As an accounting firm coach, consultant and mentor I am regularly asked to assist accounting firm owners to grow their firm. In this article I summarise five ways to do that.
Interestingly, what I find is that the emphasis is often on growing revenue, and profit is secondary. The discussion of both is important because if you want to grow your revenue but don’t care about profit then that is going to be a lot easier than growing revenue AND profit. You may have heard it said that revenue is a ”vanity” number. An owner may have a fixation that he or she must achieve a certain level of revenue to feel good about themselves or to have bragging rights when speaking with others. In this article I assume you want profitable growth.
In a broad sense there are two ways to grow:
- By acquisition or merger
Both have their place and for many firms over a period of years there will be a combination of both approaches employed. The most common however is organic growth.
I see the four ways to grow profit in an accounting firm:
- Increase prices
- Deliver more services to existing clients
- Get more efficient at delivering services
- Win new clients
The first three are about doing better with what you have.
- Increase Prices
My experience over 30+ years of working in and with accounting firms has led me to observe chronic under valuing and a lack of self confidence amongst accountants when it comes to pricing. It is often said that the first sale is to yourself and sometimes you just need to take the brave pills and lift prices. Fundamental to any pricing decision is discussion up front with a client about the investment that client will make for you to deliver an agreed scope of work. I believe for most types of work accountants deliver, agreeing a fixed fee up front with the client gives you the opportunity to articulate the value to the client. In doing so you get to charge a fee that is fair to both the client and you and which is higher than you may have otherwise charged. The key is you articulating the value to the client.
In firms with multiple partners/directors I have often observed that one of or of them charges less than their peers. If you are a chronic under charger in a multiple partner/director firm, learn from your peers. Talk to them about how they achieve higher prices than you and then apply these learnings.
- Deliver more services to your existing clients
Let me stress that this is not about selling services to clients that they don’t need or want. Without exception I believe in every firm I see there is significant opportunity to be more fully servicing existing clients needs and wants. We know from numerous surveys that you are perceive as the “trusted advisor” and clients are wanting you to do more, to be more proactive in your dealings with them and help them better understand their numbers and make better business decisions. I have seen a lot more accountants doing this during the pandemic as part of helping business owners navigate the government stimulus opportunities available to them.
I have written often about a client service matrix. This is where you prepare a table with client names down the screen and different services across the screen to highlight which services are being delivered to which clients. Your practice management system should be able to provide the data for you and you may have to drop it in Excel but it should not be difficult.
What I am saying is get a system in place to track the services provided to each client. Then have a system to educate clients on your capabilities and look for opportunities to help them. For example, in your compliance workpapers have you got questions to prompt team members to think about what pain points the client has and how you could assist them address those?
- Get more efficient at delivering services
I regularly do reviews of firms across 24 areas and one of the areas I focus on is processes and systems for delivery of services to clients. Inevitably I find opportunities for improvement. Your mantra here should be “let’s find the best way to complete each of the tasks that make up client service delivery and roll them up into an efficient, effective process”. Simplify, remove duplications, have tasks done by the right person at the right time, automate where possible and make sure the client is fulfilling their obligations to provide necessary information in a timely fashion.
I believe successful firms have one way to do each task, that they have worked out is the best way. What I often see in multiple director/partner firms is that each partner/director has his or her own unique way of working. Wrong! There are huge benefits from having a single way, including the ability to use team members most effectively. If you get efficiency in your workflow management and service delivery you will be able to generate higher revenue without increased costs and therefore generate increased profits. Or you may have a smaller team and lower costs to deliver the same revenue. Either way you are ahead.
My experience is that even when firms have a project to increase efficiency they often lack rigour in their work and fail to achieve the best possible level of efficiency. Don’t let that be you! Apply some rigour to your thinking about your service delivery processes and systems.
- Win new clients
In summary I think a great process to follow to win new clients is:
- Build an ideal client profile
- Understand what they need or want
- Identify where the ideal clients hangout
- Connect with the ideal client prospects
- Have a process to convert leads to clients
- Growth through acquisition
Arguably this can be a faster way to grow your revenue and profits but it can also end in tears! And it is often a more expensive way to grow your business. You might pay between 80 cents and $1.20 for $1 of annual fees, whereas if you grow organically you will spend much, much less than this on marketing and sales activity.
I will write more about the acquisition of fees / a firm in another article but for now just caution you to go into it with your eyes open and complete appropriate due diligence to ensure you are getting what you think you are getting. And remember, if you put significant effort into growing organically you might be surprised at how quickly you grow.
Pick one of these five ways to grow profits in your firm and start working on it today.