I’ve always been a proponent of partnering with other businesses as a means to enhance my own business. Some of these businesses I align myself with would even be considered competitors by most. So I must be a sucker right? Well…maybe.
The reason I have been so willing to work with others is because of the Principle of Comparative Advantage. I’m don’t refer or ‘outsource’ highly profitable services to other providers. Contrarily, I recommend the use of others for what is labor intensive and oftentimes not very profitable for a small CPA firm working on a small scale.
In turn for my referring clients and prospects to them, they refer clients and prospects to me. They are referring small businesses that need more profitable tax, accounting and consulting services than what I am forgoing. This only seems to make sense to me, but many CPA firms are unwilling to engage in this practice.
One of the criticisms I hear is that the other providers can’t provide the service as well as the CPA firm. This point is actually debatable, but for now let’s concede this point agreeing that CPA firms are more qualified to provide the service than a larger national company. This is the beauty of the Principle of Comparative Advantage.
In this scenario I have an absolute advantage over the other provider in the service being rendered. I could do it better than the other person(s). But since I have an even larger advantage over that person in the areas of tax preparation and planning, that is where I should focus my time. In the process both of us become more profitable, hence the reason they are so willing to refer good business to me.
And that is why I continue to refer people to other third-party providers even while most CPAs attempt to hoard the clientele, but shhhh!....don’t tell them about my secret this comparative advantage is what leads to my competitive advantage.
The reason I have been so willing to work with others is because of the Principle of Comparative Advantage. I’m don’t refer or ‘outsource’ highly profitable services to other providers. Contrarily, I recommend the use of others for what is labor intensive and oftentimes not very profitable for a small CPA firm working on a small scale.
In turn for my referring clients and prospects to them, they refer clients and prospects to me. They are referring small businesses that need more profitable tax, accounting and consulting services than what I am forgoing. This only seems to make sense to me, but many CPA firms are unwilling to engage in this practice.
One of the criticisms I hear is that the other providers can’t provide the service as well as the CPA firm. This point is actually debatable, but for now let’s concede this point agreeing that CPA firms are more qualified to provide the service than a larger national company. This is the beauty of the Principle of Comparative Advantage.
In this scenario I have an absolute advantage over the other provider in the service being rendered. I could do it better than the other person(s). But since I have an even larger advantage over that person in the areas of tax preparation and planning, that is where I should focus my time. In the process both of us become more profitable, hence the reason they are so willing to refer good business to me.
And that is why I continue to refer people to other third-party providers even while most CPAs attempt to hoard the clientele, but shhhh!....don’t tell them about my secret this comparative advantage is what leads to my competitive advantage.
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