As I see it, everything is up for disruption in our profession. Everything. Our precious time sheets, our practice management software, our paper, our ‘lip service’ to customer service and our hierarchical management structures. In my eyes, everything is ripe to be blown up. So let’s talk about the underlying foundation of our firms: our legal structure.
In my state (South Carolina), there are specific state statutes that a ‘professional’ corporation can organize under. I assume these are similar to many other states. These statutes state what a ‘professional’ corporation can and can not do. It also says who can and can not own shares in this corporation. As stated in our professional statutes:
SECTION 33-19-200. Issuance of shares.
(a) A professional corporation may issue shares, fractional shares, and rights or options to purchase shares only to:
individuals who are authorized by law in this or another state to render a professional service described in the corporation’s articles of incorporation.
I believe this is for the purpose of protecting the great citizens of our state. Apparently, since you can only issue shares to ‘individuals who are authorized by law in this or another state to render a professional service,’ we are going to operate at a higher level of ethical behavior, all the while helping our clients feel warm and fuzzy. That is BS!
The ‘protectionism’ that has built up around professional corporations used to be a good thing. But now, it is holding our profession back from innovating and changing things. I believe the team working in my firm is very important. They form the culture, support our customers and drive the value to our customers. When a legislative statute begins restricting whom I may put in leadership or ownership positions, I feel restricted, not protected. The worst part is I feel like our customers have ultimately become the unnecessary casualties of these protections. Let me explain.
It is well known that our profession is utterly and totally conservative. In the past, this may have been necessary to ensure CPAs ‘do the right thing.’ I’m not sure why this was necessary, but let’s assume it was necessary. Though these protections were in place, they still could not really ensure our clients were protected. There are CPAs that still shafted their clients for their own gain (remember Arthur Andersen and Enron?). So our customers are not really as protected as we want to believe they are. They are not as safe as they think they are. We can still stick it to our clients if we want to (as long as we have the right work papers, or back-dated signed forms on hand).
It seems it would be better for our customers if we were positioned as aCompany, not a Firm.
In this, I mean a Company to be an entity that totally answers to their customers first (and regulators second). The CPA Company could be solely focused on bringing new value to their customers. On the other hand, a Firm is an entity solely focused on filling workpapers out, obeying rules so they don’t get in trouble and answering to regulatory bodies first. The clients are a distant second in a Firm. At least, that is what I believe. You can disagree if you want. But I believe our ‘firms’ prove what I’m saying. Younger staff in our firms know that we don’t really focus on our clients. We go to crappy CPE just to meet the regulatory requirements of our licenses, limit what the staff can say on Facebook because we are scared we’ll get in trouble and dread the Peer Review. And though Peer Review is a good idea, I feel like Client Review is a better tool to make me do the right thing.
But I don’t want to be such a downer. The future of our great profession is brighter than it’s ever been!
How can we change? Let’s blow some stuff up:
1. Let’s reorganize our Firms to become Companies under general corporate statutes, not professional statutes. My firm will become Blumer CPAs, Inc. I’ll be the CEO and we’ll hire people (licensed or not) that care about our clients and want a share in the profit that we create.
2. Let’s add a little risk to our companies. Adding risk means we’ll be trying new things… something our customers desperately want us to do. We’ll try new services, sacrifice in new ways for our customers and give new optional pricing models to our customers.
3. Let’s cancel our Professional Liability insurance. What will this do? You will totally care about who you let work in your firm and who you serve in your firm if you have no insurance ‘protecting’ you. Hopefully, you would become crazed about how and whom you serve (which is the point). Take away ‘perceived’ means of protection and safety (because policies don’t really protect you anyway), and start delivering uncompromising value to the people who decide if you will have a job tomorrow or not (a.k.a., your customers). No, I probably won’t actually do this because my wife won’t let me.
4. Let’s focus on positioning and marketing to the communities that are developing all around us. Social media is not bad, and all of your work should eventually come from online referrals. Market to the community. That is where the world is congregating. Let’s position ourselves there.
5. Let’s slow down our processes. Take your niche to scary deep levels, take only a few clients a month, ask everyone why they want to become a client and stop serving ‘everyone.’ I’ve tried saying ‘no new customers’ for a few months at a time just to see what would happen. What does it do to our team, our growth and the perception from potential new customers? I learned a lot about my resolve for growth and why my firm existed when I did that.
6. Let’s outsource those services that are not based upon knowledge, like preparing tax returns, payroll tax returns and ‘write-up’ work. Ask yourself, ‘would my client pay me for this service if they didn’t have to?’ If not, then get it out of your new CPA company. Be radically addicted to selling knowledge, not transactions. Eventually, the customer will take it away from you anyway or take it to another CPA company that knows they sell knowledge.
7. Let’s stop billing our services in 6 minute increments and look at the bigger picture that we sell knowledge, and that our customers want to buy knowledge. They pay you to do a tax return only because they have to. That is a sucky positioning statement, and you better fix it before the customers find out!
I have blown so many things up in my firm it’s not funny. It’s been painful, but the knowledge gained from my attempts to manage and implement risk for higher profits has made us better. We serve better, are better positioned to serve only those we want to serve and make more money.
Our future is bright, but I feel we must begin blowing stuff up, look through the dust and mine for the good stuff that remains. What will be left after you blow up the old stuff? You may find some diamonds.