What do small businesses need from CPAs?

Inadequate succession planning is the most serious threat to companies with annual sales of under $3 million, according to a survey of its members by the American Institute of CPAs management consulting services division. The consultants cited inadequate financing and insufficient managerial skills as the next greatest problems. For larger companies, environmental regulations were seen as the greatest challenge (see exhibit 1).

Smaller businesses also frequently lack the kinds of management measures that improve effectiveness or efficiency, the consultants believed. As shown in exhibit 2, the respondents said the majority of small businesses were unfamiliar with health care alternatives, technology options and prudent, cash management techniques, as opposed to larger companies, which were more aware of these and other management tools.

"This survey shows that small companies have very real needs and that CPA consultants should not neglect these businesses in favor of larger ones," said Joseph Puleo, chairman of the AICPA MCS executive committee.

The consultants also had an optimistic view of the future: Nearly 75% expected their consulting revenues to grow in the next year.

"The outlook for CPA-consultants is good and small businesses clearly don't have resident all the skills they should have," Puleo noted. "The conclusion could be that CPAs should pursue the consulting specialties that interest them."

Best advice. The surveyed CPAs urged small businesses to avoid letting day-to-day concerns prevent them from performing sufficient strategic planning. When asked for the most important piece of advice they would give clients, more than 33% of CPAs said they should plan ahead or do long-term strategic planning; 12.1% suggested better communication of their business concerns; 8.3% advocated controlling cash flow; 7.6% said client should recognize the need for consultants; and 7% said they should follow consultants' advice.

Puleo says CPAs might use the survey results to initiate discussion with clients about the challenges facing their own businesses. "The results tell them they're not the only ones who have these problems and that they don't have to suffer in silence," he said. "The next step is to let them know that their CPA can provide services, directly or through a referral, that will help them."

Practice opportunities. Business valuation and computer consulting were seen as the specialties with the greatest potential for growth among client companies (see exhibit 3). When the CPAs were asked which services they would most likely offer, business valuation came first, followed by forensic accounting and succession planning.

The health care industry offered the greatest growth potential for CPAs, according to 78.1% of respondents; 62.8% cited environmental services; 51.1% chose professional service firms; and 49.7% picked companies affected by the North American Free Trade Act. (Respondents were allowed to list more than one choice.)

The stage at which companies seek consulting advice varies according to the size of the respondents' firm. For example, sole consulting practitioners said clients generally came to them when they were in the start-up phase (40.7%) and the growth stage (32.7%). Firms with 100 or more AICPA members said clients most often came to them when their companies were in the growth stage (51%) and the maturation stage (21.6%). This shows companies may go to larger CPA firms as their businesses grow.

Emphasize the personal. And what did companies most value in consultants? Service quality, reputation and personal attention topped the list (see exhibit 4); fees were perceived as least important.

"Quality and cost-benefits are what matter," Puleo said. "When you offer a service the client perceives as directly beneficial to the company, a fair fee always will be accepted."

The survey was sent to more than 4,200 MCS division members nationwide and had a 25% response rate. Two-thirds of the respondents worked in firms with 10 or fewer AICPA members and 28.8% were sole practitioners.