When it comes to strategically growing a CPA firm, there are three equally important components – marketing, business development support and product management. You can probably name the person(s) who are responsible for marketing in your organization. You know who is responsible for selling. But who owns the product management function? Most people can’t answer that question.
What is product management, you wonder. According to businessdictionary.com, product management is:
“The organizational structure within a business that manages the development, marketing and sale of a product or set of products throughout the product life cycle. It encompasses the broad set of activities required to get the product to market and to support it thereafter.”
Basically, this is a look at every service you offer from the perspective of where it is in its lifecycle. Are you selling the right things? At the right prices? Are you selling enough of them to continue selling them? Do you have a good mix of products to positively impact profitability?
Is There Life in Your Offerings?
All products and services have lifecycles. Over time, as revenue increases, there is a drop in margin and your profitability takes a hit. Throughout their lives, your offerings will move through the following stages:
- Stage I: Introduction. In this stage revenue is nonexistent to low. The offering hasn’t been on the market very long, you have spent money on R&D, and you are educating the market as to what you do. All those factors contribute to equal little to no profits.
- Stage II: Growth. You’re beginning to gain momentum as you persuade people to buy. Sales are increasing pretty rapidly and you are finally making a profit. And because you’re doing so well, you are beginning to see competitors as they want a piece of the pie.
- Stages III: Maturity. Growth is slowing down because the market is saturated. Competition is intense and pricing is competitive. As you adjust your pricing to compete, profits begin to fall.
- Stage IV: Decline. What you sell isn’t as exciting as it once was. Competition is stiff and your sales are falling. The future of the offering is uncertain.
There are marketing strategies that should be implemented in each stage. Any service that is in stage III or IV needs to be innovated to change the trajectory.
Accounting is a mature profession. Most of our core offerings are at least in stage three if not stage four. If you don’t mix them up and innovate in some way, you will continue to see decreases in profit. However, this can’t happen until someone steps up to own the management of your offerings.
Make Innovation a Business Function
Peter Druker is quoted as saying, “Only two business functions produce new customers. They are marketing an innovation. All other functions are expenses.” Yet, you have dollars budgeted and people responsible for things like marketing, HR, IT, billing, accounts payable and accounts receivable, but not innovation. That seems like a huge mistake when innovation is the key to driving revenue and profitability with later stage offerings.
Sometimes innovation is forced upon you by regulation. It can also stem from competition and technology. When you have someone who owns product management and focuses on finding ways to innovate existing offerings in addition to brining new offerings to market, you are focusing on true growth. By moving more of your offerings in stage two of their lifecycle, not only will you top-line grow, but so will your profitability.