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A strategy for improving the quality of a CPA's life.

EDITOR

Judith R. Trepeck, CPA

Rehmann, Robson & Co.

30800 Northwestern Highway, Suite 220

Farmington Hills, Michigan 48334

CONTRIBUTING EDITORS

Jerrell A. Atkinson, CPA

Atkinson & Co., Ltd.

Albuquerque, New Mexico

Douglas L. Biensly, CPA

Martin WerbeJow & Co.

Pasadena, California

Carl S. Chilton, Jr., CPA

Long, Chilton, Payte & Hardin

Brownsville, Texas

Jimmie L. "Sam" CoJe, CPA

Cole & Reed PC.

Oklahoma City, Oklahoma

James G. Cullen, CPA

Sprague, Cain & CuIlen, RC.

Chelmsford, Massachusetts

Sylvester Del Low, CPA

Deloitte & Touche

Seattle, Washington

Dixon Fagerberg, Jr., CPA

Sedona, Arizona

Wayne J. Grace, CPA

Grace & Company, PC

St. Louis, Missouri

Charles B. Larson, CPA

St. Joseph, Missouri

J. Robed Shine, CPA

Monroe Shine & Co., Inc.

New Albany, Indiana

Stanley I. Simkins, CPA

Management Advisory Group

Albany, New York

Paula Bevels Thomas, CPA

Murfreesboro, Tennessee

How can practitioners have successful careers and fulfilling personal lives ? B. Jeannie Hedberg, partner, Hedberg, Beedie & Freitas, 733 Bishop Street, Suite 1220, Honolulu, Hawaii 96813, explains one firm's solution.

What is the connection between specialization and quality of life? Everything. Specialization can allow CPAs to spend less time on work and related activities, leaving more time for home and personal interests, yet still provide a greater profit.

Is this really possible? It's not only possible; it's an important shift for firms to consider if they are to thrive in the future. Because of the expanding number of women entering the profession, firms must learn how to integrate talented professionals who also have time-consuming personal responsibilities.

Women aren't the only ones interested in quality-of-life issues. Male professionals are taking more active roles in their families--and enjoying it. They, too, will be seeking employers who can accommodate their needs for more flexible work schedules.

PORTRIAT OF ONE FIRM

About 14 years ago, a CPA left the small local firm where she worked to start her own practice. She began by sharing office space with another CPA in a second-floor walk-up in a light industrial area. She couldn't afford any employees at first, but working by herself she was able to achieve gross billings of approximately $30,000 in the first 5 months. The next year, the first full year of practice, brought in over $ 90,000 and 2 employees. In 1990, the firm billed $1.4 million, had 3 partners who've been together over 10 years, a professional and administrative staff of 14 and 4,400 square feet of prime downtown office space.

As we all know, running this kind of successful accounting practice requires considerable time, energy and money spent on advertising, promotion and entertainment. Ambitious CPAs must sacrifice a great deal of their personal time in efforts to generate new business.

Is this true? Consider the firm described above.

* How much did it spend on client entertainment in 1990? $3,156.

* How often do partners golf with clients? Never.

* How many nights a year do partners spend entertaining clients? Maybe two.

* How does it spend its money? On salaries and employee profit-sharing plans that attract top-quality employees and on continuing professional education and other practice quality improvements.

THE ROAD TO SPECIALIZATION

This firm's focus clearly allows it to avoid spending time and money on entertaining, advertising and promotion because its reputation alone attracts clients. The partners don't spend a lot of their free time searching out clients--the clients come to them because of the reputation they've built. The idea may seem simple, but there are CPAs with demanding personal responsibilities who hesitate to enter public practice--and managers who hesitate to promote them--in the belief that partners must devote a great deal of personal time to practice development.

To build this kind of practice, it's necessary first to have a population base large enough to support a specialty. Small communities with only a few thousand residents generally won't provide a marketplace of sufficient size to specialize.

Assuming the firm's population base is large enough, how does a CPA pick an area of specialization? The first question is, What do I like to do? It can't be emphasized enough that this is the most basic and critical factor in a firm's success at specialization. Although some practice areas may be very lucrative or in great demand, the CPA who does what he or she likes will work at it with more enthusiasm and with a real and natural interest.

It's unlikely a practitioner will succeed if he or she picks a specialty based only on marketplace demand or lack of competition. The challenge instead is to determine the most appealing kind of work--tax, audit, write-up, management consulting services--and then the industries to be served.

Making these determinations is a major step toward specialization. The next step is to find trade or professional organizations whose memberships are made up substantially of potential clients who need the targeted services.

CREATING THE SPECIALTY

The path to my own specialty in taxation was as follows:

1. I hated doing audits as a staff accountant and vowed I would never do another one in my own practice.

2. Because I needed to make my monthly mortgage payments, I decided to accept any other kind of engagement, assuming the client appeared able to pay my bill.

3. As I gained more and more clients in my favored area, individual and federal estate taxes, I accepted fewer and fewer other kinds of clients.

To expand my client base, I joined the Estate Planning Council, which was made up of attorneys, certified life underwriters and CPAs interested in the estate area. The organization met for dinner once a month, which allowed me to get to know qualified professionals in this field and make them aware of my services.

THE MECHANICS

How long should it take to develop a specialty? Realistically, it can be accomplished in two to three years. After that, the advertising and promotion budget drops dramatically as the firm's reputation grows. It's then possible to enjoy a successful practice that leaves ample time for family and other personal interests.

Another advantage of specialization is it allows for better use of staff. Because staff members work in a limited number of areas, they can develop expertise in a relatively short time. This reduction in the learning curve means fewer writeoffs. Staff with deeper expertise in a narrower field can handle more of the client inquiries that in a more traditional firm would require a partner or owner to answer. This also frees up partners' time and makes their constant attendance to the business unnecessary.

One very difficult task for CPAs with newly emerging specialties is turning away clients seeking other services. I find it helpful to spend a little time talking with them about their needs. I then tell them that I very much appreciate their interest and explain that I've asked them to describe their situation so I can recommend another CPA who can better serve them. I finish by describing my own specialty.

This strategy creates two new referral sources: the client, who now knows about the firm's expertise and, one hopes, goes away with a good impression, and the CPA to whom the client is referred. I've found that referring clients to other CPAs often results in reciprocal referrals.

THE SKY'S THE LIMIT, BUT..

How large can a specialized firm grow? There's no limit on growth opportunities other than what the population base can support. The real question is, however, how big does the firm need to be? Ira primary reason to specialize is to control the amount of time spent at work, then growth may not be a top priority. Our firm has remained the same size for approximately four to five years. This enables us to generate sufficient revenues to provide a profitable return on our time. Employees and partners receive satisfying incomes and retain flexibility and control over their lives. It's a good arrangement for CPAs with large personal responsibilities-or for those who simply seek a better quality of life.

EXECUTIVE SUMMARY

* SPECIALIZATION can allow CPAs to spend less time on work and related activities, leaving more time for home and personal interests, yet still provide a greater profit.

* A CLEAR FOCUS allows firms to avoid spending time and money on entertaining, advertising and promotion because reputation alone attracts clients.

* FIRMS WITH established specialties are in a good position to attract talented female--and male--professionals who are concerned about quality-of-life issues.

* A SPECIALIZED practice requires a population base large enough to support it. CPAs then must determine what types of engagements they enjoy.

* ONCE THESE DECISIONS are made, practitioners should seek trade or professional organizations whose memberships are made up substantially of clients who need the targeted services.
COPYRIGHT 1992 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Hedberg, B. Jeannie
Publication:Journal of Accountancy
Date:Aug 1, 1992
Words:1432
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