Rebecca Marlor is the managing partner of McGill, Graviet, and Johnson (MGJ), an audit and management advisory consulting firm. MGJ has three types of clients: audit, business consulting, and government consulting. Although the firm has increased its total number of clients the past few years, Rebecca is concerned because revenues and profits have been lagging. Although the audit business is booming as more companies have moved to the area, the consulting business has been slow to catch on. Many of the business consulting clients are manufacturing companies that have been long-term clients. Rebecca has asked John McGill, founding partner who is semi-retired, to look at the following results and make initial suggestions.
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Question

Rebecca Marlor is the managing partner of McGill, Graviet, and Johnson (MGJ), an audit and management advisory consulting firm. MGJ has three types of clients: audit, business consulting, and government consulting. Although the firm has increased its total number of clients the past few years, Rebecca is concerned because revenues and profits have been lagging. Although the audit business is booming as more companies have moved to the area, the consulting business has been slow to catch on. Many of the business consulting clients are manufacturing companies that have been long-term clients. Rebecca has asked John McGill, founding partner who is semi-retired, to look at the following results and make initial suggestions.
 Required:

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 b. These percentages suggest that revenues are increasing slightly. The basic message is that the number of audit engagements is increasing at a healthy rate of 8% and 39% the last two years, respectively, but they have the lowest fee per client ($30,000). The highest fee ($75,000) business consulting clients, however, have been decreasing by 7% and 10% the last two years, respectively. Thus, audit revenues are up but business consulting fees are down. Why could this be happening?
$\bullet$ Perhaps with the new businesses emerging in the area are start-ups that need audits for bank loans but lack the cash to pay consulting fees.
$\bullet$ Maybe some of the new businesses in the area are small consulting firms that charge lower fees than MGJ and they are stealing some of its clients.
$\bullet$ Perhaps the manufacturing companies are facing increasing pressure from foreign suppliers and moving operations overseas-or, worse yet, closing down. This is something MGJ can plan for, but probably not change. It may need to increase its expertise and experience with service firms and smaller companies.

Rebecca Marlor Is the Managing Partner of McGill, Graviet, and Johnson