#TechTips: The Small Firm Advantage

By Jonathan Rivlin

The funny thing about aging is how non sequiturs trigger associations that link to long dormant memories. I recently saw a picture of  and that took me back to the summer of 1991 when he appeared in the movie “Doc Hollywood” staring Michael J. Fox and Julie Warner.

In that movie, Michael J. Fox played a young doctor, saddled with student loans, who was on his way to Beverly Hills to join a large medical practice and presumably a life of fast cars and serial marriages (not that we judge). On his way out to Beverly Hills, he had an accident in a small town in South Carolina (how he intended to get to Beverly Hills from Washington DC via South Carolina was never explained). As part of his punishment for the accident, he had to perform community service hours at the local hospital.

This movie isn’t a perfect analogy for our profession, but until we get a movie based on accounting and tax prep, we’ll have to make do with this one (and I’m not counting the recent Ben Affleck vehicle “The Accountant” — don’t get me started).

Many members of the MSATP work for, or own, small practices. In many cases, they are their entire practice. That’s how I started — I was my own admin, junior, senior, manager, and partner.  There’s an old saw that small firms can’t compete with large firms in terms of billable hours, salary packages, etc. 

I don’t buy that.

Many taxpayers specifically seek out small firms because they want a relationship with a trusted advisor. They don’t want to be pawned off to a rookie charged at hourly rates that will make you blush. Clients may not know the latest tax rules, but they aren’t stupid: they know that they are subsidizing that rookie’s training on their own dime. 

Over the course of the movie, Michael J. Fox’s character learned the value of that trusted relationship and, spoiler alert, eventually eschewed the big salaried job and moved back to the small town.

I’ve written many columns on technology. Our profession needs to embrace the coming innovations if we want to survive, but there will always be that need for a real human interaction — the kind that only comes from a small firm.

To that end, I say don’t worry about the large firms. Celebrate the aspects about small firms that your clients appreciate. We are that calm, steady hand guiding them through these rocky waters!

Now for the other side of our business: staff.

Large firms offer signing bonuses, take home laptops, casual Fridays, retirement plans, PTO, and happy hours. It’s a lot of flash and I’ll admit that I fell for it as a college graduate.

I lasted sixteen weeks to the day at that big firm. I hated every. Single. Second.

Small firms can offer something that large firms simply can’t offer:

  1. Variety – we can assign different types of projects from excel analysis to tax return prep to correspondence work to payroll and systems management. Compare this to the large firms where you spend time working on a single issue. Is there anything worse than being a FASB 133 expert?
  2. Impact – The work we do matters in the lives of our clients, and in our communities. Compare this to a large firm where one can spend way too many hours making one person just a half a percent wealthier, not that they’ll notice, and certainly not that they’d say, “Thank you.”
  3. Client contact – We enable our team to interact directly with the client. This single thing goes a long way towards building confidence and competence. Compare this to large firms that shunt their juniors off to the conference room, bull pen, or cube farm while the partners manage the client contact offsite (FYI – those golf club outings and martini lunches won’t be deductible any more…).
  4. Succession – The best person to purchase your practice is the staff member(s) that you’ve spent 5-10 years training.Compare this to large firms where some small % of new hires actually make it to the rarified partner level; it’s almost like a lottery.
  5. True Entrepreneurship – Clients expect us to be all things to them.  In the movie Doc Hollywood, Michael J. Fox’s character would read letters that his patients received. Not saying that our clients are illiterate like the characters in that movie — rather, I’m saying that we do more than provide financial statements and tax returns.  I’ve engaged in projects well outside the realm of traditional accounting and I see that becoming the norm over the next 5, 10, 20 years out. Compare this to large firms and ask yourself this question: Even if one makes partner at a large firm, do they really know what it’s like to run a business? In our world, running a small business isn’t for the faint of heart. We are our own marketing, admin, compliance, HR, and production team.
  6. True work flexibility – The large firm states that junior staff only need to hit 35 billable hours a week.  Sounds great to a college graduate who has no clue what that entails.  The reality is it takes a bit more hours that aren’t billable to get those 35 billable hours.
  7. In our practice, with enough notice, we can accommodate our staff’s schedules. We work to live, not the other way around. While there are the inevitable periods of overtime — thanks Congress — we realize that our staff needs to have a balanced life, and we can offer that.

It’s true that working in a small firm is not for everyone — there will be those that are better suited for life in a big firm. But there are other people who will do better in a small firm with us. Make it a point to find them and tell them!

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We’d like to hear from you! Please submit your own tech tips to us at techtips@msatp.org! We will award a free subscription to The Tax Book to the person who submits the best tip.

Thanks, and catch you next time!

TT

November 21, 2018

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