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Tax Practice Development

Navigating the new frontier of tax, audit & accounting business models: An interview with Doug Lewis

Nadya Britton  Enterprise Content Manager for Tax and Accounting at Thomson Reuters Institute

· 5 minute read

Nadya Britton  Enterprise Content Manager for Tax and Accounting at Thomson Reuters Institute

· 5 minute read

The tax, audit & accounting industry is undergoing a significant transformation, with traditional models being challenged by new trends and rapid changes — we speak to Doug Lewis, of the Visionary Group, about the evolving landscape

The tax, audit & accounting industry is and has been in the midst of revolution or evolution for years now, depending on how one looks at it. Indeed, the traditional partnership model is looking less traditional as new and different trends emerge.

These shifts at times feel as if they are occurring at warp speed, which is causing some firms to feel not only left behind but simply lost as to how best they should pursue options for growth — and in some cases, survival.

To get a better understanding of this continued phenomenon that is upending the industry, we sat down with Doug Lewis, Managing Director at the Visionary Group, an expert with a decade of experience in tax firm practice management and growth strategy.

Thomson Reuters Institute: Many people — including you — have described the tax, audit & accounting industry as the “Wild West.” Could you explain what you mean by the Wild West of accounting?

Doug Lewis: Absolutely. The accounting industry is undergoing rapid changes, much like the Wild West. There’s a surge of interest from various entities looking to acquire accounting firms, and it’s coming not just from traditional players like private equity but also from technology companies, registered investment advisors, and even foreign investors. It’s a dynamic and fast-paced environment, and firms are bombarded with offers and opportunities they’ve never anticipated.

Thomson Reuters Institute: What are some of the non-traditional players that are showing interest in accounting firms?

Doug Lewis: We’re seeing a lot of interest from registered investment advisors and wealth managers, which isn’t entirely new but is gaining momentum. More interestingly, technology companies with no prior ties to the accounting sector are showing interest. Additionally, offshoring providers and foreign investor groups are looking to establish a foothold in the US market by acquiring accounting firms.

tax business models
Doug Lewis of the Visionary Group

Thomson Reuters Institute: With so many options, how should accounting firms approach their growth strategies?

Doug Lewis: Every firm is at an inflection point. They need to evaluate their internal succession plans first. If a firm lacks a viable internal succession strategy, it should focus on maximizing its enterprise value to attract outside investment or a merger with a larger firm. Also, they should track key metrics, including revenue per professional head and revenue per equity owner. These indicators can help firms understand their performance and potential value in the market.

Thomson Reuters Institute: Can you elaborate on these key metrics?

Doug Lewis: Certainly. Revenue per professional head (RPH) is calculated by dividing the firm’s gross revenue by the total number of professionals, excluding administrative staff. We use $200,000 per professional as a benchmark for a healthy firm. Revenue per equity owner is another crucial metric, with firms aiming for $1.5 million to $3 million per equity owner. These metrics provide insights into a firm’s efficiency and scalability.

Thomson Reuters Institute: What common challenges do firms face in this evolving landscape?

Doug Lewis: The biggest challenge is the talent shortage. Firms struggle to find the capacity to meet demand, and many firms are underpricing their services, even those who consider themselves premium-level firms. There’s a significant opportunity for firms to optimize their client base, focusing on high-value clients and advisory services to maximize revenue and flatten their revenue curve.

Thomson Reuters Institute: How do you see the role of smaller accounting firms in this changing environment?

Doug Lewis: Small firms still have a significant role to play, given the supply-demand imbalance in the accounting profession. However, they also face challenges when taking their practice to market, especially if they lack accompanying talent. The appetite for acquiring small books of business has decreased, so small firms need to ensure they have a robust strategy for growth and succession.

Thomson Reuters Institute: What advice would you give to firms that are looking to maximize their value?

Doug Lewis: Firms should focus on building deep client relationships and offering comprehensive advisory services. They should avoid becoming too automated to the point where personal client interactions are lost.

When evaluating potential deals, savvy buyers look for firms with strong client relationships and untapped advisory opportunities. Firms should also ensure their growth strategies align with their long-term goals and market position.

Thomson Reuters Institute: Any final thoughts for firms navigating this Wild West?

Doug Lewis: It’s crucial for firms to stay informed and adaptable. The landscape is changing rapidly, and firms need to be proactive in evaluating their options and strategies.


You can find out more about the challengs facing tax, audit & accounting firms here

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