with someone outside the office. Over time this will become a habit that unconsciously happens, however in the beginning it will be something you have to work on to figure out who to call and what you want to talk about.
Scott tells me there is a similar saying that rhymes with ‘grass’ but in the interest of keeping it clean I won’t go there. Challenge your self over the next few weeks to set a meeting with a prospect, client, or referral source. Really, what would be so bad about going to a nice place to eat every week with someone and talking about how you can help each other.
Almost without a doubt you will to find new opportunities to work on and you will hit the street running without anyone needing to encourage you to do it.
The Rainmaker Companies
I had an interesting conversation with the Managing Partner of a firm last week and part of the discussion moved toward client retention, pricing, and how competitive the market is.
As we continued, it was clear that more often than not ‘Price’ was given by prospects AND clients as THE reason they had decided to leave the firm. It was also pointed out that price can be a smoke screen that hides the real reason as people generally don’t want to go into all the reasons why they are leaving, they just want to go.
My big takeaway from the conversation was when the Managing Partner told me that in his experience when existing clients leave, there is a good chance they will use price as the smokescreen. “Client don’t often leave our firm because of anything anyone did, more likely its because of something someone did NOT do”. When clients are receiving value, feel understood, and have a positive relationship with the firm, they are just unlikely to leave over price. Quitting their firm over price is more of an exception as opposed to the norm.
When a firm is fighting with other firms over price, it is usually commodity type services they are competing to deliver. When firms move above the fray to deliver more value they have fewer pricing discussions.
So, what are you NOT doing for your clients that another firm is willing to do, what services, deliverables, or ideas could you bring to clients proactively before they ask? Find the answer to these questions, especially when you consider your A and B clients and you likely find happier, more satisfied customers who will rebuff competitors and refer more business to you.
The Rainmaker Companies
Someone asked this question the other day and after pausing briefly and giving further consideration to the question I see at least three trends that in my view are really ‘hot topics’ and continue to be popular initiatives for firms looking for growth and succession.
1. It came as no surprise that I read a PCPS study this week stated nearly 50% of all accounting firms are in merger talks or will be in the next 2 years. This trend has been underway and rapidly growing for several years and given that many of our clients are part of these statistics it is a topic that impacts are firm greatly. Our advice to clients has been and continues to be that a merger or acquisition is a good things for your firm when it satisfies a couple of key criteria: does it make sense for your clients in that you are able to bring them more value and does it makes sense for your cultures in that you are bringing together with likeminded firms with shared visions of a better firm tomorrow.
2. Accounting firms are trending toward developing powerful niche practices and moving away from being generalists. In my opinion this can only be a positive trend for clients. They receive more depth and expertise from accountants who truly understand their business. CPAs who build depth and expertise are able to deliver clients organizational impact through working with them and at this level client are less price resistant and much more motivated to stay loyal to their accountant.
3. CPAs are moving from being number crunchers to Number Communicators. They are delivering more consultative services to clients such as strategic planning, IT consulting, M&A consultation, and a range of other high value, high impact services. Long may this continue as it is what entrepreneurial clients need and its the type of expertise CPAs can use to help their local economies thrive by helping people make sense of the endless facts and figures available to business owners and the public in general.
The Rainmaker Companies as an organization serving accounting firms exclusively through alliances, consulting, and training. For firms that want to take advantage of these trends we hope to hear from you.
EVP, The Rainmaker Companies
A prominent national firm conducted a study and discovered that for every $1.36 their existing database of clients was spending on accounting services they were spending only $.16 with their firm. These were services the firm could and should have been providing clients yet they were getting what equates to only 12% of their clients’ wallet share.
How many of your clients are using your firm for a couple of services and no more? Why?
Several weeks ago I was working with a firm to help them develop their construction niche. Early on in the first day of training the niche team decided they could actually double the size of their construction niche from $1.5 million in revenue to $3 million over the next three years. The next obvious question was, where would this additional revenue come from? It turns out that at least half of the increase could be found within their existing client base. Through the addition of new services they were developing and by having the entire team become engaged in the process the firm began to rapidly put a plan together to achieve their goal. In a follow up call just last week the niche champion shared how the plan was shaping up and feels confident after further reflection that they can achieve their target of doubling the revenue.
These are not uncommon stories from our team’s experience. Most accountants are just too shy about letting their clients know what they do and so clients assume they can’t do the added work that’s available. Approaching existing clients can be done in a really helpful way when you know and understand their business. By going deep with clients you provide an entirely new level of service that delivers organizational impact. At this level clients are much less price sensitive and much more motivated to stay loyal to you. Each year you should spend time getting to know more about your top clients and annually present up to 2 new services to each of them. The business owners will appreciate you thinking about them, they will be interested in knowing more about your firm, and when something your tell them about fits their strategy they will buy from you.
When you are at the table don’t leave hungry!
BECI, the Brussels Enterprises Commerce and Industry (Chamber of Commerce) will organize its 4th SME week in June 2013. Each company can have a free 30 minutes consultation on different topics (see schedule below). This year, Costmasters will be BECI’s partner for the tax & accountancy matters. They will advertise to 3500 companies, have a special flyer and a large banner on their building with Costmasters’ logo.
June 17, 2013 – Sales & Marketing
June, 18, 2013- Human Resources
June 19, 2013- Legal
June 20, 2013- International & Well Being
June 21, 2013 – Tax, Accountancy & VAT