A marketing success story.

Many partners of small firms feel inadequate when it comes to developing and implementing a marketing program. Most recognize the need but are unsure of what approach will work best.

When our firm set out to develop a marketing program in 1990, we decided to make the financial commitment to hire an experienced marketing director. The results have been remarkable:

* Revenue increased 58% during the first year, with a net cost of only $8,200 (see the exhibit on page 58).

* In the second year, the marketing department became an independent profit center.

* Marketing revenues for the first six months of 1993 surpassed the total for all of 1992.

These results show neither our firm nor our clients were too small to justify the time and money spent. Before 1990, I had only one employee, who doubled as a staff accountant and office manager. Our client mix consisted primarily of tax clients, with a small percentage of monthly write-up clients (mostly owners of small retail and service-related businesses and law firms).

THE FIRST STEP

In 1990, I added a CPA to our staff and wanted to begin some type of marketing program. Like many CPAs, I concentrated on advertising during tax season. I used various outlets, including the yellow pages, newspapers, radio and television, and I tried direct mail. In most cases, the cost was recovered by securing new tax clients. However, it became evident that although we were very busy during tax season, we had to find a way to diversify our client mix to increase our monthly billings and work flow year-round. I came to the conclusion that we needed professional assistance.

I thought the best solution was to hire a marketing director. I consulted with several marketing professionals in Tulsa, including two who had worked for large CPA firms. They concurred that a marketing director would best meet my long-term goals and objectives and also suggested some of the qualities I should seek in my recruiting efforts. These included experience in marketing professional services, a successful sales background and public relations knowledge. Further, they helped me come up with a competitive compensation arrangement. Now I had to seek financing to underwrite the cost of hiring a marketing director and fund the development of a marketing program.

I developed a one-year marketing budget and approached my banker with the plan, projected costs and what I hoped to accomplish. He thought the proposal had merit and his bank agreed to advance me a loan.

I started recruiting in late 1990 by running a series of classified ads in the professional section of the Sunday Tulsa World, which has the largest circulation in the area. About 100 people responded. Of these, I interviewed 15 applicants. After the initial interviews, I narrowed the field to 5 candidates. After checking references extensively, I selected two finalists. At this point, I asked the other staff members to join me in the final interviews. The entire process took about two months and involved four interviews with the candidate selected. He joined the firm on February 1, 1991. His background and experience satisfied the marketing professionals' recommendations: He had over 15 years' experience in marketing professional services, a successful professional sales background and a bachelor's degree in journalism.

LAUNCHING THE PROGRAM

We decided on a traditional approach using proven marketing principles. Our first step was to develop a written plan. All four members of our firm were involved in the planning process. We agreed to focus marketing efforts on securing monthly write-up clients who would pay us monthly retainers on a year-round basis. We identified our target markets--businesses and professionals we thought we could serve best--as predominantly closely held businesses and professional firms. We decided to concentrate on providing value-added services so we could command higher fees. We examined our strengths to see how we could differentiate ourselves from the competition.

We also set goals for revenues and profits as well as limits for the program's costs. We created a budget and agreed to change the firm's monthly financials to treat marketing as a separate department with its own income statement. It has been easy to determine what income should be attributed to this department; our director frequently comes back from a client meeting with a signed engagement letter and a cheek. Expenses include his salary and the cost of seminars we conduct as well as mailings and PR efforts. Our marketing program has always paid for itself and contributed further profits to the firm--proof that a program of this kind is not out of the question for any small firm.

We put our marketing plan in writing and then went about the task of implementation. To create our support materials, we located a company that specialized in developing marketing materials for CPA firms. With its help, we developed a professional firm brochure and obtained four additional brochures that addressed tax and business issues targeted to small business owners. The cost of the entire package, which included a year's supply of brochures, was approximately $2,500, which was in line with our budgeted amount.

GAINING NEW CLIENTS

We next addressed business development. We agreed that our objective always would be to promote the profession along with our firm. A direct mail campaign had modest success but our sales efforts were best achieved through personal appointments. Although we evaluated telemarketing, we did not think it was compatible with the image we wanted to convey.

We established a business development process in which the marketing director made the initial client contact to assess needs and then I stepped in to help define the scope of services and fees. The last step was an engagement letter outlining the proposed services and fee structure to the prospective client. More than 80% of the time engagement letters were signed at the initial presentation.

Networking also has proved to be a successful and cost-effective business development vehicle. We joined and became very active in the Metropolitan Tulsa Chamber of Commerce and its various networking programs. Our marketing director was appointed to the chamber's ambassador program, in which chamber representatives survey members each month to determine needs and attitudes. This has provided us with an opportunity to meet with presidents and owners of small businesses in our targeted markets. Our director also is a member of the Tulsa Connection, a local business networking club, and the American Marketing Association. All have produced new client relationships.

In the first year, our business development efforts helped us secure 17 new monthly write-up clients. Each one paid an average of 25% to 75% more in monthly retainer fees than they had to their prior accountants, which proved we had accomplished our objective of marketing on a value-added basis. The new clients were primarily closely held businesses in retail and service-related categories. They ranged in sales from $200,000 to $1.5 million in sales per year and had staff sizes ranging from 5 to 25.

As part of our integrated marketing effort--which goes beyond marketing to include public relations, sales and measuring client satisfaction--we developed an internal PR program and have been very successful in placing news releases in the local newspapers. We make sure a 3" x 5" photo accompanies every release whenever possible, which has helped increase firm visibility. We also upgraded our monthly newsletter with feature articles on new clients and both tax legislation and economic updates. In addition, we've had success in writing articles for publications. For example, we've been writing a tax column for a company's monthly newsletter for over a year. Its circulation includes a large segment of small business owners. We also write several monthly articles for a business-to-business newspaper. We obtained reprints of our articles at a nominal cost and have used them effectively in our marketing program.

In 1991, we initiated a free seminar program for existing and prospective clients. Normally, we conduct three seminars a year on topics that range from "Lending Trends and Opportunities"--which featured a panel of four Tulsa bank presidents--to "A Legislative Update for Small Business," led by the Oklahoma secretary of commerce and Congressman James Inhofe's chief of staff. The seminars are held at various Tulsa hotels, usually from 8 A.M. until 9:30 A.M. This allows the small business owners to be back in their place of business by mid-morning, which we found is critical to ensuring their attendance. The program cost an average of $500 per seminar. Additional activities have included conducting client satisfaction surveys in both 1992 and 1993 to measure our performance and secure client feedback and establishing an internal quality control program to monitor the progress of a client's work from the time it is received until it is returned.

SIGNS OF SUCCESS

A little over a year after we hired our marketing director, the firm received a Bulls-eye Award for Marketing Excellence from the Tulsa chapter of the American Marketing Association in recognition of our integrated marketing efforts and overall 1991 marketing campaign.

Many partners of small firms think marketing directors are only for larger firms, but I believe small firms trying to intensify their marketing efforts can effectively do so by hiring experienced marketers. Partners should allow a minimum of one year to develop and implement the marketing program, get expert advice on how to choose the best candidate and allow the director the creative latitude to implement new programs. It's important, too, to establish guidelines and objectives in advance to ensure a mutual understanding of what is expected. Once these steps are taken, small firms will be gratified by the benefits.

First-year marketing start-up costs

Brochures                             $2,500
Client newsletter/tax letter           1,800
Seminars (3)                           1,700
Direct mail campaigns                  1,200
Public relations                         500
Client survey                            500
Total marketing expenses              $8,200

EXECUTIVE SUMMARY

* HIRING A MARKETING DIRECTOR had a major impact on a four-person firm's growth and success.

* ALL MEMBERS of the firm were involved in developing the written plan and setting revenue goals and cost limits.

* REVENUE INCREASED 58% during the first year (1991) with a net marketing cost of only $8,200; in the second year, the marketing department became an independent profit center. During the first six months of 1993, marketing revenues surpassed the total for all of 1992.

* THE FIRST YEAR'S business development efforts helped secure 17 new monthly write-up clients, primarily closely held businesses in retail and service-related categories. The firm also was recognized for marketing excellence by the Tulsa chapter of the

FIRM PROFILE

William T. Zumwalt, Inc.

Year opened: 1989, on the retirement of William Zumwalt's father. The predecessor firm, Zumwalt and Zumwalt, Inc., opened in 1983.

Location: Tulsa.

Total personnel: 6.

Number of partners: 1.

Number of CPAs: 2.

Areas of concentration: Monthly write-up, tax planning and preparation, audit and management consulting business plans, loan proposals and retirement programs).

Percentage of fees in

Tax planning and preparation: 55%.

Monthly write-up: 35%.

Audit: 5%.

Other: 5%.

Size of clients: Businesses with $200,000 to $1.5 million in sales per year.

Types of clients: Closely held businesses (retail, service and professional corporations).

Advertising and marketing programs: Advertisements in trade journals that reach target markets (physicians, for example).

How the practice will change in the near future: The firm hired a full-time audit manager in December 1993 to meet clients' increased demand for audit services. The firm also expects increased revenue from providing marketing services, business planning and evaluating existing businesses for sales or acquisitions.

For more information

Additional information on crafting marketing strategies can be found in The Marketing Advantage: How to Get and Keep the Clients You Want, by Colette Nassutti (American Institute of CPAs, product no. 90404JA), and Winning Proposals: A Step-by-Step Guide to the Proposal Process, by Kaye Vivian (AICPA, product no. 090390JA).