How to unlock business growth opportunities in an economic downturn

As accountants look to 2023, identifying diversification opportunities could lead to longer-term competitiveness in the face of accelerated change.

A quick look at the economy tells a worrisome story. According to a new survey by the Financial Times and the Initiative on Global Markets (IGM), an economic policy and market research center at the University of Chicago, most IGM economic experts consider a recession in 2023 a foregone conclusion.

That said, it seems US banks don’t necessarily agree on the 2023 economic outlook, as recently reported in the Wall Street Journal. While the U.S. Federal Reserve is attempting to bring inflation under control with monetary tightening, it would seem inevitable that economic activity will be reduced.

While we can’t see into the future we can certainly be receptive to it by looking at repeatable patterns. The National Bureau of Economic Research (NBER) has the final say on whether a period of economic decline is a recession, and consults a wide range of indicators including data from the past 50 years. This past year’s economy stands on better ground than in recent recessions.

In all of this, it does seem, in a global context, the US economy may be ‘one of the nicer houses in a not-so-great neighborhood’

For accountants helping businesses weather the storm, the economic downturn is likely to result in an increase in questions from your clients. Small businesses may turn to you to gain a better understanding of their cash flow, how to manage available capital, their expenses and business costs, and other challenges they may be facing.

Understanding and connecting the macro environment to advise for small businesses will continue to be a focus for accountants. What we do know from past downturns is that challenging economic environments can be the making of some businesses. This also holds true for accounting practices. The key to thriving during this period will be understanding which clients will generate your growth opportunities.

“Spend time on customers who are likely to move forward with, and on, projects that are likely to close fastest, and remove the distractions that are shiny,” says Joshua Lance, Founder and Managing Director of Lance CPA Group and Head of Accounting (AMER) for Ignition.

Ensuring you engage clients in the right way from the start of your business relationship is essential, he says. “For new clients, engagement letters are a vital part of how they experience your services. These define the contract between you and your client, characterize the relationship, and speed up the onboarding process.”

“Engagement Letters are also the best way to both safeguard your position and cash flow, without damaging client relationships, especially when combined with regular invoicing and taking control of payments,” he says.

Joshua Lance launched Lance CPA Group in 2013, as a Chicago-based certified public accounting firm offering accounting services, including tax planning and preparation. It was a year characterized by sluggish growth, lingering since 2009 when the recession ended.

In 2015, he successfully identified an opportunity to diversify and specialize in business advisory for micro-breweries. Today, the firm works with these businesses and digital agencies, providing, he says, “a support line” for their growth.

“Change is a certainty, it will always happen,” he says. The framework for business growth opportunities is similar regardless of market conditions. It comes down to the basics of building business and tracking revenue, and verifying what the leading indicators are, for example, revenue or results of the activity.”

And no matter what the economy is like, all businesses have to ensure their finances are in order, that they focus on strategy and think about business growth opportunities. You could argue this is even more important in tougher economic times.

“Use this time of change to get sharp with your own business decisions and the specialist advice you offer,” Joshua Lance says. “What can you do to track now and see the early signals of growth in your client work? Importantly, be critical of what you’re going to carry forward, and what you’re going to leave behind.”

“Choosing a niche to focus on was an important step for our firm. We chose to work with craft breweries because I was a home brewer and had a passion for the craft beer industry,” he says.

“In 2014, breweries were popping up in Chicago and I knew they would need someone who understood not just accounting and finance, but the regulatory aspects of their industry and how to apply it to their business strategies. We now work in an advisory capacity with breweries across the country.”

Achieving this sort of growth may mean aiming beyond what you feel you and your team are capable of. Tiffany Davis, President of Washington Accounting Services Inc, and Ignition Council member says, “Learning to be comfortable with the uncomfortable will be critical for moving forward with an idea and achieving your goals.”

“Business owners have no time or desire to be tax experts, yet the traditional process of emailing reports and filing tax returns is sadly still common practice for firms.”

If you’re thinking about diversifying for business growth, she advises clearly defining your goal and developing a hypothesis with your team to identify the results you’re looking for to help make the decision.

“The key to diversifying will be developing an idea that translates beyond the next 12 months and figuring out how to bring automation into the forefront of your customer journey to make your team more productive and have them working at their fullest capacity,” she says.

While mapping out your goals is important, Tiffany Davis says, “The proven routes to revenue are equally important. Cash will always be king and do the work to revert to the proven methodologies. You might put your idea into motion and monitor it for several weeks before you develop a sound plan and know what you’re going to spend trying to achieve it.”

“Take your employees on the journey with you,” she adds. “Show them what the prime investment areas could be, and explain the potential opportunities for diversification and growth. The team should be able to contribute to the hypothesis with some data points and alternative solutions.”

“Make your vision of where you want to be a reality and analyze your data points to get there,” she says. “There should be a pretty clear direction on what works and what doesn’t. The collective learnings and the playbooks you share across your team will impact your culture and create a better workplace environment.”

On the topic of culture and business diversification it’s important to get your team's buy-in, Joshua Lance says. “When you’re building out your growth plan, instead of seeking approval ask, ‘What’s wrong with it? How can we make it better?’, which will result in a truthful, more critical answer.”

“This also presents an opportunity to step back and think about: what’s my team going through right now, where are they spending their time and how can we get some efficiencies. You may even get an improvement on your idea.”

Regarding possible career opportunities arising from diversification, Joshua Lance says, “Employees are protecting their own financial and job security. They may actually see the diversification of your business as a threat rather than advancement and growth. Where you and your team can evolve and grow your practice while staying true to your company’s vision should hopefully see your objectives align naturally.”

When asked if diversification created career growth opportunities for her own team, Tiffany Davis says the accounting industry in general has changed considerably over the past 10 years and accountants are now far more influential.

“I think we're at one of those turning points in accounting’s history where we're really driving a lot of the vision that is the future of the small and medium businesses now.”

“When I started my firm in 2007, I think you would have looked at the accounting profession just as a regular job and probably not considered accountants as leaders. It was an outdated profession and very little technology was involved. I think from that standpoint, accountants are much more influential today,” Tiffany Davis says.

You can capitalize on the New Year mindset and set expectations with clients and your team that change is a certainty, regardless of the economic outlook. Use the time to articulate the change in focus and to pinpoint clients who will be responsible for your growth. Using an engagement letter will ensure these all-important relationships are set up for success from the get-go.

With Ignition, your engagement letter or contract terms form part of your proposal to save you time. Get a head start using our legally vetted, industry standard terms, or upload your own. You can even access engagement letter templates from selected accounting industry bodies.

Find out more about how Ignition makes it simple to sell, bill and get paid for your services – all in one place. Watch the online interactive demo.