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Strategic planning: what CPAs need to know.

Take a minute to think about the nature of your business. If you are in public practice, is it limited to tax preparation and auditing or are you are providing clients with other services as well? If you are in private practice, is your company ready to move ahead and are you prepared to advise management about the future?


If you're like many CPAs in public practice, you've probably started doing some general consulting work. You may have helped clients restructure debt or refinance their businesses or deal with bankruptcy. Maybe you've begun advising clients about buying and setting up microcomputer systems.

Then, of course, there's litigation support--one of the fastest-growing areas of CPA practice. You may have been asked to evaluate assets to be divided in divorce cases or determine the monetary cost of damages to plaintiffs in liability suits.

There's no question the accounting profession is changing. No longer are CPAs focusing solely on what happened to clients' businesses during the past year. Events are taking place and trends are developing that will affect you--and your clients--in the years ahead. What's more, many of those development swill present you with new, exciting and profitable ways to expand your business.

Are you prepared to take advantage of those opportunities? Do you know where your firm is headed and where you want it to go? Are you keeping up with developments that could affect the success of your firm? And most important, do you know what you have to do in order to move your firm forward in the 1990s?

If the answer to these questions is "yes," your operation is in good shape. You're undoubtedly doing well now. And you're prepared to grow and prosper in the years ahead. On the other hand, if the answer is "no," you probably have the sense that your firm is drifting and continues to be shaped by circumstances as they occur.

It doesn't have to be that way. By making strategic planning part of your regular activities, you and your partners can gain control of your partners. You can give your firm a definite direction and help it reach the destination you choose.



CPAs who work for small or family-owned businesses or larger corporations also can benefit by introducing strategic planning into their companies. They can help other executives begin to focus on the future. They can enable the company to identify and thereby take advantage of opportunities that otherwise might be overlooked or anticipate problems before they become crises. By initiating and remaining involved in the planning process (see sidebar on page 37), corporate CPAs can influence the future of their companies directly and assume a greater role in company decision making.


The words "strategic planning" strike terror into the hearts of many businessespeople. Yet, despite its imposing name, strategic planning is simply an ongoing process that consists of setting goals and figuring out the best ways to reach them.

There's nothing difficult about it. The process is the same whether you work for a large corporation or operate as a sole proprietor. In fact, if you're a CPA operating an accounting firm, strategic planning offers a double benefit. First, it helps your own firm move forward. Second, it can become a highly profitable service to offer your clients (see sidebar on page 39). Here's how to get started.


The first step in the strategic planning process is to gather all your key people together to take a look at the firm as it exists right now. What is it that you do? How, when and where do you do it? And what is it that you've been trying to accomplish? Put your description into a short paragraph. It is your "statement of purpose." For example:

"Smith, Jones & Co., January 1, 1991. We are a CPA firm with six partners and 60 employees generating revenues of $5 million a year. We have offices in New York, Boston and Baltimore. We provide tax and auditing services to 150 small and midsized companies involved in a wide range of businesses. We also audit the records of several local governments. We're trying to expand our services and our client base and improve profitability."

Now that you've identified what the firm does, take a look at how well it does it. What are its strengths and weaknesses? What does it handle successfully? What needs improvement? And, in the case of a partnership, what are the key contributions each partner makes, such as management ability, bringing in new business, keeping up with new regulations, ec. To simplify the process of identifying strengths and weaknesses, analyze the business along functional lines. Examples of six relevant categories follow.

* Marketing. Are you positioned clearly in terms of the clients and businesses you serve? What are your principal methods of generating new business--advertising, word of mouth, etc.? Do you enjoy a good reputation within the business community and the community at large?

* Sales. Have you periodically increased the volume of business from your regular clients or customers? Is total revenue increasing? Is it meeting previous projections? Are you aware of potential problems that could affect your gross income in the future?

* Administration. Does your business run smoothly, even during peak periods? Are you getting maximum productivity from partners or key executives? From staff? Prom equipment? Do you handle staffing well? Are you satisfied with suppliers of products and services? Are you holding costs down as well as possible?

* Personnel. Do you have people being groomed for partnership and/or top management positions? Have you had difficulty recruiting? Do you have problems with turnover? Are you planning for future hiring needs, particularly in light of the current and projected labor shortages? Are your firm's or company's salaries and benefits in line with those at similar firms or companies? Is morale generally high?

* Data processing. Does your computer system handle your current needs? Does it have the capability to be expanded? Are you getting the most from the hardware and software you use now?

* Finance. In looking at both balance sheets and income statements for the past three years, what do you see? How are your cash flow and accounts receivable? What is the ratio of expenses to revenue? The ratio of personnel costs to revenue? The amount of revenue per employee?

After answering questions such as these, you should have a good picture of your operations and of what helped you achieve success up to this point.

Now, take it one step further. The group should pinpoint the firm's or company's single greatest strength. Is it the variety of services you offer? The way you deliver services--with speed, personal attention? Is it your reputation for honesty and dependability? For being available whenever your clients need you?

That key strength is known as the "driving force." It's the factor that's going to be evident in all aspects of your business in the future. And it's the feature that's going to set you apart from your competitors.

Now let's summarize what you've accomplished with strategic planning so far. Yoy've highlighted the purpose of the firm or company. You've analyzed its strengths and weakness. And you've zeroed in on the reason(s) you've been successful. Now that you have a clear picture of where your business stands, you're ready to look ahead.



Of course, you want to become "the biggest, the best, the most highly regarded" or some other combination of glowing superlatives. But the problem with listing such vague objectives is that it's hard to know when, or even if, you can attain them. Instead, be specific. Spell out your goals in measurable terms. Focus on criteria such as

* The volume of revenue you hope to be generating in five years.

* The number and locations of offices, stores or plants you want to be operating.

* The number of employees you expect to have.

* The nature of your practice or business.

* The industries you intend to serve.

* The number of new clients or customers you want to attract.

If yours is a small operation, with only one or two executives, it's relatively easy to envision the future and establish goals. On the other hand, if you're dealing with a large or multipartner operation, or with a family-owned business, it's important for each partner, executive or family member independently to write down what he or she sees as the entity's best diretion in terms of the criteria listed above.

After each individual's goals have been identified, it's essential to reach a consensus. Again remember that, for strategic planning to be successful, it must be a team effort, with members brainstorming together. Once you reach a consensus, refer to that composite view of the future as your statement of goals; it's what you will be working toward.

This is where the hypothetical Smith, Jones & Co. expects to be five years down the road:

"Smith, Jones & Co., January 1, 1996. We are a CPA firm with 10 partners and 100 employees generating annual revenues of $8 million. We have offices in six mid-Atlantic cities. We provide tax and accounting services, plus financial consulting services to 250 small and midsized companies, most of whom are in manufacturing industries."

The statement needn't be lengthy or complicated. But it must be absolutely clear because it is going to become the basis of every decision you make. From now on, projects will get the go-ahead or be shelved, money will be allocated or denied and new ventures will be undertaken or abandoned on the basis of whether they help the firm reach these goals.


In the best of all possible worlds, you and your partners or executives could decide what needs to be done and simply do it. But, of course, there will be unforeseen developments that affect the most well-considered plans. And while you can't know everything that's going to pop up, you can recognize the trends already taking shape and those likely to develop.

The American Institute of CPAs strategic planning committe worked for almost two years developing 90 assumptions about the future. Not all will affect your business. But you should consider those that are likely to have the greatest impact on your firm or company, and incorporate them into your plans. Among those most likely to affect all businesses are:

* Increaesd competition.

* Expansion of international operations.

* Demand for a wider range of nonaccounting and nonauditing services.

* Increasing reliance on computers and automated equipment.

* Expansion of industry regulations and standards.

* Move toward decentralized management and away from pyramid structure in organizations.

* Increased pressure on profitability, in terms of rising costs for rent, salaries and benefits and the resulting need for increased productivity.

* Hiring difficulties in the future--decline in birthdate resulting in fewer entry-level workers; increased need to train workers who lack specific skills and experience.

* Increased used of paraprofessionals.

* Greater ongoing training needs, for all members of the firm or company.

* Likelihood of increased turnover.

* More demand for life-style assistance--for example, parental leave; help with dependent care; need for flexible and part-time scheduling.

Some of these require action now. Others simply should be kept in mind. What's important is that you be aware of them and know what you're likely to be up against so you can act when it becomes necessary.



At this point, you and your partners or other managers must decide what you need to do to reach your stated goals by the target date--in this case, five years. This is the nuts and bolts of the entire strategic planning process and the part that involves developing an action plan.

The action plan is critical to the implementation of your strategic plan because it establishes actions and pinpoints individual responsibilities and due dates for action.

It is also important to note that throughout the process of strategic planning it is important to have complete documentation of all meetings, consensuses reached on issues and specific actions to be taken. The article that follows, "Technology Update: Group Decision Support Systems," describes technological advances that make this documentation process easier. However, it also can work with simple flip charts and a few magic markers. The important issue is not how you document the process and capture every idea but, rather, that you do capture this information during the group discussion.

Again, it makes sense to break the whole into parts, as was done in identifying strengths and weaknesses. For example, if the statement of goals notes the firm's or company's commitment to expanding into three more cities within five years, every department will need to be involved in planning and executing the expansion. You might begin by having all partners or executives address the following questions:

1. Which cities represent the best places to expand and where should the first new office be located? You'll want to consider such factors as potential clients or customers and volume of business; existing competition; the state of the local economy; the size of the labor pool; and the availability of suppliers.

2. Will you open a new office or acquire an existing firm or business?

3. If you open an office, should you build a new facility or lease space? What equipment would you need to buy or lease? Does it make more sense to have current partners or executives set up the new operation or to hire people to handle the details? On the other hand, if all of you like the idea of a merger or acquisition, are there good prospects in that area?

4. Who would staff the new office? If you bought an existing firm or business, wuld you keep the employees already on the payroll, relocate some of your own staff or hire new people? What type of support services or training would be needed?

5. Could your current computer system handle the expansion you're considering? If not, could you build on the existing system or do you need to buy new equipment?

6. What would the expansion cost, considering all of the variables? At what point would the operation become profitable?

These questions produce a lot of "what if" situations, as various alternatives are considered. One way to make this process easier is to use existing software packages designed for just this purpose. This important aid to the strategic planning process is described more fully in the article "Making Small Business Planning Easier," which appears on page 53.

Obviously, these are just a few of the questions that would need to be answered. And you also can see that all key people must be involved in the planning process from the outset.

Who should do what? That depends on who already does what and how well. If yours is a small CPA firm, assignments for developing concrete plans should be based on both interest and expertise. On the other hand, if you're helping develop a plan for a larger corporation, it's wise to let executives do what they do best--handle marketing, finance, personnel or whatever.

Once individual assignments are agreed to, set a deadline. Schedule a meeting form say, one month from the day the statement of goals is adopted. Ask each partner or department head to present the results of his or her research at that time. Each person then should offer ideas, suggestions and possible solutions to the problems encountered. Encourage communication between department heads to minimize problems brought on by conflicting needs and limited resources.

An important caveat: As you develop your plans, always focus on your firm's or company's goals and strengths. One of the biggest mistakes entities make is to throw money at wekness rather than building on what the organization and its individual partners to best.

For example, assume one of your goals is to bring in new business, and for the sae of argument, one of your partners (Bob) is a genius with numbers but hates meeting new people and fades into the woodwork at social gatherings. It would be a waste of time and money to suggest, with the hope that he'll become friendlier and generate new contacts, that Bob become a member of the local golf club.

That doesn't mean you shouldn't consider joining the golf club. Instead, let Bob stay at the office, doing what he enjoys most and does best and have the more socially adept partners represent the firm at tee-off time.

After the first brainstorming session, have partners or executives develop increasingly specific plans. Let them establish their own deadlines and regularly report to the managing partner, chief executive officer or whomever is in charge of the planning operation. Then periodically schedule group meetings to monitor progress. If you have offices in other locations, the partner in charge of each should oversee the development of a plan that fits in with the firm's or company's overall goals. That partner also should attend group meetings.

Remember that strategic planning doesn't mean writing down the "shoulds" and filing them in a drawer. Planning is an ongoing process. On the other hand, your plan isn't a document written in stone. Things happen. Changes take place. Any good plan needs to be reviewed periodically and revised when necessary.

How often should you review it? At the very least, schedule an annual planning session--say, during a retreat--when phone calls and day-to-day crises can't interrupt the meeting. In addition, department and local office plans can be checked every few months or as often as it seems appropriate.

Good strategic planning involves teamwork, communication and commitment. But it's worth the effort. As soon as you begin, you'll have greater control of your business and keep it moving steadily forward.

J. CURT MINGLE, CPA, is managing partner of Clifton, Gunderson & Co., Peoria, Illinois. A member of the American Institute of CPAs strategic planning committee for six years, he is a member of AICPA council and a trustee of the Financial Accounting Foundation. The firm, which has more than 850 total personnel, has implemented strategic planning in all its 30-plus local offices; all local office plans supplement and tie to the firm's overall strategic plan.
COPYRIGHT 1990 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Mingle, Curt
Publication:Journal of Accountancy
Date:Jul 1, 1990
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