Small- and medium-sized practices (SMPs) are increasingly recognized as some of the most innovative and adaptable organizations in the accounting profession. Their ability to navigate the unique challenges faced by small and medium-sized enterprise (SME) clients, coupled with a growing demand for support beyond traditional accounting services, positions them perfectly to capitalize on a range of emerging opportunities. However, to truly unlock their growth potential, SMPs must stay attuned to the latest developments, including advances in technology and burgeoning areas like sustainability.
This article explores the diverse avenues for growth and the mindset needed to fully exploit these opportunities, illustrated with some initiatives and examples from Pakistan which help showcase how opportunities for growth can be enacted.
Cultivating the Conditions for Effective Growth- Strategic Alignment and Overcoming Barriers
SMPs handle multiple matters simultaneously, such as business development, service delivery and talent acquisition. One of the biggest challenges for SMPs is that they often find themselves doing everything on their own to retain clients and provide quality service. Over time, audit and assurance services require extensive responsibility, demanding more time and effort, yet they may not be a profitable revenue stream. That is the reason many SMPs are looking for growth opportunities in other service areas. Effective growth is not about expansion at any cost; it's a strategic alignment of activities with the firm’s core objectives, tailored to its unique nature and circumstances. However, restrictive thinking, such as apprehension towards adopting new technologies or diversifying service lines, can impede maximizing these opportunities. Identifying new revenue streams is crucial to supporting SMPs in attaining sustainable growth.
Leveraging Partnerships and Regulatory Changes
Innovative approaches like forming partnerships with external organizations, including banks, can offer significant advantages, though they might initially meet resistance. Regulatory changes, often perceived as obstacles, can also unveil new prospects for firms proactively scanning their environment. This proactive approach necessitates empowering team members to not only deliver current services but also to develop new opportunities. In Pakistan, an initiative is underway which involves SMPs collaborating with Banks/Lending Institutions to address challenges for various stakeholders generating mutual value.
Bank/Lending Institution: The client portfolios of banks often include many SME clients in need of support with financial literacy and financial management. Many banks are unable to provide such support directly, creating risks around both client quality and client retention. Partnering with SMPs to provide training and other interventions directly to SMEs can alleviate these concerns, creating confidence to grow services for diversified SME clientele and contributing to enhanced profitability. Additionally, capacity building programs for employees supported by SMP partners will enable bank staff to meet future needs and provide improved customer service. Joint research activities for enhancing SMEs’ access to finance will also provide value.
SMEs: Poor financial literacy and financial management can create barriers to growth and success. Ineffective business planning and budgeting can lead to reputational issues with customers, loan defaults and ultimately business failure. Training delivered by SMPs can improve immediate financial capabilities but creating a relationship with an SMP as a trusted adviser also gives access to the availability of wider support services and can facilitate access to new finance in the future.
SMPs: Engaging with SME clients and undertaking outreach can be challenging due to limited financial resources and difficulties in accessing decision makers. This can leave SMPs restricted to certain industries or traditional areas of service, restricting opportunities for innovative thinking. Partnering with banks can give access to new SME clients, and provision of training or initial services can build trust leading to further business opportunities not only in traditional areas such as bookkeeping and tax services, but also advisory work such as business plan support.
Professional Accountancy Organizations (PAO): Advocating for the importance of SMPs and the profession to the economy is challenging without demonstrating the benefits accountants can provide to the most vulnerable organizations. Creating links that support small businesses and local economies helps improve the reputation of the profession and its attractiveness to new entrants. This may also present opportunities for increasing the visibility of the profession--for example, through the presence of accountants at physical branch locations or through collaborative digital marketing.
The above examples may serve as a guide for other jurisdictions looking to adopt a customized approach tailored to their specific needs and in accordance with local legal regulations.
Sustainability and Resource Allocation
Sustainability is extremely important for businesses irrespective of their size, geography, and industry. Social responsibility and ethical practices such as engaging in community activities, transparency in business practices, and fair treatment of employees can also help build a firm’s reputation. Careful resource management is also a must as it is vital to maintaining a skilled workforce and balancing expertise with the capacity to fulfill client commitments. This includes continuous training and development and ensuring that staff are equipped to handle evolving client needs and industry changes.
An innovative example set by a firm in our jurisdiction is the introduction of a work-from-home and flexible working model long before the pandemic. The initiative aimed to get economically inactive female professionals back into the workforce. The firm took advantage of commonly used digital tools to engage a large number of high-quality professionals from around the world who due to personal circumstances were not able to work in traditional office-based set-ups. This unique model, which was replicated world-wide due to necessity in the pandemic, gave the firm a significant advantage. They have maintained quality service throughout the pandemic and have been able to exploit increased business opportunities. Aside from this, the ability to encourage inactive professionals back into economic activity also has broader societal benefits. Continued advances in adoption of remote work remain essential for the profession, and present continued opportunities for SMPs, provided that adequate work ethics are embedded in the practice management system.
Developing the Right Mindset for Growth
Even under favorable conditions for effective growth, firms may need to adopt a new mindset to seize their opportunities most effectively. This evolution can take the form of further collaboration with other firms, greater use of digital tools, and more strategic choices of prospective clients.
Embracing Change and Collaboration
Given their limited resources, SMPs must adopt a mindset that embraces change and collaboration. Sharing resources, co-developing tools, and supporting each other can lead to significant improvements in service quality and growth. This collaborative approach can be an essential lifeline for SMPs navigating an uncertain landscape.
Keeping in mind the concept of 'Networking' or 'Pooling of Resources' as the best solution, the Institute of Chartered Accountants of Pakistan (ICAP) introduced the “Networking of Firms” concept to improve the quality of training for its students and enhance the quality of services rendered by SMPs. This has provided an advantage to many firms that share their resources under the rules established for this purpose.
Utilizing Accessible Technologies
Leveraging accessible technologies is becoming increasingly crucial. Platforms such as LinkedIn and Instagram can be pivotal in projecting a firm's identity, enhancing brand awareness, and attracting talent. Online digital knowledge gateways are now frequently available to provide the required support.
The export of services is one area that is growing rapidly in our jurisdiction, and with a strategic location and a majority youth population, there is a likelihood that this will become one of the fastest-growing revenue streams for SMPs in the near future. ICAP is making all efforts to provide adequate knowledge and support to all its members in this area of service.
Selective Growth and Client Profiling
Appropriate growth is not about pursuing every opportunity or indiscriminate revenue expansion. It is important for SMPs to specialize and to undertake a careful evaluation of prospective clients’ needs against the firm's broader aims; it will be important to identify opportunities that bring the most value. While larger clients may promise higher fees, they may not always align with the firm’s capabilities.
For SMPs, the pathway to growth is multifaceted. It requires a balanced approach that combines strategic planning, openness to innovation, and a mindset geared towards collaboration and change. By understanding their unique position in the market and capitalizing on emerging opportunities, SMPs can not only grow, but also raise standards in the accounting profession. This holistic approach to growth ensures that expansion is not only achievable but sustainable and aligned with the firm's long-term vision to create value in various economies.
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