The Top 5 Business Challenges for Accounting & Financial Services Firms
Any decision-maker at an accounting or financial services firm knows the industry is undergoing dramatic changes. The effects of those changes are hitting firms from every angle and producing a whole new set of major business challenges.
At CPA firms across the country, aging baby boomers in senior roles are approaching retirement and driving consolidation. Throughout the marketplace, a pitched battle is underway to secure the top talent. In this demanding and highly competitive environment, the ability to anticipate emerging challenges can spell the difference between market leaders and also-rans.
As part of its annual High Growth Study of professional services firms, the Hinge Research Institute surveyed over 1000 professional services firms of many different industries and firm sizes .
Within this larger sample, we identified 269 accounting and financial services firms. These firms employed over 645,000 professionals.
While the study explored many issues, one of particular interest was participants’ view of the challenges facing their firm over the next several years. And because this is an annual study, we were able to look at how these concerns have changed since the previous year. The results were revealing.
The Top 5 Business Challenges
So what were these leading challenges, and what do they mean for firms seeking to remain competitive in today’s demanding and rapidly evolving marketplace?
1. A shortage of top talent
Last year, the need for new business topped the list. This year, the top concern is finding the talent to service that business. And this concern is not unique to accounting and financial services. Firms across the professional services spectrum struggle with the same issue.
Winning the talent wars has been a growing concern. Last year it was number two on the list. This year it is the most widely reported business challenge. Given this growing concern, we recently conducted a study on the role of a firm’s employer brand. You can think of your employer brand as your firm’s reputation and visibility as a place to work. While it offers no easy solutions, the study did show that there are many opportunities for firms to improve their ability to attract and retain top talent.
2. Downward price pressure on services
Not even making the top five last year, downward price pressure is the second most frequently cited business issue in the 2018 study. When we talked with top management, it became clear that multiple factors are driving this concern. Unsurprisingly, commoditization of services (see 3 below) is front and center. But it is not the only force in operation. Increased competition and automation also play important roles.
One of the most successful strategies to combat price pressure is to focus on making your firm’s high-value expertise more visible in the marketplace. You may have such experts in your firm already: individuals who are widely recognized in the industry, and even beyond, for their talents. These well-known professionals, whom we call Visible Experts®, boost the perception of your overall brand among both clients and employees — and they tend to command higher billing rates as the visibility of their expertise increases.
3. Commoditization of services
Commoditization simply means that the services your firm offers are viewed by potential clients as interchangeable with the same services offered by numerous competitors. In short, they are commodities, just like pork bellies or crude oil. Ouch.
This predicament is particularly painful to partners who have spent large chunks of their professional careers trying to build a firm that stands apart. The pervasiveness of RFPs and the frequent involvement of procurement departments in buying decisions have only contributed to this problem.
The antidote to commoditization is differentiation — changing the way prospects perceive your firm in a way that is meaningful and valuable to them. Many accounting and financial services firms struggle with differentiation, and more than a few partners do not know how to evaluate their current differentiators or go about establishing new ones. Fortunately there is a reliable process for doing just that.
4. Automation/artificial intelligence (AI)
Last year, technology issues occupied the number four spot. This year, the issue seems to have evolved into a somewhat different concern. Now, it is not only about keeping up with rapidly changing technology. It’s also about being replaced by technology. If you offer a routine compliance service, can a cheaper AI-powered solution be far off?
Often, common business challenges in an industry double as rich opportunities, and this is just such a case for accounting and financial services firms. For example, firms that leverage the power of marketing automation have a distinct advantage. We are also seeing an increasing trend toward packaging technology and professional services together as new “products.” It’s precisely because the field as a whole is struggling with technology that using it successfully can be so effective.
5. Increased competition from new/larger competitors
As geographic barriers to competition wither because of modern communications technologies, one might well expect increased competition from new firms. Add to that the emergence of entirely new technology-driven business models and rising client expectations, and you have the perfect formula for increased competition. Can downward price pressure and commoditization of services be far behind?
Clients expect stellar service — think of it as table stakes. Moreover, they’re expecting to have their problem solved by someone who has done it before. So what sets your firm apart from competitors that offer similar solutions and stellar service?
Your firm can begin to address this challenge by recognizing what value your firm adds as part of the services you provide. Then, develop a program to communicate that value to potential clients. This is where the concepts of differentiation and Visible Expertise really come into their own.
Today, attracting and developing new clients and the talent to service them is a key business driver for CPA firms and other financial services businesses. As clients’ needs, buying behaviors and expectations evolve, firms’ marketing programs must adapt alongside them. At the same time, these marketing programs must also focus on attracting and keeping the best talent by cultivating a strong employer brand.
As accounting and financial services firms attempt to address all of these challenges, they need highly strategic, coordinated marketing more than ever, and many firms may require expert guidance. The firms that are able to build a nimble, multi-purpose marketing machine will be the ones that compete successfully and grow.
- Develop a robust marketing plan that covers all your bases with our free Marketing Planning Guide for Professional Services Firms.
- Download our free book Inside the Buyer’s Brain to learn more about what sets sales winners apart from runners-up.
- To learn how to build a resilient, high-growth firm, check out Hinge University’s course, The Visible Firm®.
How Hinge Can Help:
Hinge is a global leader in helping professional services firms grow faster and become more profitable. Our research-based strategies are designed to be implemented. In fact, our groundbreaking Visible Firm® program combines strategy, implementation, training and more.
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