Practice management: Crain offers responses to increased BV competition

“The business valuation practice area is maturing, and rapid growth is not longer the norm for the profession’s established firms,” writes Michael Crain (Financial Valuation Group) in the November 2010 issue of Journal of Accountancy. “Although demand for valuation services is robust, it is harder for firms entering the field to earn superior returns unless they have a competitive advantage,” he adds.

Crain uses Porter’s competitive forces theory to show how managing partners in BV firms can respond.  “Some or all of the following will likely occur in the future or are already affecting the profession,” he believes:

• More intense competition for market share.
• More selling to experienced, repeat buyers.
• Competitive focus shifting toward price and service.
• Cautious additions to capacity and personnel.
• Reorientation of a firm’s production processes, marketing and selling.
• International competition increases caused by standardization and price pressure.
• Industry profits falling during the transition to maturity, a change that may be either temporary or permanent.