Accounting Niches (Tampa Bay Business Journal)

KPMG image via Wikipedia(This story originally appeared in the Tampa Bay Business Journal in June 1994)

By Bob Andelman

If Dwight Darby & Co. handles the accounting chores for more automobile dealerships than any other CPA firm in town, there's a good reason for that: Wayne Bond.

"I love cars," says the Tampa firm's managing partner. "I used to build 'em and race 'em. I even worked in a dealership when I was a kid. I know the business, the lingo."

Bond's personal interest in the field certainly helps the 25-person firm. When he came on board many years ago, Dwight Darby had two automotive clients; it now has nearly 30.

The firm's specialization in automobile dealers may be a more colorful example of the niche work many independent accounting firms chase these days, but it's no less apropos. From divorce work and business valuation to not-for-profits and health care, many Tampa Bay CPAs believe their future lies within highly specialized fields.

"It's very helpful to develop knowledge in a particular area or industry, that you know the buzzwords, you know what's going on," Bond says. "When you do, you get referrals. Most of the new automobile dealerships are referred to us by existing dealers.

"It gives us an area to compete in," he says. "The Big Six -- yes, they can handle the mega-dealers with 50 to 100 dealerships. But they can't service the locally owned dealerships."

Local and regional automobile dealers prefer hiring accounting and legal professionals who know their business. According to Bond, this is of greater importance in auto sales than other businesses.

Surprisingly, there isn't much paranoia among auto dealers when it comes to accounting. If there were, why would so many use the same firm? Bond says auto sales figures are available through so many agencies, public and private, that they don't sweat it.

Dwight Darby & Co. is one of 22 American accounting firms belonging to the Auto CPA Group. Geared toward tax and accounting issues for auto dealers, the group meets twice a year. The most recent gathering featured a speaker from the IRS who specializes in automobile dealerships.

There are perks offered to Bond as a result of his relationships, but he always demurs.

"I've had dealers offer me demos for part of my fee," he says. "But a car doesn't divvy up easily between my partners very well. I will buy from my dealers, however. And I will not allow any of my partners to buy from a non-client dealer. It makes good business sense; we should trade with our clients when at all possible."

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Auditing not-for-profit organizations is an important portion of Lewis, Birch and Ricardo's business. It's a narrow category complicated by ever-increasing state and federal reporting requirements.

"We do a great number of them," says managing partner Ron Ricardo. Ricardo, a former partner at KPMG Peat Marwick, says Lewis, Birch and Ricardo will sometimes pick up a new not-for-profit client from a Big Six or other large firm because one of the partners is a member of the not-for-profit's board of directors rendering that firm no longer "independent."

Litigation support for divorce cases with substantial holdings are another of the downtown Clearwater firm's niches.

In general, Lewis, Birch and Ricardo -- 20 employees strong -- prides itself on being a full-service accounting firm. The secret is good people. "You have to be aggressive; you have to be creative," he says. "If you have good people, you'll find a way to compete."

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Garcia & Ortiz handles a growing volume of litigation and government work. But it approaches the niche concept from a different direction than identifying a specific field of specialization.

"We compete in two main areas Ñ service and pricing," says managing partner Louis Ortiz. "We're a full-service firm and we serve various fields, but so do the Big Six. In order to compete effectively, we have to offer more involvement. And we don't have the overhead they do, so we can pass the savings on to the client."

With offices in St. Petersburg and Tampa, Garcia & Ortiz splits its staff between the two cities. It's an efficient system for gaining clients in either city or those with operations spanning both sides of the bay.

Ortiz figures his firm can compete with the Big Six firms for many accounts. But sometimes, he says, an independent firm can help its client grow too much.

"One of the areas in which the Big Six do a very good job of taking clients (from independents) is when they go public," he says. "The underwriter will almost invariably recommend a Big Six firm to take the company public. While we think a local firm can do a credible job, the underwriter wants all the horses of a Big Six firm."

That scenario hasn't directly impacted Garcia & Ortiz yet, but Ortiz has one client that might be poised to go public soon. Meanwhile, he's hedging his relationships and investment by affiliating with McGladrey & Pullen, the eighth-largest accounting firm in the country. McGladrey & Pullen has 52 such affiliates around the country, each with an exclusive geographic area.

"We belong to their network," Ortiz says. "When we get involved in jobs that are larger or more difficult than this firm can handle or because the client is in another state, we get involved with McGladrey & Pullen. We use their library and resources. We're like one of their offices except we retain local ownership. It makes us more competitive."

The human touch helps, too. While it challenges the creativity of an independent accounting firm to find an area in which the Big Six firms cannot effectively compete, their very bigness sometimes causes their smaller clients to feel overlooked.

"A $20-million client, to a firm like ours, is very important," Ortiz says. "$20-million to a Big Six firm is not very important."

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Real estate, construction and manufacturing clients dominant business at Tampa-based McNulty & Company. Those are the industries Jim McNulty started serving in 1971 (he opened his own shop in '76) and they've been good to him ever since.

"The '70s and '80s were a good time to be in construction," he says. "A lot of people have gone out of business, but the survivors have done very well."

McNulty thinks that in today's market, it's critical for an independent accounting firm to identify a specialization or a series of specializations.

"There will always be a need for alternatives to the big companies," he says. "Some people need the big companies. But everybody can use a small firm for something. We're less layered. Generally speaking, our fees are going to be lower than the Big Six."

McNulty & Company gets referral business from the Big Six several times a year, he says, when a firm has some type of conflict on an account or they need his special skills in litigation, business valuation or divorce work. "A special project, a niche, a conflict Ñ if they can refer it to a small firm and not risk the client getting close to a rival Big Six firm, they're better off doing that. We aren't any threat whatsoever to the relationship a client has to a Big Six firm.

"We're doing work for a Fortune 500 firm's subsidiary -- I'm not sure their auditor even knows we're in the door," McNulty says. "But we're no threat to them because we're not big enough to handle their audit and tax needs."


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