BDO Alliance Executive Director Michael Horwitz on Helping Accountants Expand Their Networks

In a recent conversation, David Toth, Chief Growth Officer of Winding River Consulting, sat down with Michael Horwitz, Executive Director of BDO Alliance USA and MPB | Leadership Accelerated alumni. Below is a summary of their conversation.

Click here to watch the full podcast interview. 

After joining Ernst & Young in the 1990s, Michael Horwitz helped to create the firm’s first alliance program and quickly discovered a passion for engaging with and supporting his fellow accounting professionals. That passion led Michael to join BDO Alliance USA, the country’s largest association of independent accounting and tax firms, in 2002.

Today, Michael serves as the Executive Director of BDO Alliance USA and has played a pivotal role in the growth of the alliance. Starting with 75 member firms, BDO Alliance USA now comprises over 400 organizations (including 260 accounting firms and 150 advisory firms and vendors), with annual revenues ranging from $750,000 to $200 million.

Michael’s role as Executive Director provides him with a highly-informed perspective on the issues faced by the accounting industry today, from how to gain advantages from emerging technologies to how to prepare for sustainable, long-term growth in the face of private equity’s growing presence.

New Technology Remains a Priority

Michael stresses that technology will continue to be the most important factor affecting the industry this year and beyond. The speed with which technology options are changing is incredible, and it’s his view that firms that take a progressive stance toward adopting new technologies will come out ahead of their competitors:

“A lot of firms have historically said, ‘Hey, I'm not sure that this AI thing is for real,’ or ‘I’m not exactly sure how we're going to implement it.’ But nowadays, most of the firms recognize that they need to do something more. Technology is prominent and there’s a willingness to invest, recognizing that if they don't, they're probably not going to be in business for too long.”

Exploring New Governance and Ownership Options

As PE firms continue to move downmarket, more and more firms are exploring the new options available to them. The BDO Alliance USA has firms all over the spectrum: from those focused on remaining fiercely independent to those that are open to exploring new opportunities:  

“Some firms are interested in being involved in a transaction and we're trying to help them figure out as best we can where those opportunities lie. In other instances, we have firms that are vehemently independent and have no interest in being involved in a transaction. They want to grow organically, and sometimes they want to be the acquirer.”

From Michael’s perspective, it’s crucial for firms to educate themselves on the different options available to them. It’s one of the reasons why four PE firms actively participated in the latest BDO Alliance EVOLVE conference.

 “We think it's great to enable our members to understand the various options available to them. They’re best qualified to make the right decision for their firm, but to do so, they have to be educated on the different options available to them.”

Member firms of the BDO Alliance USA have multiple ownership structures, including employee stock ownership plans (ESOPs). The alliance includes multiple ESOP companies among its membership.

Unlocking A Better Vision for Long-Term Growth

Michael highlights two under-discussed topics that accounting firms should tackle as they develop a long-term vision for the future of their business. The first is addressing expectations for future leadership:

“We've been talking with our members about the succession challenges that have been facing accounting firms for the last 25 years. It's more real today, in the sense that many of the partners that are leading accounting firms are in their 60s and late 50s. The younger generation is looking at them and saying: ‘How is this going to transition to me?”

As a result of these conversations, many firms are investing in professional development programs like MPB | Leadership Accelerated to ensure their firm retains the horsepower to deliver continued success for years to come.

 This path provides the leaders of tomorrow with access to coaching and leadership development training from experts, exposing emerging leaders to what it takes to build and sustain a successful firm.

The second major hurdle Michael highlights for accounting firms developing a long-term vision for their business is deciding which levers to pull to deliver growth:

“Accounting firms are in an enviable position from a supply and demand perspective. There’s more demand than there is supply, and many firms have raised their prices to benefit from this situation. But there’s also operating efficiencies that firms are trying to build into their practices through offshoring and leveraging technology in more effective ways.”

Michael counsels' firms to focus on profitable revenue growth, not revenue growth for the sake of it. It’s a strategy that’s being embodied by many BDO Alliance firms:

“When we did our last benchmark survey for our members, 85% of their revenues were recurring and the average growth rate was about 14%. That’s significantly higher than inflation. But if you take into account compensation adjustments, bonuses, and healthcare? You need to clear a 7% to 10% growth rate with your existing recurring revenue base to cover the increasing costs.”

While the last few years have been particularly strong for the industry, Michael knows it’s dangerous to assume that this will continue indefinitely. From his perspective, it’s vital that leaders make an effort to step back from the day-to-day and consider their long-term vision:

 “Their mindset should be focused on business strategy and deciding which options will contribute to their future success. For example, how much of a focus will members have on migrating their traditional service offerings to include advisory services? If firms can be more intentional in terms of their futures, that’s a good thing.”

How Culture Helped BDO Alliance USA Grow

Michael’s journey with BDO Alliance USA began over 20 years ago, but he’s still deeply invested in building up connections between members of the professional community he’s helped to expand.

Michael credits that supportive culture to the influence of CEO Wayne Berson and COO Steve Ferrara when describing how the alliance grew from just over 70 firms to over 400 accounting and non-accounting companies:

“This is important to us. This is one of our strategic initiatives that attracted me to the firm 22 years ago: you have a willingness to be of service and to recognize that abundance is good. There's opportunities for everyone.”

Michael goes on to describe how digital platforms have enabled BDO Alliance USA to reach its audience and significantly expand its membership. By continuing to recruit diverse member firms, the alliance hopes to create even more value for members through its business resource network:

 “If we can bring national and global level resources to small communities around the country that can be efficiently delivered in conjunction with great independent accounting firms, everyone wins. It's an ecosystem that is mutually beneficial.”

The recent BDO Alliance USA EVOLVE conference was a great example of that mutually beneficial ecosystem at work. The event attracted over 1,900 members, all eager to expand their professional networks:

"We had breakout sessions covering a variety of interesting content along several different tracks. There was lots of networking, lots of continuing professional education (CPE), some great speakers, and a trade show. We're trying to strike the right balance between education and networking, and that's been effective. We also have programs for emerging leaders.”

How MPB | Leadership Accelerated Supported Michael

Michael participated in the MBP | Leadership Accelerated program in late 2023. When describing his experience, he recalled how the program helped expand his already long list of connections:

“Some folks I’ve met who have been part of the program are managing partners right now. We have a number of our alliance firms that have gone through your program and rave about it. My personal experience was that the content was phenomenal.”

Michael also spoke positively about the content’s value for up-and-coming managing partners:

“The topics that you cover are not traditional topics that people talk about. Sometimes they're difficult conversations to have. You've covered most of the things that I could think of that a managing partner would be interested in, whether they're coming in from a smaller firm or a very large firm.”

 Applications for the upcoming cohort of MPB | Leadership Accelerated are now open. Join us in Chicago in October 2024 for a rigorous bootcamp focused on accelerating the leadership skills of the next generation of accounting firm leaders.

 Register today.