What Type of Growth does Your Firm Desire?

What Type of Growth does Your Firm Desire?
Over the last couple of days I have been reading the latest growth updates provided by firms at the bigger end of town. Those who have achieved 1-2% growth whilst others are reporting 10%+ growth and it made smile.

Looking at some of the reported results, it probably isn’t surprising to see those who have been active in the acquisition market also reported higher growth rates for the year. Now, I’m not sure how these growth rates have been calculated and whether aspects such as acquisitions would be included in such figures. But it certainly reminded me of how the accounting profession, in general continues to experience the non-traditional trend of poor year on year growth. Often, this is what is driving the desire for acquisition, amongst other things. Nonetheless, it also rekindled my interest in the internal review of how firms endeavour to grow and whether all growth is good.

In revisiting the approaches that firms may utilise to generate growth, we may consider some or all of this, not necessarily exhaustive list:

1. acquisition/merger
2. organic
3. charge rate or fee increases
4. new clients
5. extended services to your current client base
6. top line growth
7. bottom line growth

Now given the number of purchasers out their in the open marketplace compared to vendors, as well as the numerous discussions we are regularly involved in, acquisition or merger is generally seen as the easier form of growth at present; albeit the difficultly in finding any or the right practice to acquire.

However, we shouldn’t be fooled. There are many reason why a firm may wish to generate quick growth which don’t all necessarily originate from below average performances. Nonetheless, this approach is seen as quick and easy, if there is such a thing.

Of course some firms prefer the slow but steady approach of organic growth which can really be reflective of one or more of the points that follow it on the list above. Essentially, we’re talking about growth that is generated from internal activities or approaches.

At the moment many firms are experiencing what we call negative raw growth, which basically means that without the current annual increases in their rates or fees, the revenue of the firm would actually be going backwards. This is a good check for a firm to run to see whether they are actually achieving any real growth.

Naturally, most firms tend to win new clients each year, hopefully at a net positive gain to those departing out the door and this can be a significant issue for firms with an aging client base. Are you loosing more than you are gaining due to business sales, death and the like?

A firm might be able to introduce new or broaden their services to its client base or identify clients within the firm that don’t presently utilise the full gamut of its services. Although in a tight economic climate, this may be hard to sell.

Another question that your firm may wish to ask itself is whether the desired growth is only wanted within the revenue side of the equation or whether growth in profitability might also be a desirable outcome.

I don’t believe there is a one size fits all approach to strategising for growth. It should be driven individually by each firm based on their long term planning, skills, expertise, capacity to services clients etc. Each firm should be encouraged to identify the particular type or method of growth that is most desirable for them.