CPA Firm Growth Amid COVID-19 Destruction
The U.S. economy is amid the most massive upheaval and downturn since the Great Depression. Unfortunately, COVID-19 has permanently altered the business landscape. Likewise, small businesses are the most vulnerable. However, you can have CPA Firm growth amid COVID-19 destruction and help small businesses, too! Further, remember that CPA firms are not immune to the economic impacts of the pandemic.
Small businesses and their owners are the lifeblood of the compliance, tax, bookkeeping, and outsourcing services provided by CPA firms. And, a shrinking pool of small businesses means increasing competition among and between CPA firms. The result is downward pressure on professional rates and fees.
How can CPA firms alter the competitive landscape in their favor? They can grow their advisory services by helping clients grow their business. In other words, accounting professionals can leverage their role as trusted advisors.
It may seem counterintuitive to be preaching the opportunity of growth in a rapid economic contraction. However, CPA firms hold a unique relationship with their clients as trusted advisors. But, accountants know the numbers. Further, they must demonstrate that they know the business.
Think Like a Business as an Owner, not as a CPA to Achieve Firm Growth
To understand a business, a CPA firm must consider issues from their client’s perspective. Analyzing numbers after the fact or from a compliance perspective is mostly a “rearview mirror” exercise. Growth opportunities are more readily identified from a forward-looking, or “windshield” approach. Focus on understanding a business’ unique value. What does the business provide to targeted customer groups through efficient and effective channels?
According to Peter Drucker, the father of business consulting, a business exists for the sole purpose of creating a customer. And, not just ANY customer – a profitable customer. Every business must make a conscious decision. Which customers do they want to focus on? And .which ones do they choose to ignore? This distinction is critical and yet is often overlooked. Trying to be everything to everyone may be a strategy, but it is not an effective one. Helping your client identify, retain, and grow a profitable customer base is a win-win for both of you.
Timely Revenue Growth Strategies Work Amid COVID-19 Destruction
The following growth strategies are timeless and timely. CPA firms can utilize these strategies to uncover avenues for growth for their clients, regardless of industry, market, or business model. There is no “silver bullet.” Growth initiatives are rarely overnight viral successes. CPA firms are in a privileged position to deliver impactful advice. They can help their clients do more than survive. CPAs can help them thrive.
Our strategies of travel and face-to-face meetings have been curtailed during the COVID-19 pandemic. We were forced to use more mass email and social marketing. Virtual video meetings became frequent. We may have chosen outsourcing for tasks where we didn’t have the expertise. Personal relationships need established. And it may be more important than ever to focus on the two growth strategies below. You can help businesses during this time while helping your CPA Firm Growth amid COVID-19 destruction.
A thorough analysis of customer segments provides major benefits. Segmenting allows businesses to understand which customers are the most and least profitable. Companies can then cater to specific customer problems, wants, needs, and build more meaningful relationships. Importantly for growth, the analysis may uncover underserved and profitable new customer segments, which can then be pursued. A better understanding of customer segments leads to more focused value propositions. Certainly, this is true for existing and newly identified segment combinations, more convenient ways (channels) to reach customers, and improved clarity about what a customer is willing to pay for.
Growth Strategy #1 - Customer Segmentation
Customers are why a business exists. Profitable customers allow a business to exist. Identifying profitable customer segments and potential segment combinations establishes a framework for uncovering latent growth opportunities.
Customer segmentation involves grouping them into categories, the most common ones being:
- Geographic which is based on where the customer is located. It can be a country, region, city, or even specific zip codes or neighborhoods.
- Demographic which is based on specific characteristics of the customer such as ethnicity, gender, age, religion, marital status, education, occupation, income, etc.
- Lifestyle which is based on activities, interests, and opinions of the customer, such as how often they travel abroad, eat out regularly, are they active in sports, etc.
- Life stage which is based on the stage of life of the customer, such as single/unmarried, married without children, married with dependent children, married with independent children, retired, etc.
- Behavioral which is based on the attitudes, perceptions, and opinions towards a product or service, such as readiness to make a purchase, brand loyalty, first-time buyer vs. regular customer, frequency of purchases, etc.
- Benefits which are based on the customers’ perceived benefits they receive, such as value maximizers, big spenders, sensible users, time saved, prestige seekers, social signaling, etc.
In short, a customer group is a separate segment if:
- Their problems or needs/wants require a distinct value proposition
- They are reached through different channels of delivery
- The customer group has substantially different profitability margins
- They require different types of interaction and engagement with the business
Growth Strategy # 2 - Channels
Expanding marketing channels is an often-neglected strategy for growth. Many companies rely solely on marketing channels they are already familiar with or think they should be using because of their type of product or service. As a result, far too many companies focus the few channels they are comfortable with (search engine optimization, social media ads, email campaigns). Businesses neglect other potentially fruitful avenues. If a company can identify a single successful channel that the competition overlooked, it can unlock growth while the competition languishes.
Companies cannot wait for customers to find them. Growth requires that businesses find their customers. There are at least 20 distinct marketing channels a business can use to reach prospective customers. As the valued advisor to your client, the CPA firm can utilize the following framework to explore promising opportunities systematically. Using the framework helps clients to expand their market and drive growth.
Above all, after the testing, none of the channels seem promising, the process should be repeated. The lessons learned from and data collected from the earlier tests will help inform a company about what types of messages are, and are not, resonating with targeted customers. The data should provide invaluable insight into each channel and the point at which it failed to deliver profitable customers.
Framework for Opportunities and Growth
- Brainstorm – the goal is to come up with reasonable ways a business might use new channels (we suggest at least 12 – 15). If a company were to advertise offline, where would prospective customers see or hear it? If the business were to support an organization, which ones best align with the targeted customers’ values and ideals? Do not dismiss a channel because of preconceived bias. There should be at least two ideas for every channel – that is, brainstorming! Some things to think about and consider:
- How likely is the idea to work?
- How many incremental targeted customers would be reached?
- What is the expected cost to acquire a customer through this channel?
- What percentage of targeted customers reached would convert to customers?
- At the expected customer acquisition cost, will the customer be profitable?
- Categorize – from the brainstorming session, sort the channels and ideas generated into the following categories:
- Priority – the channels and ideas that seem the most promising
- Potential – the channels and ideas that seem like they may work
- Possible – the channels that seem less likely to work
- Prioritize – select the top three channels from the priority category.
- Test – the goal of this step is to discover which of the newly identified channels are worth pursuing. The tests should be designed to answer the following questions:
- How many incremental targeted customers were reached?
- What percentage of targeted customers converted to customers?
- What is the rough estimate of the customer acquisition cost?
- Do the results suggest this channel produces profitable growth?
- Focusing – ideally, one of the new channels tested will show potential. A company can then begin directing efforts and resources towards expanding and leveraging the new channel.
In conclusion, customer segmentation, channels, and the framework can help your clients grow. In other words, these questions are like the brainstorming questions. When testing, you are replacing educated guesses with data. Keep in mind that, when testing, you are not trying to get a lot of customers with a channel just yet. Instead, you are merely trying to determine if the channel could work.
The tests should be relatively small and not require much investment in time or money. For example, run four YouTube ads instead of twenty. You should be able to get an idea of a channel’s potential with just a few hundred dollars of investment.
COVID-19 has forever transformed the business landscape on a scale and at a velocity, we have never experienced. Within the present turmoil and uncertainty lie the seeds of opportunity and latent growth. Frankly, the prospect for CPA Firm Growth amid COVID-19 destruction is notable. Employing a “windshield” approach to advising your clients on how to unlock growth through customer segmentation and expanding channels are timeless and timely ways for CPA firms to unlock growth for their clients and themselves.
Guidance and content for this article came from Peter Mares, CPA, MBA, a co-founder of Growth CPR. Peter has held executive positions with global responsibilities in Fortune 500 and 1000 companies and was a partner at a “Big 4” international accounting firm.
Growth CPR provides Main Street CPA firms access to the expert tools and frameworks used by world-class consulting firms to elevate their business acumen and resuscitate their growth strategy.