Like all healthy relationships, strategic partnerships thrive through give and take. By contributing skills and resources their business partner lacks, both parties expand their overall ability to create value. For many accounting firms, this could lead to new services being delivered or access to alternative market segments — both vital at a time when average revenue growth has slowed to 5.7% — the lowest in eight years according to the latest Rosenberg Survey.
The survey, released by consulting firm The Growth Partnership, lays bare the urgency for firms to find business partners. Based on two decades of data, the report concludes that bigger accounting firms are more profitable: they have the people, infrastructure, and leadership to provide a value proposition and services mix that appeals to larger clients.
While the profitability and size correlation is a key driver of industry consolidation, not all firms can or will merge up. Those that don’t will need to lean on strategic alliances to drive growth and to stay competitive against larger, better-resourced firms.
How do strategic partnerships drive new business for tax and accounting firms?
The benefits of a long-term business partnership go beyond referring engagements and receiving referrals. The right strategic fit gives you the ability to accept or bid for engagements outside of your firm’s focus and allows you to complete these projects in the following ways:
- Contracting your business partner to deliver services directly to the client
- Dividing each project into separate pieces and allocating them between you and your business partner
- Leveraging resources you lack from the partnering firm, such as their infrastructure, products, services, and expertise
Mutually beneficial strategic partnerships can also attract more accounting business by:
- Improving your ability to adapt to client needs and deliver value and convenience quickly
- Giving you cost-effective access to new markets
- Strengthening your brand if your strategic partner is reputable and trusted in their field
- Broadening your network to include a wider range of professionals
- Building client loyalty when you refer them to strategic partners who provide an outstanding experience
Types of partnerships that will benefit your tax and accounting firm
There are multiple ways to collaborate with other firms for mutual benefits.
While these are short-term or occasional arrangements rather than strategic partnerships, joint engagements allow firms to combine their knowledge, labor, and other resources for a single project and share profits and losses as agreed. A joint engagement is worth considering to boost your chances of winning a proposal.
You can enter into long-term business partnerships with firms that offer some similar services. For example, think of an alliance between a small bookkeeping business and a local CPA firm. The bookkeepers often come across clients looking for recommendations on legal entity structures. As they’re unable to provide this type of advice, they refer their clients to the CPA firm. The CPA firm, on the other hand, contracts out projects to the allied bookkeepers when their own workload is near capacity.
There are two main types of partnerships between tax and accounting firms with similar services:
- Upstream alliance: This is formed when a small firm pairs up with a larger practice to leverage their assets and provide clients with better or more specialized offerings. This type of relationship is often about resource sharing and has great potential for long‐term gain.
- Downstream alliance: Bigger firms can benefit from partnering with a smaller practice or one that focuses on a specific niche. These types of alliances are useful for small or price‐sensitive jobs.
Accounting practices also develop specialized alliances with other professionals with complementary products or services offerings. Examples of specialists who might be a good fit include:
- Business consultants
- Estate tax attorneys
- Executives and leadership coaches
- Human resource specialists
- Investment advisers
- Insurance brokers
- IT companies
A strategic partnership enables firms to better support client needs and deliver on non-traditional disciplines such as digital transformation, business valuation, human resources management, and investment advice.
Selecting a strategic partner for your tax and accounting firm
Turning an alliance into a success story requires more than a formal agreement and a mutually beneficial business plan because collaborating means working together closely — despite differences in operating styles. You and your business partner need to agree on what needs to be done and how to do it.
To find the right business partner, here are four steps you need to take:
- Understand your firm: This means assessing your performance, capabilities, skills, client demographics, and weaknesses to figure out the value you can bring to the table as well as what you need.
- Define what you would like to achieve: What are your firm’s vision and core business strategy? How will a strategic partnership help? It’s important to be specific. Are you trying to grow your accounting firm by gaining exposure to a different market? Have you noticed clients needing complementary services you don’t yet provide? Or would you like to attract bigger, better-paying clients by strengthening your brand? Perhaps it’s profitability you’re targeting and a strategic partner could lower operational costs?
- Evaluate business partners: Location, experience, and range of services influence strategic fit, but cultural fit is equally important. It’s invaluable to spend time with partners, managers, and key staff of a potential strategic partner to understand their business philosophy and cultural norms. Beyond structure, policies, and procedures — the things documented in organization manuals — you need to grasp how things are really. Are issues communicated directly and openly, or is there an emphasis on raising concerns through the right channels? These insights inform potential challenges and the protocols you should put in place.
- Trial with a small job: Once you have successfully shared information, developed ideas, and made decisions together on a project, then you can enter a long-term relationship with confidence.
Long-term success of a strategic alliance depends on the ability of both partners to leverage differences and resources, but you must share similar values as well as a commitment to quality if your goal is to serve more clients — and serve them better.
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