Since I put up this post on Monday I have had some negative and positive remarks. For most it has been a wake up call to the real value of an Accounting firm. This morning I was asked a question by a journalist:
“Isn’t the whole notion of professional services that the value is the people? The power is the partnership…why on earth would you seek to extract it from the overall value of the firm”?
Good question. Here is my response.
Yes the power of the firm is in the people – without a doubt. Im not saying we remove the partners completely. I am suggesting that we get better utilisation of partner time and we get more leverage of people per partner.
The key thing here is how much of an asset is the firm if the owners have bought themselves a job? Typically in small firms or firms that are larger with low leverage (people per partner) they will have a very low sustainability index. What partners need to do is get super effective with their time and only do 3 things:
1) High end delivery work for a low percentage of time – so if they are doing client work they are getting paid well for it – say less than 30% of time and more than $500 per hour type work.
2) Nurturing existing clients – service, sales, finding opportunities – say 40% of time
3) Leadership – new ideas, driving performance, working ON etc. – say 30% of time
Most partners are doing low level work and too much of it (low leverage) or with their non-chargeable time they are doing administration work.
When this is the case everyone misses out. They clients are not serviced properly, the partners are not doing work they should be doing and profits are not where they should be.
It’s all about balance. An accounting business (like any business) needs leaders but the leaders can get leverage if they hire the right people and ‘get off the tools’
There are 5 business models in the profession – 4 good, 1 bad
1) Solo person (no employees) – adviser & outsource the rest – good cash business with low overheads
2) Small boutique firm that specialises in niche markets or niche services – still reliant on partners but very profitable
3) Trying to be everything to everybody – low leverage, large client base, often with low leverage of people per partner (generally less than 7:1 ratio)
4) Growing vibrant firm with great leverage of people per partner – more than 12:1 people per partner
5) Part of a consolidated group – where the partners are now employees
All 5 are valid however no. 3 is what I call ‘between a rock and a hard place’. If 1 or 2 people go on leave (or leave) then it is the partner(s) that are back on the tools doing the work.
It is no. 3 where most of the profession sits and it is no. 3 that will have a very low (sometimes negative) sustainability index.