What is the best opportunity for accounting graduates in 2020?
Well before we can answer that question, first it’s crucial to realize that accounting graduates for 2020 are entering a thoroughly altered employment landscape, and one that’s continuing to shift under our feet.
The traditional employment route envisioned by many college graduates in accounting—get your first job at a big accounting firm, then evaluate your options once you have a few years’ experience at a big firm—is becoming less appealing and less available with each passing year. This article from Accounting Today, based on an AICPA study, shows that accounting firm hiring of college accounting graduates is down by 30% over the past few years. For existing employees at these larger accounting firms, pay cuts and layoffs are happening with regularity.
The major trends driving this new reality are not likely to reverse or slow down anytime soon:
- Larger accounting firms are aggressively automating. Artificial intelligence, robotic process automation, and blockchain are three names for what’s happening. No matter what you want to call it, there is no denying that larger firms are replacing people with technology.
- Larger accounting firms are aggressively outsourcing. The COVID-19 Crisis has further “virtualized” the workplace for tax and accounting services, making it easier for accounting firms to hire people in lower cost countries. For those accountants in a “junior” role, where you’re not necessarily dealing directly with clients, maybe you can help me understand why we want to pay you $40 per hour when we can get the same work done for $2 per hour? Managers at large accounting firms are good at math. And the math is tough, for new accounting graduates seeking a good starting wage and a great long-term opportunity at a larger accounting firm.
So, is it “hopeless” for recent accounting degree college graduates?
On the contrary, I can’t think of any better time for a recent college graduate to enter the workforce—as long as you’re prepared to follow a less traditional employment path.
Let me explain what I have in mind here and then let’s see what you think…
“Little Engine that Could” Tax & Accounting Firms—Hidden Goldmines?
Just as a couple key trends are driving the decline in employment opportunities at large accounting firms, a couple key trends are driving the increase in employment (and partnership / ownership) opportunities at “little guy” or “little girl” CPA, Enrolled Agent (EA), and tax preparer firms.
I’m speaking here of smaller independent tax businesses, typically with a team size of 1-4 and many sole proprietors, a.k.a. “Mom and Pop Shops” or some variation thereof.
Not exactly the big names in the accounting world, definitely not the most glamorous workplaces in the world, but highly profitable and valuable businesses in their own right. The “seasoned veterans” at the helms of these businesses have rock solid relationships with hundreds (sometimes thousands) of clients who return year after year and don’t ever want to go anywhere else.
These “little guy” or “little girl” businesses are who we mainly serve at Pronto Tax School, Inc. In the process of serving more than 20,000 of these smaller operators, we get to know them on a personal level, and we learn about the challenges they’re facing right now.
A major challenge so many of these folks are facing is: they want to retire or slow down (or they need to retire or slow down, for health reasons), but the only problem is…there is no one to replace them!
If they stop working, their businesses will die.
With more than 10,000 Baby Boomers retiring every day, this “Greatest Generation of CPAs” (and EAs and Tax Preparers) need “new blood” into their businesses…fast. Here’s a report showing that over 70% of smaller accounting firms have owners that are over age 50. Many of these smaller firms are powered by gritty, smart, and super-experienced owners in their 70s, 80s, or even 90s.
The type of people who never give up, have proven track records, and are regarded as pillars of their communities, trusted by hundreds or even thousands of clients, respected by their competitors, not always the best-dressed person in the room but someone you can count on rain or shine.
No matter how hardy these souls are, however, Father Time remains undefeated over the long haul.
You are already seeing larger accounting firms “gobbling up” these smaller firms in mergers and acquisitions but the truth of the matter is, in many instances, these “little guy” or “little girl” owners do not want to “sell out” to larger firms. They’ve spent their entire lives fighting against these larger firms and the ways they do things. And now they’re supposed to sell their businesses to these larger firms who will pretty much for sure fire their loyal secretary on Day 2 after the merger finalizes?
So many of these folks would much rather have an “in house” option where they are passing on their firm to an employee who’s “part of the family,” so to speak.
How about YOU, recent college accounting graduate?
You say you’re looking for a great opportunity, and the “old way” of finding one (starting your career at a big accounting firm) is clearly in decline, right?
Have you ever considered apprenticing under a “little guy” or “little girl” tax and accounting business and positioning yourself to become a partner or full owner when the existing owner retires, decides to “step back from the day to day,” gets too sick to work, or dies?
For accounting graduates seeking opportunity, these smaller accounting and tax firms should be on your radar.
The Self-Employment-ization of America
The second major trend that’s creating massive opportunity in the smaller, independent tax and accounting firms can be called the self-employment-ization of America. Meaning, the trend of more and more people going self-employed and starting businesses.
Let’s face it, people who don’t have any business activity are not looking like great long-term tax and accounting clients at the moment, would you agree? Why pay an accountant $200 – $400 to fill out your tax forms when you can go online and do it yourself or have your cousin do it for free or $40 or whatever? Clients who just have W-2 income are ditching professional tax preparers by the millions (online filing was up 23% just during tax season 2020, according to IRS statistics).
But once you have self-employment or business activity, everything changes, doesn’t it?
Doing your own taxes becomes drastically less desirable, as you realize the value of tax and accounting services isn’t just in “filling out forms,” but in developing a relationship with a trusted expert you can rely on when you face tax or finance struggles in your business. Since being self-employed / having a business is a daily struggle by definition, every person who’s self-employed legitimately needs professional tax and accounting help, to even survive, let alone if they want to actually thrive in today’s incredibly complex business and finance environment.
Larger accounting firms will continue to dominate the “higher end” business clients, $5 million or more in sales or however you’d like to define that “upper echelon” type of business.
But there are tens of millions of business clients “all the way up the food chain,” so to speak, that are not a good fit to work with a big accounting firm—in fact, big accounting firms won’t touch these smaller businesses with a 10-foot pole!
I tell you what, though, the fees these clients pay can make you a pretty good living, as long as you know how to “handle the personalities” and process the work efficiently and effectively…
Working at a smaller tax and/or accounting firm, serving small-to-medium business clients, puts you in position to capitalize on two rising tides…
How to Maximize Opportunity When Entering a “Small Firm” Environment
If the opportunity to work at a smaller tax and/or accounting business appeals to you, the question in your mind right now might be something along the lines of:
How can I maximize my opportunity if I do decide to go this route?
This is a very important question because many of the attributes and tactics that are highly valuable in a big accounting firm scenario are the exact opposite of what these smaller operators want and need you to be and do.
As with everything in life, establishing reasonable expectations helps to avoid disappointment.
First, expect that most of these smaller operators will not have a well-constructed training program. In fact, they’re often too busy serving their own clients to provide any sufficient level of training to “newbies” who enter their realm. (This is one reason why they commonly don’t have anyone who can replace them, because they don’t invest enough into training their new hires.)
For this reason, we recommend investing in your own training before going into a smaller firm environment. Or ask your boss to put up some money to get you access to some self-study tax training. You need to be able to advance your own skills and knowledge without becoming a “time suck” to that owner that’s already caught up in serving his or her clients, dealing with existing team issues, etc.
Secondly, your ability to generate new business is critical to your long-term success in the smaller firm environment. Typically, in these smaller firms, the owner is the only “rain maker”—the only one on the team who consistently brings in clients and revenue. The other team members service the clients that the owner brings in.
If you want to get onto the partner or owner track yourself, you’ll want to step up and show that you can acquire and retain clients. Indeed, the more you act like an owner, in terms of “making it rain” for client acquisition rather than just sitting in a desk and waiting to be told what to do, the more likely you are to become an owner at some point, either at your current firm, another firm, or on your own.
Developing your client-getting skills may feel like a “favor” you’re doing for your boss, but over the long-term, it’s you who actually benefit the most. If and when you do “take over” the firm, a healthy percentage of the clients are likely to leave. Yes that’s right, in these smaller firms, numerous clients may be doing business with the firm purely because of their relationship with the owner.
No matter how big you smile or how smooth you talk or how good you “account” (or whatever it is “you people” do), you’re not the owner I know and love—and you never will be! So, you taking over is a perfect opportunity for me to change accounting firms. No hard feelings, but now that you’re here, I’m gone!
When you are confident in your own client acquisition skills, and you have built a pipeline of prospects who will become clients over time, you won’t worry about the percentage of clients who depart when you take over.
My third piece of advice for recent accounting graduates to maximize your opportunity in the small accounting firm environment might seem a bit “warm and fuzzy,” but it might be the most important thing of all:
Focus on relationships!
In these smaller firm environments, the owner, the team members, the clients, and even the vendors that service the business often think of ourselves as a family. Yes we have differences of opinions, we’re not always the most professional operation in the world, we might have gotten into a fist fight in the parking lot back in 1998, we probably should have fired the owner’s nephew a long time ago but he’s still here and he still eats everyone’s food in the office fridge even if you put your name on it, I realize we’re not making any profit on such-and-such client but he’s been with us forever, and all the rest of it.
At the end of the day, though, we’re a family—and that’s what we want to be.
If you can get with that “vibe” of being part of the family, you might be surprised the “family style” deal an existing owner might be willing to give you:
- No down payment to buy into the business.
- Seller carryback financing on your buy in.
- I’ll personally call all my clients and talk about how great you are and why they should stay as clients even though I’m retiring.
- I’ll back you up 100% when my nephew is bitter that you’re making partner and he’s not.
- And more. Tell me what you need me to do, to give you the best chance of success, and I’ll do it.
Sometimes, we see owners literally give their business to a key employee, for free, just because they know that employee will take care of the clients and carry on the traditions of the business.
If you’re interested in learning more about how we help tax professionals connect with other tax professionals to find these and other opportunities, click here to jump on the Pronto Tax School email list, and we will look forward to serving you.
Until then, I hope this blog post is of value to you, and congratulations on your achievement of getting an accounting degree and keeping an open mind about the amazing opportunities available to you today!
Have a question? Contact Andy Frye.
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