Litigation

Why solos and small firms shouldn?t ?partner? with larger CPA firms on projects

By Tracy Coenen

A couple of weeks ago I had an email exchange that exemplified why solo practitioners like myself should not “partner” with larger firms on projects. There is no “partnering” about it. The bottom line is their bottom line, and their bottom line is enhanced by two key moves:

1. Profiting from your work
2. Stealing your intellectual property so they don’t have to “partner” with you next time

Here’s the first email I got from the consulting firm:

We have a client in the Milwaukee area who is in need of Fraud Risk Assessment services.  They have been spooked a bit by the Koss situation.  Is this a service you provide?

Are you willing to work as a partner/subconsultant or only as a prime?  Is Sequence Inc. basically a one person operation or do you have a local staff?

What does this email say? First and foremost, it says that the consulting firm doesn’t have the know-how necessary to provide their client with the services they need. But they’re not about to let something silly like competence stand in the way of collecting fees! They will find a way to do it.

But I know how the game works, so I replied that I’d only do a project like this as “prime” and that I do have access to staff and subcontractors when necessary. Of course, the reply I got is that they’re only going to do this project as the prime, but that me subcontracting for them would be a “win-win”.

I agree. THEY would win twice. Win-win.

Here’s how the larger firms work deals like this: They ask you to discount your normal billing rate. The simple reason for this is that they’re going to mark up your rate and turn a profit on you. The lower they can get you to go with your rate, the more profit there is for them.

The larger firm will likely make overtures about future projects, implying that if you’re willing to offer a lower rate, there might be a higher volume of work with them in the future. That’s just dumb. If you’re billing hourly, and all you have to sell is your time, there is no reason to discount the rate. Unless, of course, you’re just as happy working 40 hours @ $100 per hour, or 20 hours @ $200 per hour. I’d take the 20 hours, but that’s just me!

The second part of the plot involves you training the larger firm’s staff to do this kind of engagement. More importantly, you’ll be providing the larger firm with copies of all of your work programs and methodology. You’ve just given away the keys to the castle. The larger firm will never need you again on an engagement like this because now they have your intellectual property and their staff is trained.

I realize the firm contacting me has no qualms about trying to provide fraud-related services to their clients even though they’re not qualified to do it. I don’t know of any of my small/solo firm competitors in my area who would be willing to help them on this project. I’d like to think they’re all too smart to get taken for a ride like this.

It’s easy to see why a small or solo firm should almost never partner with a larger firm on projects. It’s not a partnership, no matter what promises they make. Don’t lose money by discounting rates, training someone else’s staff for those discounted rates, and creating a competitor for yourself who uses your proprietary methodology.

Full post as published by The FRAUDfiles Blog on March 27, 2010 (boomark / email).