In working on strategic planning for accounting & advisory firms, a key issue is always: moving forward, in which client industries should the firm invest? A quick glance at firms’ websites reveals that most firms are already largely organized by industry — sometimes exclusively. However, these organizational alignments were developed based on firms’ historical client bases rather than on analyzing future market opportunities. Not surprisingly, when we ask partners about the future growth industries, the partners tend to mention their existing business areas rather than industries not yet stressed by their firms.
As we work further with our clients, it becomes clear which existing industry practices are no longer growth areas and thus, going forward, should be run as “cash cows.” The choice of new growth industries is less obvious. It is highly dependent on number of factors:
– the firm’s geographic location(s)
– where a potential industry sits on the maturity curve
– the firm’s service specialties
– the ease or difficulty of finding expertise in an industry
– the firm’s risk profile
– the partners contacts & networks
– and, the competitive landscape.
Properly making this decision is one of the most important elements of strategic planning for these firms. It needs to made based on careful analysis of these factors and the firm’s willingness to make investments. Such as, acquiring other firms at the cost of short-term impact on firm economics, management distraction and the challenges of culturally assimilating a new partner group. Perhaps the most important factor of a firm’s capacity to add new industries is the ability, or inability, to find the right new leaders. Our experience shows that business results depend very heavily on the strength of the industry leaders and that, once a leader is appointed, many firms are reluctant to make a change, irrespective of performance.
Notwithstanding these challenges, there is no better way for accounting & advisory firm’s to drive new top line growth than to successfully add new industries and services. All the more reason to give these decisions the careful focus they deserve.