Top 5 CPA Challenges Today – Part 1

The CPA industry is undergoing tremendous change. Most professional service industries are experiencing disruption of some kind. But the CPA industry is witnessing disruption unlike ever before. Periods of disruption create big winners and big losers. The stakes are high.

The disruption comes from several sources. Baby boomers, many of whom are founders or leaders of CPA firms, are nearing exit. Artificial Intelligence (AI) technologies are changing how CPA firms work and bill clients. CPA clients are clamoring for far more than just tax returns. Millennials want a different career trajectory than prior generations and attracting and retaining this vital work force is crucial.

Mid-size CPA firms are certainly contending with many issues. We recently got together to discuss what we’re seeing today as the top challenges for the CPA industry. We believe that once you can identify root causes of these challenges, you can start to address them. Here are our perspectives.


The Alliott Group and The Shattuck Group both serve mid-size CPA firms. After reflecting on our mutual experiences over the last several years, we’ve identified the top 5 challenges our clients report to us.

  1. Succession of the firm
  2. Consistent strong growth
  3. Ideal client acquisition
  4. Service model differentiation
  5. Leadership, strategy and decision-making

Below you’ll find our analyses of root causes of these challenges. 


As much as we all love our work, sooner or later we will have to leave it behind. This transition is particularly relevant in the United States because millions of baby boomers, those born between 1945 and 1965, are retiring in record numbers.

Succession is a top of mind concern for many CPA firms. But for the mid-size firm, the issue can be acute. Here is why. A large CPA firm has likely already addressed the succession issue. Most large firms are not particularly at-risk from leadership transition. They often have management teams and steering committees to plot out the future of the firm.

The small CPA enterprise, whether a solo-entrepreneur or limited partnership, often will not continue after the professionals who started it retire. The exit plan usually calls for a transfer of clients through some means. But the equity of the enterprise itself is often not a consideration or of significant transferable value.

Not so for the mid-size CPA firm. These organizations have transferable value, often in the millions of dollars. They have thousands of clients who depend on them for services, and the firm leadership feels a sense of obligation to those clients. The mid-size firm also often has trusted long-term staff who the leadership cares about. Firm leaders would not want to see these people lose their jobs just because the leaders are exiting the business.

Last, but certainly not least, the senior leadership exiting the firm need several things. Usually they want a pay-out on their equity in the form of a lump sum, multi-year earn-out or ongoing cash distributions based on their partnership share. They also want to see the business continue to thrive, usually because they have sweat-equity and a deep emotional attachment to the firm.

But the challenge for the mid-size CPA firm is that they often do not have the strong management teams or steering committees of the larger firms. They often have highly competent technicians, subject-matter experts, who are good at their jobs.

But who does the leadership trust to pick up the banner and lead into the future? Who are they confident will be a good steward of what they love – their business? Who has the skills, the vision, the passion and the drive to ensure the business thrives into the next generations?


Most mid-size CPA firms have slow growth in client acquisition, profits and revenues. While these firms are stable, they often see annual growth in the single digits. This is frustrating for firm leaders who believe they should be realizing double-digit growth year over year.

We believe there are three root causes of slow growth: an undifferentiated brand and service model; reliance on government agencies to drive clients through the front door; and dependence on client referrals for new client acquisition.

To a prospective service buyer, one CPA firm looks pretty much like every other CPA firm. Why would a prospective client choose this CPA firm over that one? Most CPA firms seem to have:

  • Quality staff who are completely competent to do the work.
  • Very similar types of offerings, usually centered around tax and audit services.
  • A good reputation and a local presence in the community (Chamber and Rotary).
  • Longevity in the market, sometimes measured in decades.
  • Salt of the Earth people who are likable and trustworthy.

If you put yourself in the shoes of a potential service buyer, you’ll see what we mean. Conduct an online search for CPA firms in your area, excluding major firms, and visit their websites. While the graphics and names might be different, the core offerings are probably very similar. In fact, there are organizations who sell websites to the CPA industry based on templates they believe represent the “average” CPA firm. Sameness is baked right into the equation.


Another root cause of slow growth is a reliance on government agencies to create demand for CPA services. Every CPA knows that April 15 looms large in the minds of their clients. This date and the fear of government action drives people to the front doors of many CPA firms.

We wonder what would happen if the IRS suddenly changed policy and only required people to file tax returns every 5 years without penalty? What would the fall-out be to the CPA industry? How would this impact your firm?

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Yet another root cause of slow growth is reliance on client referrals. For many mid-size CPA firms, this is the primary source of new client acquisition. The problem with referrals is that you don’t control when they come or who is referred to you.


Client acquisition is also a top challenge for the mid-size CPA firm. There are several root causes to this issue: too many potential clients; pressure to be rainmakers and the absence of an ideal client profile.

One root cause is that there are too many clients available, but not all clients are ideal. This often leads to clients who undervalue services and demand discounts. We believe these clients don’t make you money, they cost you money.

Nearly every CPA firm leader we speak with is acutely aware of how discounts degrade profits. We don’t know of a single mid-size CPA firm that feels as if they are compensated fairly for all the hours their firm puts into client service.

Another root cause is the pressure, inside CPA firms, to be a rainmaker. When CPA firms look at only certain metrics, like net-new clients, but not other metrics, like profit-per-client, it’s easy to lose sight of what really matters. Just because you can serve certain clients, this doesn’t mean you should serve those clients.

This leads to a third root cause. Most mid-size CPA firms, being geographically local or regional, don’t develop a market niche based on an ideal client profile. Instead, they acquire clients through local referrals. This means they are not in control of client acquisition and take whatever their referral-engine gives them.


As we noted above, one mid-size CPA firm looks pretty much like every other CPA firm to a prospective client. This is especially true when it comes to service offerings. For many mid-size CPA firms, business and personal tax returns are a staple and audits closely follow.

We see three root causes to the differentiation challenge: you sell intangibles, AI is changing everything; evolving client needs require differing services, but it’s hard to know which services to offer.


The first root cause is the intangible nature of services. The client cannot see or touch your work product until it takes material form, like printed tax returns, audit statements or reports. Since clients have little visibility into what it takes to serve them, they sometimes devalue the effort and time it takes to produce the documents.

To combat this, some CPA firms are producing longer documents. In other words, a 50-page report must be worth ten times as much as a 2-page report – right? These CPA firms seem to think that if you want to prove your value, you must drown the client in paper.

In an age of proliferating data and information, we do not believe that more documentation is the solution to differentiation. In fact, we see trends where clients are paying more for less. This is especially true with the time-starved entrepreneur who wants 5 or 10 bullet points, not 50 pages.

AI is another root cause of the differentiation challenge. AI resources enable CPA firms to crank out more work product in less time and without increasing headcount. But clients now know this. If a task that used to take your firm 10 hours to complete now only takes 2 hours, the client expects a concomitant reduction in their bill.

The third root cause is changing client needs. There are more entrepreneurs today than at any other time in human history, and they need a lot more than just tax returns. When an entrepreneur wakes up in the middle of the night thinking about something, they are more likely to call their CPA than any other professional advisor.

However, it’s tough to know what services to offer beyond tax and audits. How does a CPA firm:

  • Discover which needs to address?
  • Develop the skills to deliver the service?
  • Staff up to deliver the service?
  • Know which services are a market trend versus a one-off?
  • Know how much to charge for the service?
  • Gain recognition in the market and consistent deal-flow for the service?


Given all the other challenges we’ve noted here, it is not surprising that many leaders of mid-size CPA firms are struggling to see the way forward. We believe there are two root causes to the leadership challenge: the partner model and an absence of specialized talent.

The first root cause, the partner model, contains two problems: the skills required to make partner are not the skills required to lead a service organization; and getting alignment between partners can stymie progress.

The arc of many CPA careers can be plotted as intern, staff accountant, partner, equity partner and decision-maker. The skills to become an equity partner are often a mismatch to the skills required to lead a service firm. To make equity partner, most CPAs must achieve certain revenue milestones, which means that they are very good at developing work product and billable hours.

Leadership and strategy, the foundation of good decision-making, have little to do with the actual work-product of a CPA firm. For a CPA firm to grow, they need leaders with a strong entrepreneurial mind-set and ability to envision the future of the firm. They need good strategic thinkers who can build and execute plans.

The other problem with the partner model is how it impacts decision-making. If 10 people are the decision-makers for a firm and they must make decisions on topics where they are not experts, and they must all agree, inertia is the likely outcome. Nothing happens.

The second root cause of leadership issues is the absence of specialized talent in key positions. For instance, a Chief Marketing Officer has highly specialized expertise in marketing. If a committee of 10 equity partners does not contain this expertise, it is highly unlikely that CPA firm will have a sound marketing strategy.


We recognize that a root-cause analysis is only half of the equation. You also need ideas and strategies to address these challenges. This is why we’ve drafted a second article entitled Top 5 CPA Challenges Part 2 – How To Overcome Them. This article goes into greater detail about how to address the challenges analyzed here.

If you found our analyses insightful, we know you’ll love the ideas we have for resolving these challenges.



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