When Strategic Planning is Right for Your Firm

I recently spoke to a group of marketing directors who were interested in discussing how a firm’s strategic plan can be integrated with marketing. They quite rightly felt that if they are expected to impact the firm’s marketing efforts and growth, they need to have a “seat at the table” during partner meetings focusing on firm strategy and vision.

I began the discussion by asking how many of their firms even had a strategic plan. Surprisingly, very few.

Why have their partners avoided strategic planning? Their response was consistent with what I have heard throughout 20 years of consulting with CPA firms: Too busy. Don’t want to be held accountable for achieving goals. Not sure if the effort will make the firm more profitable. Complacency – partners are perfectly satisfied earning $345,000 a year – the current average earnings per partner at firms under $10M, according to the 2014 Rosenberg Survey.

We perform an analysis each year that we call the “haves vs. the have-nots.” It’s a comparison of profitability (as measured by income per equity partner or IPP) between firms over $10M and those under $10M. 2013 data showed the over-$10M with an IPP of $492,000, 43% higher than at smaller firms. At its peak before the recession, the larger group outperformed the smaller group by a whopping 65%!

What accounts for this huge gap in IPP? Larger firms are much more likely than small firms to have: (1) a strategic plan with partner goals and accountability (2) partners who keep billable hours lower to avoid being “too busy,” (3) a culture that does not tolerate complacency among partners.

And finally, the firms engaging in strategic planning believe in their hearts that the effort will make a significant impact on firm profitability.

Readers of this post are likely to have one of the following reactions:

• We’re satisfied with what our firm has achieved. Sure, we want higher IPP, but we don’t feel that strategic planning is right for us. As Clint Eastwood famously said: “A man’s got to know his limitations.”
• We drink the same Kool-Aid as Rosenberg. We’ve been doing strategic planning for years and swear by the results it has achieved for our firm.
• We haven’t done strategic planning but we’re now ready to give it a try. We want to be in the “Haves” column!