How CPAs Become Great Consultants

The accounting profession has come a long way since the first CPA exam was administered in New York, in 1896. Outside events, such as the creation of the SEC and the tech revolution, have dramatically changed CPA firms’ service portfolios. In the early 80s, a legendary CPA industry consultant, Don Istvan, told practitioners that accountants deliver two types of services: Type I services are those that clients need – audits and tax returns – only because outside entities require them. Type II services are those that clients both want and need – helping clients solve problems, operate more efficiently and achieve greater success, which today we call consulting.

Many believe that consulting is on the threshold of making another quantum leap forward, because CPA firms will need to compensate for the possibly dramatic revenue reductions in compliance services. Technology, including artificial intelligence, is positioned to dramatically reduce the time required and the fees charged for conducting audits, preparing tax returns and even providing financial advice.

Today, consulting services only comprise 10-15% of all revenue for the vast majority of CPA firms (as is the case with all of my writing, the focus of this blog is primarily on firms below the Top 50). There are three reasons for CPA firms’ relatively weak emphasis on consulting:

1. CPAs are enjoying enormous income levels from their compliance work — the average equity partner income in the latest Rosenberg MAP Survey was an impressive $521,000. With income like that, it’s understandable that CPAs would be reluctant to change their service models.
2. CPAs rarely like to be the first to do anything. They prefer to wait until “everyone else is doing it,” rather than jumping on the bandwagon of change. Generally, they won’t change unless they have to.
3. Many CPAs aren’t sure how to do consulting. Here’s a great example: A CPA firm client of mine referred one of his clients to me for consulting. The company was a small, privately owned valve repair shop. The company was stagnant, floundering and earning very little income for the owner. I knew nothing about the valve repair business. I simply used basic, logical techniques: learned how the company works and operates, reviewed the company’s financial, production and performance data, interviewed all key personnel confidentially, summarized my findings in a written report and presented the results to the owner. My client, the CPA, called to tell me how thrilled his client was with my work. I told him, “Joe, you could have done this job.” Joe responded, “Yeah, you’re probably right. But I would be afraid I wouldn’t find anything wrong.”

Two types of people will read this blog. The first type may be moved by what I’ve written but will continue to focus on compliance work; that’s what they know, it makes them a lot of money and, deep down inside, they are not convinced that their compliance goose will stop laying golden eggs in their lifetimes.

The other type, for whom the remainder of this blog is written, may feel that they need to begin positioning their firm to do more consulting in the future, preparing for the day when compliance work will become be a fraction of what it is today.

I recently shared with a group of practitioners what I’ve learned in 20+ years as a consultant. Here are the highlights. By the way, your friendly author/consultant, initially a CPA himself, never got an MBA and never was trained how to become a consultant. I learned by jumping into the deep end.

1. Yes, clients hire us for our knowledge of best practices. But we should never TELL them what to do. We help them arrive at their own decision.
2. Practice the Boy Scout motto: Always be prepared. Never wing it. Do your homework on your client. And charge for your preparation time.
3. Some people have great memories, but many think their memories are better than they actually are. The reality is that most of us have lousy memories. Do your homework. Study your notes. Practice makes perfect.
4. Never trust the client to take notes on advice you deliver. My experience has been that clients take terrible notes. Always prepare a written report summarizing your work, recommendations and decisions made. The report doesn’t have to be long, but it should be powerful.
5. Avoid making decisions based on a small sample. Just because one person says something doesn’t mean that it is “right.” Before reaching any conclusions, be sure to get several people saying the same thing.

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6. When leading the group sessions, be fastidious about concluding each segment with concrete action steps. Never, ever, be vague or “have a good discussion” without reducing it to goals. A good consultant is never content with just leading the client in a great discussion. We should be passionate about getting the client to take action.
7. Always ask yourself: Does the firm have the wherewithal to execute what you give them? Accountability? Leadership? Financial incentives? Don’t just deliver your advice. Part of your consultation should be engaging them in efforts to ensure implementation.
8. Tell it like it is. Be tactful and professional, but also assertive and direct. Your assessments, messages and recommendations should be crystal clear. Don’t hold back for fear of how the client will react. Tell the client what you think, even if they didn’t hire you for it.
9. Strive to be a high-priced, lower-volume practice. The goal is to have clients say about you: “She’s expensive, but she’s good!” Consultants are specialists; specialists never discount their fees.
10. Make yourself a “famous person” by getting name recognition in your market or field. Become an expert. Get published. Speak at conferences. Send out blogs or newsletters. Do all of these again and again. This can and should be a major way to get business.
11. Key personnel at the client often disagree on issues that are addressed. Avoid the appearance of taking sides or being biased in favor of one person over another. There are several ways to address this:
    1. Poll key personnel. If there are 8 in the group, and 6 or 7 say yes to an issue and 1 or 2 say no, the outliers will often relent on their own.
    2. Citing data from national surveys to corroborate your observations and recommendations adds to your credibility and can sway your clients’ actions.
    3. Cite Best Practices. Clients love to hear that many other companies practice what you preach.

If you do the above, you don’t have to tell them that they are wrong. They can see this for themselves.

12. Give clients lots of templates and handouts.
    1. When you “talk” about something, people only retain 20% of what you say.
    2. Follow it up in writing with a handout or graphics, and it rises to over 50%.
    3. If you follow it up with examples they can use to implement, you approach 75%.

A final vignette

A few years ago, I was facilitating a firm retreat for a third-generation CPA firm. One of the retreat topics was marketing and their stagnant revenue growth. In doing my homework on the firm, I observed that 100% of their revenue was from audit, accounting and tax. No consulting whatsoever. I asked them why consulting was zero. They said it was because they didn’t know how to do consulting.

I then asked if they had any specialties or niches. They said that a third of their revenue was in auto dealers. I asked them how many auto dealer clients they had, and they said about 30. I asked them if, in the course of their work with auto dealers, they learned a lot about the auto dealer industry. Without hesitation, they said yes. I then asked them if their 30 dealers included some who were tremendously successful and profitable, while others struggled. They emphatically responded yes, again.

I concluded this line of discussion with the following: “You have just told me that you have acquired a tremendous amount of specialized expertise and experience servicing auto dealers for decades. Some might call these ‘best practices.’ You should be able to use this knowledge to obtain consulting engagements with, say, 5 or 10 of your least successful dealers to improve their business. You have some great consulting opportunities right in front of your nose! This will be a great way to jumpstart your consulting practice.”

So, take the great leap forward by taking advantage of consulting opportunities that exist today at your firm. Your firm will have a brighter future if you do!