A roadmap to firm growth.

There are three essential elements in creating a successful accounting practice: quality service, satisfactory partner compensation and healthy growth. All too often, however, CPA firms mistakenly believe that if they meet the first of these criteria--superior service--success in the other two inevitably follows.

Obviously, the success of any business venture begins with the excellence of its service standards. Without them, the potential for growth and attractive compensation are virtually nonexistent. But there is nothing unique about a firm that does a good job for its clients. Many thousands of accounting practices across the country provide excellent client service. Unfortunately, many of these firms never will consist of more than one or two people. Good service alone will not make the world beat a path to your door.

Our own firm is a case in point. Our service is excellent but is no better than hundreds of our good competitors. Yet since 1981, we've grown from billings of $315,000 to over $5 million--with an annual growth rate of 22% since 1987. During this time, we have not had any mergers or acquisitions--or a large marketing budget. In addition, we practice in a part of the country that has had considerably more business contraction than expansion.

If we assume all CPA firms offer a similar level of service efficiency, what then can be done to ensure firm growth and the increased compensation that usually follow?

KNOW THE GOALS

The first step in any real growth program is what I call "goal visualization." What types of business should the firm serve? How wide a geographic area will it cover? How big do the partners want the firm to be? I should emphasize there is nothing wrong with being content with the size of a firm as it is. If the firm has a dozen or so good clients and reasonable revenue expectations, it can stay at that level until the partners retire. This choice is understandable. However, it leaves the firm vulnerable to the vagaries of the economy and to competitors who are seeking to increase the size of their firms.

If a firm chooses growth, it must first draw up its own roadmap. The partners should get together and write down specific objectives: Where they want to go, how quickly it can be done and what it will take to accomplish it.

Once written, that roadmap becomes the path to the firm's visualized goal and its growth strategy. It should be regarded as a working tool to be used daily.

Marketing the firm's skills cannot be a subject that comes up casually every six months or so at a partners' meeting. Sales and marketing must be an agenda item at every firm business gathering. The essential question is: "What has been accomplished since we last talked?" Growth depends not only on detailed planning but also on continuity of execution.

In approaching the intended market, it's important to remember that potential clients don't realize how good the firm really is. In all likelihood, clients know little or nothing about tax compliance and planning, financial recordkeeping, accounting principles, etc. Firms approaching a market are dealing with the perception--not necessarily the reality--that they're better than the competition. One of my growth strategy themes is that clients buy perception and end up with reality. Creating a positive perception requires constant attentiveness and reinforcement. That's why our firm developed what we call a multidimensional marketing strategy.

The tools used in implementing this strategy are the same time-honored communication techniques that have been used successfully by American industry for many decades: publicity, advertising, seminars, printed materials, peer pressure and networking. The difference is that CPA firms have used them only sporadically or not at all. Firm managers don't have to invent new techniques, just use the techniques with dedication and continuity. Be assured that 30 days after an article about a firm appears in print, the readers will have forgotten 90% of what was said.

OUR FIRST STEP

Again, I'll use our own company history as a pattern. In 1981, we partners mapped our growth goals and decided to begin with what may be the most valuable and least expensive of all promotional tools: publicity. We also decided it would be useless to begin this endeavor unless we were willing to give it real effort.

For example, whenever someone is added to our staff, regardless of the position, we prepare and issue a news release. We do the same for internal promotions and new services. More often than not, these announcements appear in print because the media, particularly local publications, are hungry for information. If a news release isn't picked up the first time around, we often send it out again.

Since we began this effort, we've frequently been asked, "How come I'm always reading about your company? You really must be growing." The truth is we may not be any better or more successful than anyone else. We're just creating a more visible perception that we are.

Such activity also becomes a self-fulfilling prophecy. Not only are prospective clients impressed but so are media people. The firm becomes, by implication, an opinion leader in the business. In our case, editors now call us for comment on pertinent editorial subjects.

This reputation has led us to the second element in our publicity strategy: Writing articles that demonstrate our expertise in specific areas of accounting practice. A recent story in an Ohio-based publication, by-lined by us, was directly responsible for bringing in two new clients that we'd never heard of--adding $35,000 to our annual revenues. We approach periodicals or newspapers about writing articles for them--and the response usually is good. Then we assign the article to the appropriate firm member, although we are now considering the possibility of hiring freelance writers.

OUT OF THE MOUTHS OF CLIENTS

Publicity is only one component in our multidimensional approach. As our business has grown, many of our clients have expressed their appreciation for the way we've met their accounting needs. We use these endorsements as the backbone of an ongoing advertising program in our Cleveland-Akron market area.

It's important to remember in both publicity and advertising work that what you say about yourself easilty can be discounted. What others say can have real impact, whether it's a newspaper, in a magazien or in the statements of existing clients. This sort of approval from disinterested organizaitons is called third-party endorsement, and it is the life-blood of any successful communications program.

We've based most of our advertising on this concept. We don't tell people how good we are--We let others do it for us, in the form of testimonials. From one ad of this type we obtained the business fo what has become our third-largest client (see exhibit 1).

EXHIBIT 1 A third-party endorsement

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When we started this program, we first approached clients that were well known in the areana dthat we knew would be willing to give us a favorable endorsement. After our ads began running, though, many of our clients approached us to volunteer to be in them; some even offered to pay for the ads, although we declined. We've gone from about 10 client endorsement ads to almost 40. We categorize them by niche to use in the appropriate publication or proposal.

It's also important, periodically, to urn ads that demonstrate growth rate, on teh ancient premise that success breeds success. As an example, the Case Weather-head School of Management at Case Western Reserve University in Cleveland annually publishes a list of the 100 fastest growing companies in northern Ohio. We closely monitor this prestigious list and encourage our clinets to apply for inclusion. We historically represent 20% of these companies--and our own firm has been included for the past seven years. We didn't hesitate to let the public know about this (see exhibit 2).

As the prestige and awareness of the firm grow, it's to make use of another fruitful communication technique. Seminars on trends in taxation and financial reporting are an important way to meet face-to-face with prospective clients. In setting up such meetings, practitioners should remember not to do it without an important cosponsor--a bank, investment firm, law firm or possibly an insurance company--one whose reputation in the field of money management is impeccable--to lend additional substance to the firm's presence.

Second, don't be disappointed if the crowd isn't too large. We consider ourselves lucky if only 10% of the invited audience actually shows up, but they all see the invitation, which in itself increases the firm's prestige and reputation. The firm now is cast as an expert in a given field and endorsed as such by the prestigious cosponsor. In sending out invitations, a firm should work from a sound mailing list and should line up a keynote speaker who won't put the audience to sleep.

Our cosponsors supply names for the mailing list, to which we add our own firm referral sources, prospective clients and friends of the firm. We try to keep our invitation lists big and growing; we don't believe in purging names from lists too often because it's impossible to know who might show up and bring in new business.

We supplement our multidimensional marketing strategies with printed materials, such as brochures that summarize all the other communication efforts, establishing patterns of company growth, testimonials from happy clients and significant news developments.

Another facet of our strategy is careful attention to more personalized communications routes. We send specially designed greeting cards to clients to recognize birthdays, anniversaries and the like, mailing as many as 15 every week. We even send cards confirming upcoming appointments--a reminder to clients and prospects alike that we're thinking of them constantly.

The last two components of our multidimensional strategy deal with partner peer pressure and an overall firm commitment to networking. All partners have individual practice development goals and we continuously compare against each other. Networking is a key component to a successful growth strategy. The face-to-face interaction with referral sources is a must. We have ongoing staff training in the art of networking and have instituted internal programs to ensure every professional is involved.

There are a few growth strategies our firm won't use. We tried direct mail--and it worked well for us--but we believed it didn't fit with our professional image, so we discontinued it. We don't do telemarketing or hire salespeople to generate business for the same reason. We have never directly solicited a client or made a cold call. Even when a firm has made a commitment to growth, it can only use the techniques with which firm members are comfortable, and these techniques were too aggressive for us.

We are always monitoring and challenging our growth strategy. We recently hired an outside consultant to reevaluate our programs. This gave us an added focus in identifying and marketing industry and technical niches, provided a more sophisticated referral tracking system and spurred us to hire a marketing coordinator to assist in implementing our plan.

HOW CAN IT BE DONE?

The big question is, How do CPAs enact this plan while maintaining the required level of service excellence? There are three methods, but in our opinion only one is sound. A firm can hire an outside marketing and communications firm to implement the growth program, but this tends to divorce the activity from daily routine and also can be quite expensive.

Another option is to delegate total responsibility to a marketing expert on staff, which means the firm is depending on only one person for firm growth. This can limit the resources at the firm's command.

The option we favor is to make new business the concern of 100% of our employees, from the managing partner to the receptionist. In our firm, for example, all the clerical staff have their own business cards. Does this bring in new clients? Probably not, but it does give them pride in where they work and changes their attitude about their marketing roles. We demand that every employee be involved, in some manner, in at least one new business activity every month. We conduct in company contests, with awards such as free dinners and days off. Through this type of participation we added 68 new clients (those with over $1,000 in fees) in the first eight months of 1994 and have made more than 2,000 new business contacts during the past three years.

Does this multidimensional growth strategy really pay off? The skills required are simple enough: time, energy, dedication. We spend about $15,000 to $20,000 on marketing every year, which is miniscule compared with our annual billings. The real costs are intangible--the firm member's time and energy. But the benefits can be considerable, if our own statistics are an accurate measurement. Since 1988, our firm has averaged a new client every 3.1 business days. When we started our program, we hoped our firm would be billing $1 million a year. We are now more than five times that size--and growing.

RELATED ARTICLE: FIRM PROFILE

Saltz, Shamis & Goldfarb Year opened: 1987 Locations: Cleveland and Akron, Ohio Total personnel: 75 Number of partners: 5 Number of CPAs: 32 Areas of concentration: Hospitality; graphic arts; temporary help; law firms; nursing homes; medical practices; steel service centers; distribution. Gross fees: $5 million Percentage of fees in Accounting: 35 Auditing: 4 Tax: 50 Consulting and personal financial planning: 11 Size of clients: $100,000 to $150 million Type of clients: Privately held Best thing we did in the last five years: Stress internal communication and hire the best people we could. Worst thing we did in the last five years: Not hire enough good people. How the practice will change in the near future: Employee stock ownerhip program for CPAs.

RELATED ARTICLE: An overview of a multidimensional growth strategy

1. Publicity

* Send press releases: Handled by firm administrator; office manager; partners; minimal cost.

* Write articles: Handled by various firm members; no cost. 2. Advertising

* Client testimonials and outsider endorsements: Handled by firm administrator; cost--preparation: $500; to run a 1/3 page ad one time in local press: $600 to $800 per month. 3. Seminars: Handled by firm administraor; office manager; partners; cost--about $500 to $1,000, bur cosponsors cover some or all expenses. 4. Printed materials: Handled by clerical support staff; cost--$2,000 to $3,000 per year. 5. Personalized communication: Handled by all firm members; minimal cost. 6. Partner peer pressure. 7. Overall firm commitment: Handled by managing partner; cost $15,000 to $20,000 per year.

Note: Since the firm hired a marketing coordinator, she has taken over responsibility for press releases advertisements, seminars and printed materials, among other duties.

RELATED ARTICLE: Executive Summary

* SINCE 1981, ONE CPA FIRM has grown from billings of $315,000 to over $5 million--with an annual growth rate of 22% since 1987. The secret to its success lies not only in quality service but also in using a multi-dimensional marketing strategy.

* THE STRATEGY BEGAN with a partner meeting in which they charted a growth roadmap with specific objectives. The roadmap is a working tool that's used daily.

* THE FIRST STEP IN THSI FIRM'S program was publicity, the most valuable and least expensive of all promotional tools. Other techniques included advertising featuring client testimonials, seminars, printed materials, peeer pressure and networking--efforts used successfully by American industry for many decades. Firm managers don't have to invent new techniques, just use the techniques with dedication and continuity.

* THE FIRM HAS MADE new business the concern of everyone from the managing partner to the receptionist. Such participation helped add 68 new clients in the first eight months of 1994 and resulted in more than 2,000 new business contacts during the past three years.

RELATED ARTICLE: All in the timing

Whenever there is a meeting of two or more people in our firm, practice development is always an agenda item. We have a bimonthly partner meeting and a bimonthly management meeting (senior managers and partners) in alternating months; we also have a monthly lunch meeting between both firm offices and a monthly meeting of strategic practice units, which are organized around niches. The importance of practice development is discussed and reinforced at all of these meetings. In addition, we hire temps to cover the phones for our annual firm meeting, which includes all employees and features practice development sessions and contests. These regular reminders are one of the ways we support our growth strategy.

GARY S. SHAMIS, CPA, is managing partner of Saltz, Shamis & Goldfarb, inc., Cleveland, Ohio. A member of the American Institute of CPAs management of an accounting practice committee, he served on the Ohio Society of CPAs MAP committee and on the 1994 White House Conference on Small Business' taxation task force.