1. New Strategies for Profit and Performance Your strategy should be the solution, not the problem. CPA Leadership Institute August 7, 2013

2. What do you find is the greatest marketing challenge facing your firm?

3. How do you think the most successful firms will address these marketing challenges in the future?

4. Current Strategic Challenges Shrinking margins Downward fee pressure Complexity Labor – Shortages – Demographics – Cost – Efficiency Technology integration

5. Average Profit Margins © INSIDE Public Accounting 2012 Used with permission

7. Complexity Laws and regulations Standards Information overload Deal structures/financial instruments Risk analysis Technology

8. “Any fool can make things bigger, more complex, and more violent. It takes a touch of genius-and a lot of courage-to move in the opposite direction.” Albert Einstein

9. Competition Every firm – Needs more good people – Needs for everyone to work faster – Needs everyone to be more accountable – Needs more clients that will pay their fees – Needs brain power and capital for succession – Wants to be the best

10. “If rivals all pursue the “one best way” to compete, they will find themselves on a collision course”. Understanding Michael Porter Joan Magretta 2012

11. Competitive Forces that Shape Strategy Bargaining Power of clients Bargaining power of experienced CPAs Threat of new firms Threat of substitute products or services Rivalry among existing competitors Adapted from Understanding Michael Porter Joan Magretta 2012

12. AICPA Demographics Source: AICPA 2009

13. AICPA Demographics

14. CPA Human Capital “Cliff” CPAs Non-CPAs MenWomen Men

15. Salary & Benefit Costs Average personnel costs as a percentage of net revenue – 2012 45.1%* Many firms 50%+ * © INSIDE Public Accounting 2012 Used with permission

17. Salary Trends © INSIDE Public Accounting 2012 Used with permission

18. Average Pay per Professional © INSIDE Public Accounting 2011 Used with permission

19. 5 Year Trends © INSIDE Public Accounting 2011 Used with permission

20. Innovations in Communication Written language>3500 BC Printing pressChina 1000AD Gutenberg1436AD Digital wordAbout1940AD Accounting1970-1980’s

21. Innovation Curves

22. Strategy “Competitive strategy aims to establish a profitable and sustainable position against the forces that determine industry competition”. Competitive Strategy Michael Porter 1985

23. Keys to Success Strategic competition means choosing a path different from that of others. Understanding Michael Porter Joan Magretta 2012

24. Firm of the Future CPAs Non CPAs

25. Strategies Consolidation Cost advantage Differentiation Technology

26. Consolidation

27. Shake-Out Age of partners Lack of succession options Unwilling to invest in technology Lack of capital Unable to extract value Lack of expertise/specialty Profitability pressures

28. Is growth in itself a strategy?

29. Growth Objectives Talent Niche/Specialty Geography Critical mass in practice areas Economies of scale Profitability Improved client service

30. Consolidation Challenges – Management – Integration – Processes and systems – Standardization – Capital/investment – Risk

31. Consolidation Challenges – Transition/succession – Client relationships – Client service – Increased fee structures

32. PCPS Top Issues Partner accountability/unity Bringing in new clients Retention of current clients Fee Pressure/Pricing of services Developing a succession plan Source: AICPA 2011

33. Cost Advantage Labor costs Efficiency Leverage Technology

34. Reduce Labor Costs Reverse upward delegation – Don’t allow people to work below their level – Higher level personnel must leverage – Utilization levels need to increase – Hire skill levels for the task

35. What tasks are you doing that you shouldn’t be doing? Scanning Admin duties Setting up files Making copies Inputting 1099s Typing letters Write up work Payroll reports Chasing client info Data entry Data imports Filing PDF docs Ordering supplies Deliveries Filing Bank reconciliations

36. Redefine Positions Data management Executive assistants Data input Technology specialists Client relationship specialists Technical specialists Team leaders/managers/supervisors

37. Reduce Labor Costs Manage and control Gain efficiencies – Standardization – Processes and procedures – Specialization – Leverage/critical mass Manage margins

38. “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency”. Bill Gates

39. Processes Lagging Over 60%

40. Files not Consistent Over 72%

41. Innovation 2009 The Henry Ford of Heart Surgery In India, a Factory Model for Hospitals Is Cutting Costs and Yielding Profits Source Wall Street Journal Nov 2009

42. Innovation Headline 2013

44. Inside India's 'No-Frills' Hospitals, Where Heart Surgery Costs Just $800 Source: Business Insider April 21, 2013

45. Innovation in Public Accounting www.cpainnovationproject.com

46. Technology Adoption and integration Appropriate level of experience Consistent application Improve proficiency Avoid duplication Simplify!

47. Technology Strategic partners Process driven Limit manual tasks

48. Processes Intake – Standardized – Paperless – Organized – Timely Type of service Relationships?

49. Differentiation Specialization Geographic location Niche services Client service

50. Specialization Critical mass Expertise Efficiency Processes Investment Rapid growth Reputation

51. www.SteveEricksonCPA.com Leverage Strategy and Value Curve $

52. Geography Less competition High value Convenient Technology Need for better management and processes

53. Client Service Strategy Staff – Engagement – Control – Part of something bigger – Success

54. What Employees Want Valuable work To be successful To feel secure To be needed To be cared about

55. Rating of Motivators

56. Copyright ©2012 Steve Erickson LLC

58. Leadership Lesson from Neha

62. Leadership Lessons from Neha Care for me and I just exist. Care about me and – I will care about you – I will try harder – I will do better – I will learn – Our relationship will grow ever deeper – I will succeed

63. You know what needs to be changed in your firm to improve client retention and client acquisition.

64. Start the Journey Start building a culture of success Tie the marketing plan to the firm strategic plan Change the language in your practice Make outstanding client service the gold standard in your firm Define marketing in terms of the solution, not the problem

65. Take advantage of the opportunity before you to truly differentiate your firm from your competition.

66. Copyright © 2012 Steve Erickson LLC Accounting Firm Profit Improvement Model TM