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Half of American Businesses Still Operating in Crisis Mode

Crisis mode still hangs on in half of American businesses according to a survey of CPAs.

The survey, reported in theJournal of Accountancy,responded to questions about their clients economic situation. Since accounting firms work more closely with with corporations and typically have a much broader and deeper understanding of firms than that made public, I suspect that this may well be a true picture of the economy.  

The larger accounting firms reported that their clients are showing signs of recovery, while smaller CPA firms said that their clients are still in crisis mode.  (I assume that larger CPA firms tend to work with larger businesses, while smaller CPA firms work with smaller business firms.  My experience has been that the differences are not only about expertise in larger vs. smaller firms, but also about cost to the client.) Less than 10% from both large and small CPA firms said that their clients were not affected at all.  The rates of crisis were slightly higher in the Midwest (the rust belt) and the West than in the Northeast and South.  Almost of 27% of CPA firms are in crisis mode themselves.  

Certainly recovery in this recession has been slower than any since the Great Depression.

Although some economists argue it’s not structural, I disagree strongly.  By structural change I refer to long-term, widespread changes in business that impact more than one or two functions or disciplines.  The shift from uses of technology that were narrowly focused in a certain few disciplines to technology’s constant application in all business divisions and professions is a structural change.  By now, most are aware that over the past five years technology has impacted every single business function.  Now these changes are flowering among all the service professions.  For example, professional service firms including consulting, accountancy, medicine, law, and architecture can no longer compete with larger firms unless they are able to afford very high cost technology support.  Over the past two-and-one-half years I consulted for one the largest law firms in the Upper Midwest and was shocked by the profound changes taking place even in that iherently conservative profession. 

The firm, with more than 600 attorneys, has a technology support group of more than 150 people.  Such structural costs inevitably exclude smaller law firms from major opportunities, limiting their future.  If you’re in need of a physician, you’ve learned just in the past 10 years that small clinics (under ten physicians) have gone the way of the Dodo bird. Technology and its attendant costs now impact every business function and every service corporation.  These structural changes impacting all of business also tend to slow the recovery.

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