The future is not looking bright for the vast majority of small accounting firms, according to a recent survey.
Defining “small” as having five or fewer equity partners and a maximum of $10 million in annual revenue, nearly three-quarters of small accounting firms surveyed expect 2016 to be less profitable than 2015.
A Forbes magazine survey of 301 managing partners of small accounting firms revealed that 70 percent of them expect 2016 to be a tougher go than 2015.
They note that a number of factors, including staffing and fee compression, are making it more difficult for smaller firms. These factors are also impacting partner compensation in these firms.
Many small accounting firms are finding it difficult to compete against larger and specialized peers. Nearly 60 percent of managing partners surveyed said that there have been times during the past three years when their firm has not been able to address significant business opportunities. To rectify that situation, a number of firms have chosen to team with other providers, including other accounting firms, on certain projects. Many have said they have looked at aligning with another firm.
Eighty percent of managing partners who have said they have missed out on opportunities said they have also looked at aligning with another accounting firm to broaden their services.
One solution for smaller firms feeling pressure from not having the bulk to compete in all areas is to join a network like the BDO CPA Alliance. When an opportunity presents itself that a smaller firm may feel unequipped to handle on its own, an alliance provides the option of bringing in a peer firm to help on the project.
“We are periodically called in by other accounting firms because of our expertise at addressing complex estate and income tax planning,” Daniel Geltrude, managing partner of Geltrude & Co. and director of the firm’s Family Office practice, told Forbes. “When we work on these cases, we clearly understand that we are a resource and that our only connection with the ultra-wealthy client is around the planning. We are sure not to encroach on the services the referring accountant is already providing. Loyalty is critical in these types of arrangements.”
Going forward, it is likely that small accounting firms will need to go beyond their in-house staff more frequently to stay competitive and grow business. Creating alliances with other firms to broaden the services they offer can be the answer.
And, in some cases, aligning with another accounting firm can be the optimal solution.
Sansone Accounting & Tax is a provider of accounting and tax services. Sansone is known for guiding clients through planning and preparation decisions to minimize tax liabilities and help increase their business efficiency. Whether it is accounting regulations or questions about QuickBooks, the firm prides itself on being available to play a major role in supporting financial, record-keeping and tax-planning issues. To schedule an appointment with one of Sansone’s certified public accountants, call (815) 459-4300.