Notebook/26/dp1st/mark2nd

Mark Hafner

We hear a lot these days about acquisitions, mergers and consolidations. And it’s not only in the banking industry; other industries are being affected as well, including professional services firms.

But what if you don’t want to be acquired or consolidated? Many smaller accounting firms are grappling with this issue, trying to figure out how to stay independent while remaining competitive.

The undeniable conclusion is this: If you decide to stay independent, you’re going to have to offer additional services in order to succeed in a highly competitive marketplace. You’re going to have to identify some “value-added” benefits that help set your firm apart from the competition.

It may not be enough anymore for an accounting firm to be the best at tax planning, for example. Obviously, quality work is still of crucial importance. However, these days, CPA firms need to go beyond that to survive.

Many firms are already providing value-added services but may not realize it, or aren’t promoting those services as strongly as they should, if at all. The situation is complicated even more by the fact that many small-business owners don’t have a clear understanding of what a valuable resource a CPA can be to their companies.

Additionally, while many business owners are either skilled at sales or the technical aspects of producing products, they’re not necessarily adept at managing a firm.

Helping business owners understand the financial dynamics of running their companies can be one of the most useful “value-added” services that CPA firms can provide. Some of these services include:

? Guidance in basic business practices: For one thing, CPAs can help with a company’s collection policies. This will impact the speed with which receivables turn, and improve the flow of capital into the business.

CPAs can also impress upon business owners the significance of creating a paper trail of sales, deliveries and invoices as a way to manage credit risk.

? Standard business advice: CPAs can offer advice to help business owners control the critical relationship between cash flow and profitability, and suggest ways to manage growth, forecasting, and borrowing.

? Building a lending relationship: CPAs can tell clients what lenders are looking for in a business, what the current trends are in lending, and how to find alternative sources of funds. They can instruct owners about how to keep monthly sales journals, cash receipts and other documents that provide historical information that lenders need to assess loan requests.

While CPAs do (to varying degrees) educate their clients, those clients may not necessarily appreciate the fact that they’re really getting added value when they’re provided with that information.

The value CPAs bring to the table in managing cash flow, risk, and accounting inefficiencies is considerable, but they need to do a better job getting business owners to recognize it.

? Introductions and referrals: A client may not need a lawyer, insurance broker or lender right now. But when the time is right, the ability to refer a qualified professional will be greatly appreciated. Interestingly, many CPAs don’t think of this as a value-added service because they make introductions all the time.

The issue then becomes one of communicating this service to existing and prospective clients. It’s important, therefore, to make sure the firm’s promotional materials, like brochures and newsletters, make reference to having a network of professional affiliations. In addition, all members of the firm need to communicate this regularly to their clients and prospects.

? Entertaining clients: Never underestimate the value of entertainment.

Providing opportunities for clients to get to know their CPAs better and to glean information in an informal setting (without being billed for it) is invaluable.

Though usually unspoken, many clients expect and look forward to some form of entertainment breakfast, lunch, ballgames as a part of the overall relationship. And it’s this relationship-building aspect that will help keep the competition at bay.

What you’re probably saying about now is, you do all of that already. And I’m sure that’s true.

But are you being recognized for it? Are you positioned in the minds of your clients and prospects as having the competitive edge over other firms because you do more? Obviously, only you and the other members of your firm can answer those questions, and it’s probably a good idea to all sit down and do just that.

If there is any hesitation in saying the firm is recognized for the extra value brought to client relationships, then the next step is to document that value.

Documentation can be done in a variety of ways. Along with company brochures and newsletters, you can distribute testimonial letters, reprints of articles written by members of the firm, and notification of the speaking engagements undertaken by members of the firm.

The bottom line is this: The ability to communicate the extra value your firm brings to its clients is in many ways just as important as the value-added services your firm provides.

Firms that consistently identify, communicate and provide added value will have a very easy time staying ahead of the competition and reaping the rewards of remaining independent.

Mark Hafner is president of Celtic Capital Corp. He can be reached at [email protected].

Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact James Klein at (213) 743-1759 with feedback and topic suggestions.