Capacity Without Capability Is a Growth Trap for Tax Practices
- Jon Hubbard, Shareholder
- 14 hours ago
- 4 min read
Tax firm leaders balance two competing pressures every year. On one side is the drive to become more efficient through technology, process improvements, training and better use of experienced staff. This work is essential to managing capacity. On the other side is the need to build new capabilities, including advisory and consulting services that expand the firm’s value proposition and long-term profitability.
Both matter, but many firms focus almost exclusively on capacity while underinvesting in capability. Over time, that imbalance becomes a growth constraint.
A $10 million practice built almost entirely on individual tax preparation is less valuable, less resilient, and less scalable than a $10 million practice with a diversified mix of compliance, advisory and consulting services. Client advisory services (CAS) growth outpaces median firm growth, with CAS practices reporting a median growth rate of 17%, compared to 9.11% for the overall firm, according to the 2024 CPA.com & AICPA PCPS CAS Benchmark Survey. Capacity alone doesn’t create firm value; capability does.
The opportunity cost of urgent, deadline-driven work
One common pattern we see in tax practices is deprioritizing higher-value work in favor of urgent, deadline-driven tasks. Compliance work has immovable deadlines. Advisory and consulting work often doesn’t. As a result, professionals perpetually postpone them.
Recently, I spoke with the leader of a $3.5 million tax practice, who shared that his firm had nearly $500,000 in tax consulting engagements in backlog. The work had been scoped. Clients were interested. But because those projects were self-paced rather than deadline-driven, team members constantly pushed them aside in favor of lower-value tax preparation.
I asked him to consider the situation differently. “If I could add 10 percent to your top line without bringing on a single new client, would you take that seriously?” The answer was an immediate yes. Yet that opportunity already existed inside the firm. They simply lacked protected time on the calendar and leadership commitment.
One type of work isn’t better than another. Clients need compliance and advisory services. The issue is ensuring that the mix of work your people perform intentionally moves the firm toward greater profitability and long-term value rather than keeping it trapped in a cycle of volume and urgency.
Technology serves capacity and capability
Many firms invest in technology with a narrow goal of increasing throughput. They deploy automation, workflow tools and AI-enabled software to process more returns. That’s necessary, but it’s not enough. Firms should apply technology to both sides of the equation.
On the capacity side, technology should reduce manual effort, standardize processes, and create predictability. On the capability side, technology should enable deeper analysis, better client insights, scenario modeling and more proactive planning conversations.
Firms that don’t invest in technology that supports advisory work often find themselves unable to scale those services even when demand exists. Professionals must intentionally redeploy efficiency gains toward higher-value activities, or those gains simply create more room for more of the same work.
Courage precedes capability
The Strategic Coach has a helpful framework for understanding this challenge: The Four Cs, which emphasizes four foundational elements of growth: commitment, courage, capability and confidence.
Most firm leaders want to start with capability. They ask which skills to build, which services to offer and which tools to implement. They want to design the perfect plan before making changes. But capability doesn’t come first; commitment does.
Waiting until you solve your capacity constraints and clarify every detail delays action indefinitely. At the top of any growth plan, you should clearly articulate where leadership is willing to be uncomfortable.
Growth requires behavior change. That may mean saying no to certain work, protecting advisory time during tax season, reassigning responsibilities or holding partners accountable for shifting their client mix. Most leaders already know what needs to change. The real barrier is the reluctance to endure short-term discomfort for long-term gain.
Without a commitment to those behavioral changes, nothing else matters. You’ll underutilize new tools. New services will remain theoretical. Staff will default to familiar patterns. Confidence follows action, not the other way around.
Move from awareness to action
Balancing capacity and capability is an ongoing leadership discipline. Firms that make progress in this area intentionally protect time for higher-value work, even when deadlines loom. They align technology investments with the firm’s future service mix, clearly define the behaviors required to shift the firm forward and accept temporary discomfort as the cost of sustainable growth.
Your firm will thrive when you deliberately convert efficiency into expanded capability and long-term value. That shift starts with clarity, commitment and the courage to change how the firm operates today so it can grow tomorrow.
Do you want to connect with other Tax Leaders in the accounting profession to strengthen your leadership and expand your firm’s tax capabilities?
The Boomer Tax Leader Circle is a peer group of forward-thinking tax leaders from successful and growing firms who collaborate to navigate complexity, elevate advisory services and build more profitable tax practices. Apply now to develop trusted relationships with peers who face the same challenges and shape the future of tax leadership.
Jon Hubbard is a nationally recognized consultant, keynote speaker and thought leader helping accounting firms drive strategic growth, enhance client relationships and develop future-ready leaders. As a Shareholder and Chief Growth Officer at Boomer Consulting, he leads several peer networks and serves as the Director of the Boomer Circle Summit, where firm leaders exchange ideas, share best practices and develop strategies to navigate growth and change. Jon is passionate about helping firms embrace change, leverage technology and create a culture of innovation.
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