What Does it Take to be the “Best of the Best” Accounting Firms?
Every accounting firm has its own formula for getting ahead but reaching the very pinnacle of this highly competitive profession requires certain key characteristics and attributes. With two decades of naming ‘Best of the Best’ accounting firms, IPA Publisher Mike Platt is armed with data that tells the story of how some firms have managed to weather every storm and grow no matter what.
Every year, IPA selects 50 Best of the Best firms based on their performance across more than 70 metrics included in IPA’s annual survey of more than 500 accounting firms. Contact IPA to participate. Best of the Best firms come in all sizes and are geographically dispersed across the U.S.
The fact that some firms make it on the list year after year is no fluke or random stroke of luck – Platt shared commonalities of these elite firms in a recent AAM High webinar, which was recorded and can be accessed at no cost through the AAM Store.
Platt noted that Best of the Best accounting firms:
- Take training seriously. Continuing improvement is a top priority at all levels of the firm, with professionals encouraged to reach their full potential, even if they don’t stay with the firm.
- Shift their thinking. They offer solutions, not services. They listen more than they talk.
- Charge what they’re worth. Best of the Best firms have the confidence to charge 20% more than their peers. And they don’t get jittery when a client complains and rush to offer a discount.
- Care for their staff. They pay well, offer flexible schedules and pay attention to whether staff would recommend them as an employer. Best of the Best firms include everyone in setting the future vision of the firm.
- Embrace a scrappy, entrepreneurial attitude. They do more with less and provide innovative, top-quality solutions to a very specific type of client.
- Demand partner accountability and results. They set a code of conduct and strict criteria for performance and “get rid of partners who don’t play by the rules.”
Best Practices, Lessons and Ideas
Platt also touched on practices of the Best of the Best that some firms, surprisingly, are slow to adopt. One is a formal, up-to-date pipeline process. “About 40% of firms have no idea what’s in the pipeline at any given point in time, and that’s a sad thing to say.” Track leads and discuss them in monthly partner meetings, Platt advises.
Another perennial problem is partners working too much on technical work and not enough on growing or transforming the business. Typical partners spend the vast majority of their time on client work, Platt says. “But be sure that time is focused on high-level review work, not the daily grind of working the details of tax returns,” says Platt.
They should instead focus on bringing in new business, mentoring staff, supervising managers, building niches, and gaining more visibility in the community. “If there was one thing that I would encourage every firm to do, it would be to get partners to focus on doing more partner-level work and hand off the technical work they shouldn’t be doing.”
Platt says too few firms – only 1 in 4 according to IPA data – implement a formal client classification process. Firms should rate their clients by letter grade (A through D), cull “toxic” or “D” clients, and be pickier about which clients they’ll accept. “I can tell you in 20 years of looking at this question, not once have I ever encountered a firm that said, ‘We fired a D client and it was the wrong thing for us to do.’ Not once.” Not only does thinning the bottom end of the client roster allow firms to focus on more valuable “A” clients, but employee morale and engagement also tend to increase, Platt says.
A couple of trends Platt encourages firms to watch for are the growing ranks of non-CPA professionals and shifting pricing models.
According to the 2020 IPA Human Resources report, about a third of firms are recruiting outside traditional accounting programs, courting graduates in computer science, general business, engineering, entrepreneurship, and liberal arts, Platt says. “Is there going to be a place for them as partner in the firm? How do you evaluate people with different skill sets?”
Best of the Best firms are also embracing up-front billing and increasing their fees regularly. According to the latest IPA research, about 70 cents of every dollar is billed by the traditional hourly rate. Of the remainder, about 23 cents is fixed-fee or upfront pricing, 4 cents is true value pricing, and the rest is in retainers, commissions and success fees.
Finally, Platt urges firm leaders to think of the satisfaction that comes from a day of hard work volunteering for a worthy cause. “How do you bring that same level of commitment to the work environment on Monday, on Tuesday, on Wednesday, and have the excitement and enthusiasm and encouragement and engagement that they had when they volunteered with Habitat for Humanity?” Cultivating that attitude among employees can benefit both the community and the firm.
Access a free recording of the Jan. 21 webinar, “Secrets of IPA’s Best of the Best Accounting Firms.” A PDF of the slides is also available by emailing Rhonda Clark.
About Christina Camara
Christina Camara is the managing editor of INSIDE Public Accounting, which publishes two award-winning publications: the IPA newsletter and the annual IPA National Benchmarking Report, along with in-depth reports focused on IT, HR, and firm administration.
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