Innovative 'Resourcing' Niche Drives 132% Growth As The Siegfried Group Tries To Reinvent The...

How does a firm grow 126.1% in one year? With a very deliberate, well-planned strategy, says Rob Siegfried, president and CEO of The Siegfried Group in Wilmington, Del.

Siegfried's firm grew its net revenue from $17.6 million last year to $39.8 million in FY04. He projects net revenue of $90

Nontraditional services are driving the firm's growth: only 10% of revenue comes from traditional accounting and tax services. All the rest - give or take $1 million in consulting fees - comes from the firm's unique "resourcing" practice, which places its own employees with clients in roles "that help the client with projects of strategic significance."

In addition to general accounting, internal controls, internal audit, financial reporting and other traditional services, the firm's employees provide operational accounting special projects, such as risk management or developing compensation systems, to Fortune 1,000 clients. Because Siegfried's employees are full-time career professionals, they don't pose some of the challenges that temporary staff from agencies present, for example, they aren't jumping from job to job or presenting training challenges for the client. "This is a career for them, so it's not like working for a staffing company. We're run like a professional services firm. That's what we are," Siegfried says.

Approximately 100 to 125 of Siegfried's clients are publicly owned, and 85% of the firm's clients are Fortune 500 companies with at least $3 billion in revenue. Among them: The DuPont Co., JP Morgan Chase, Eureka and Borden Chemical. One major client is a Big Four firm that Siegfried declines to name. It uses the firm's senior professionals - those with four to 10 years of experience - to staff its own engagements, then signs off on the work.

Although growth has been astronomical, so have costs. The firm hired almost 350 professionals in the last six months at a cost of approximately $30,000 each - that's $10.5 million in recruiting costs. The firm also opened 12 new offices in FY04, creating a national presence from the three offices in the New York-Philadelphia corridor that it operated previously. New locations include Atlanta, Boston, Chicago, Cleveland, Houston, Los Angeles and San Francisco. "We now have a national distribution channel but no real competitor," Siegfried says.

Siegfried Looks For Big Payoff To Come Down The Road

Those investments and risks generated a financial loss for the firm, Siegfried concedes. He doesn't expect the firm to turn a profit until FY06 because of its huge recent investments.

But with just four partners, The Siegfried Group stands to have some advantages over a traditional accounting firm once some of the partners' investments start yielding returns: Its leverage ratio is 106.5:1, compared to the average IPA 100 firm's 6.7:1.

Greater profits for partners and the ability to spread the wealth are among those advantages, Siegfried says. "We have greater leverage, so we can share a greater percentage of what we have with other people," he notes. For example, the firm treated its 500 or so employees to a three-night, four-day jaunt to Las Vegas recently.

Such gestures go a long way toward recruiting quality people, Siegfried insists. The firm offers employees a four-part value proposition that makes it an attractive employer, he says: a compelling business strategy, interesting work, a team environment and great compensation. The average employee earns an additional 25% of salary in incentive compensation. Among the incentive compensation programs: equity ownership, whereby employees can purchase equity based upon experience, contribution to the firm and years of service. Approximately 20% of the firm is owned by 32 non-senior executive employees. The firm also offers sales incentives, profit incentives based on individual performance, and recruiting incentives. More than half of its employees earn 20% or more of their salaries in sales incentives.

Accounting Services Remain Essential To Firm's Core Identity

Although the resourcing practice is driving most of the firm's revenue, Siegfried still considers his business to be an accounting firm. "We're absolutely still a CPA firm," says Siegfried. "I've just made it more fun and more productive. The traditional model for an accounting firm is flawed and dysfunctional. I've spent a lot of time trying to figure out how to make the life of a CPA more rewarding."

To do that, Siegfried models his firm's management practices on those of great corporations rather than of traditional accounting firms. He has a board of directors, and most of the members are from outside the firm. He regularly hires some of the profession's foremost consultants, and he's a self-confessed education junkie: He completed the "Birthing of Giants" Entrepreneurial Executive Leadership Program sponsored by the Massachusetts Institute of Technology and completed extensive educational programs offered by management guru Michael Gerber to become a Certified E-Myth Consultant.