The Small Firm Advantage

Does your firm have it?
BY JAMES C. METZLER

EXECUTIVE SUMMARY
Despite their modest size, local practices have many real advantages that give them a competitive edge in recruiting, retention, client service and other vital business areas. PCPS is undertaking many new efforts to support its small firm members, and is rededicating itself to initiatives and publications that highlight the small firm advantage.

That advantage stems from a smaller practice’s flexibility, collegial atmosphere, opportunities to be hands on and its grassroots ingenuity. Senior members who are genuinely friendly and let employees know that having good staff is a big part of what makes them successful offer tremendous encouragement to firm members in good times and bad.

Ambitious staff members get more opportunities in small practices. At the same time, staff members who don’t want to advance to management level still can find challenging work. Many employees choose small firms because they don’t want to spend a lot of time on the road, but the biggest advantage is the involvement of management in the work process. Typically clients work with decision makers in the firm.

Women find it easier to advance at small firms, which is encouraging since they continue to enter the profession in high numbers. But work/life balance continues to be a priority for talented professionals of both sexes and at all levels.

From a partner’s point of view, it’s easier to feel like an owner in a small firm. At a larger firm, even partners feel like employees.

Small firms don’t have to change what they’re doing or try to be more like large firms. They simply have to recognize all the good they have going for them and reinforce it, both inside and outside the practice.

James C. Metzler, CPA, is AICPA vice-president, small firm interests.

hallenges and limitations face many small businesses, including CPA firms. But despite their modest size, local practices have considerable advantages that give them a competitive edge in recruiting, retention, client service and other vital areas. Because I worked in small CPA firms for more than 30 years, I see those advantages clearly.

At the AICPA Private Companies Practice Section (PCPS) we think it’s time to help our members focus on ways to make their size work for them. Accordingly, PCPS is undertaking many new efforts to provide insight and support for our small firm members and is rededicating itself to initiatives and publications that highlight the small firm advantage. With our new small firm logo (at right), members can quickly locate those resources. This article describes how many small firms are using size to their advantage.

Use the PCPS small firm logo to quickly locate helpful resources.

C OMPETITIVE E DGE
What is the small firm advantage? It is the flexibility, collegial atmosphere, opportunities to be hands on and grassroots ingenuity that give a smaller practice an edge in facing management challenges that include the following:

Recruiting . In the ongoing scramble to find new talent, small firms can stand out from the crowd by being more responsive and personal. At 30-person Wilkins Miller PC in Mobile, Ala., partner Michael Kintz, CPA, says, “Many new hires find us because a staff member told someone about our firm’s family atmosphere.”

Small firms that bring satisfied staff members into the recruiting process have a clear advantage. For example, at 20-person Millikin Benning Kleckler & Kobischka LLC in Rockford, Ill., and Monroe, Wis., a talented young CPA was weighing whether to take a job in the Rockford office or with a national firm. “Because the candidate said she planned to start a family soon, we sensed she was very interested in flexibility,” says partner Curt Kleckler, CPA.

The firm invited her to talk to new mothers on staff to get direct information and reassurance about the firm’s capacity to accommodate flexible schedules. Kleckler believes she elected to join his firm in part because the people who ultimately would make decisions about her future schedule used flextime themselves and understood her situation.

Retention . Once a firm attracts talented employees, what’s the best way to hold on to them? Find out what they want and make them feel valued. That often is easier to do in a small environment. “Some people want time off, while others appreciate a casual business atmosphere or firm outings to baseball games,” says Kintz. Employees feel like part of the firm when senior members are genuinely sociable and friendly and let them know that having good staff is a big part of what makes the business successful. A small firm can give that personal attention.

Small firms also encourage firm members by participating in their lives in good times and bad. “We attend colleagues’ family weddings and funerals,” says Kintz, and really reach out to someone going through tough times. That unity is reflected in a low turnover rate. During a recent three-year stretch, the firm lost only one professional while it added four.

Ambitious staff members get great opportunities in small practices, too, says Bruce C. Smith, CPA, managing partner of 25-person Mather & Co., Louisville, Ky. He observes that in the largest firms it’s rare for a partner to accompany a staff member on fieldwork, but practices like his accommodate that regularly. Big-firm staff members generally are assigned only a few engagement tasks and don’t get a broad sense of the client’s business. In a small firm, when a junior staff person goes out in the field with a partner, it’s an opportunity for him or her to take part in the interaction and get to know the client better.

Staff members who don’t crave a management position can find challenging work in small firms as well. “Public accounting is a great place to be, but not everybody wants to be an owner,” says Kintz. “At a smaller firm it’s easy to identify staff members’ strengths and understand how they can contribute without getting on an ownership track.”

Work/life issues. “Women are gravitating to smaller firms where they represent 47% of the workforce, compared with 40% at larger firms,” according to “A Decade of Changes in the Accounting Profession: Workforce Trends and Human Capital Practices,” a new study by the AICPA’s Work/Life and Women’s Initiatives Executive Committee. Women find it easier to advance at small firms, and that’s encouraging since they continue to enter the profession in high numbers. And of course work/life flexibility is not important just for women. The study found that more than 75% of professionals of both sexes at all levels showed great concern about maintaining a work/life balance.

Adaptability—the foundation of any work/life balance program—often is simpler to achieve in a local practice where there’s less bureaucracy and it’s easier to customize programs for individual firm members. “If you find people you think can do the job, be as flexible as you can in meeting their needs,” Kleckler says. “When somebody comes into my office and makes a special request, I try never to say no.” His strategy is to hire people with strong skills and a good work ethic, then adapt to their needs. “If they want to take a week off in filing season, and they think they can make it work, you really can’t refuse.”

In addition, many staff members choose small firms because they don’t want to spend a great deal of time on the road. “We serve the local market, and the resulting lack of travel appeals to recruits,” Kintz says.

Client service. From a client standpoint, “the biggest advantage in a small firm is the involvement of management,” says Kintz. “There are typically at least two people involved with a client, one of whom is a stakeholder, plus a manager or another staff person. The clients work with decision makers in the firm.”

Smith notes that a common complaint at some firms is that clients are not sure who’s in charge of their account and whom they’re supposed to call when they need help—the senior manager, partner or someone else. “Our clients are cottage industries, family businesses. Some have worked with our firm for 30 years, even after the business was passed on to a new generation. They want to know they have a familiar person at the firm as a contact when they reach out.”

Kleckler has a basis for comparison; he was with a large firm for 11 years, where he rose to the level of senior manager. His clients were large companies with their own CPAs and other qualified people on staff, so the kinds of questions they asked him were much different from those a small practitioner typically would get. “The clients we deal with rely on us more for basic, day-to-day questions, and they need an answer right away.”

S TREAMLINED M ANAGEMENT
Practitioners also point out the advantages of smaller practices for firm leaders. It’s easier to feel like an owner in a small firm, says Kleckler. “At a larger firm, even if you’re a partner, you’re pretty much an employee. You’re not given a lot of decision-making responsibility.” In a smaller practice, however, even staff and administrative personnel are aware that decisions are made on-site. “If staff members have an issue or a question, they know they can get an immediate answer, or at least talk to someone about it right now. They don’t have to wait to send to the New York home office for a response.”

Kintz also notes that some procedural changes are easier to make in a smaller environment. When his firm decided to go paperless it hired a larger firm to help with the project. The consulting firm had a number of offices and its representatives told Kintz that they had firsthand knowledge of the many problems of going paperless. But for Kintz’s firm the problems were few and the change was relatively easy. When things came up, they ironed them out in weekly staff meetings. “We got together to talk about what worked and what didn’t. When you’re small, it’s easier to capitalize on efficiencies.”

Kintz also believes that smaller firms benefit from focusing on productivity rather than on hours worked. “When you have a real sense of what people are doing, you have a better idea of who needs help and who can take on more work.”

Despite the firm’s size it does have a person who works as a marketing and recruitment coordinator—two functions that often dovetail. It constantly tries to stay informed about people who are available in its market, so that if a client calls and mentions it needs someone—from a bookkeeper to a CFO—the firm just may have a resume on hand that fits the bill. “In a smaller environment, when you have one person wearing two hats, you can maintain that sense of who’s out there. As a result, we often can provide a service that makes us a resource for clients.”

A NEW PERSPECTIVE
Small firms don’t have to change what they’re doing or try to be more like large firms. They simply have to recognize all the good they have going for them and reinforce it, both inside and outside the practice (see “Accentuate the Positive,”below). 

  Accentuate the Positive

Have your staff and partners answer the questions in this checklist to make the most of your small firm advantages.

Why are we proud of our firm? What are its most important assets?

What would we want prospective staff members to know about our firm?

What would we like prospective clients to know about our firm?

Why is this a good place to work? How would staff members describe the firm?

Why do clients like our firm? How would they describe our services and client service?

In what ways is our size an advantage?

How can we use our advantages to enhance our services, client relationships and staff satisfaction?

Given the answers to the previous questions, how would we market our firm to a promising young recruit? To a potential client?

“We definitely try to press our small firm advantage in marketing and recruitment efforts,” says Smith. The managing partner makes an effort to meet with all new or prospective clients to reinforce the fact that if the partner a client works with is not available, the client can call the managing partner. “We want clients to know they can count on that benefit when working with our firm.”

In a competitive environment in which high-quality work is the norm, what differentiates one small firm from another may be only price or service. Smith believes those offering the best service will win. “That hands-on approach is second nature at small firms.”

I hope this article will help small firm readers maximize the many advantages they possess. In offering big rewards to their staff and their clients, small firms get practice development opportunities that capitalize on their special strengths.

 
AICPA RESOURCES
CPE self-study courses
AICPA’s Guide to Financing the Growing Small Business: Sources, Strategies and Disclosures (# 730483JA).

AICPA’s Guide to Reporting and Disclosure Problems for Small Businesses (# 734334JA).

Analytical Procedures for Small Business Engagements (# 730551JA).

Innovative Tax Planning for Small Businesses: Corporations, Partnerships & LLCs (# 745518JA).

Marketing: Successful Strategies for CPA Firms, DVD/manual (# 181831JA), VHS tape/manual (# 181830JA), additional manual (# 351830JA).

Profit-Building Techniques for Small Businesses (# 732411JA).

Small Business Audits: Balancing Risk, Effectiveness and Efficiency in Today’s World (# 732431JA).

Successful Selling Strategies for CPA Firms, DVD/manual (# 181190JA), VHS/manual (# 181191JA), manual for DVD/VHS (# 351191JA).

JofA articles
Second-CPA-Firm Update, JofA , Sep.05, page 61.

Small Firms: Think Big! ” JofA, Jun.04, page 22.

For PCPS members only
“Not-for-Profit Board Member Orientation,” a PowerPoint presentation for use with clients and prospects, educates board members on their roles and responsibilities and how they can manage and measure success ( http://pcps.aicpa.org/Resources/ ).

The PCPS Firm Practice Center ( www.aicpa.org/pcps ) provides information for the PCPS membership section of 6,000 local and regional firms whose interests the AICPA represents to the profession, regulators and standard setters. PCPS offers CPAs practical guidance and quick access to information on professional issues affecting performance and profitability.

The TIC Alert ( http://pcps.aicpa.org/Resources/ ) keeps PCPS members informed about new and developing standards and their potential impact on small business clients.

Publications
The CPA’s Guide to Retirement Plans for Small Businesses (# 017237JA).

The CPA’s Guide to Small Business Financing (# 091013JA).

How to Prevent, Deter and Detect Fraud in Your Business (# 018200JA).

Not-for-Profit Organizations—AICPA Audit and Accounting Guide (# 012645JA).

For more information or to order, go to www.cpa2biz.com or call the Institute at 888-777-7077.

SPONSORED REPORT

Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.

QUIZ

News quiz: IRS warning on cyberattacks and a change in pension rules

Once again, the IRS sounds the alarm about a threat from cyberthieves. See how much you know about this and other recent news with this short quiz.

CHECKLIST

Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.