Istanbul in 4 days

This past 4 days I have been in Istanbul, Turkey at an Entrepreneurs Organisation (EO) conference (also Paris & Singapore on way home). There were 800 of us from 35 countries attending the Istanbul conference. I attend these events as part of my quest to search the globe for latest/best/greatest ideas on business and personal…

Xero vs MYOB

Over the past 4 weeks I have interviewed both Tim Reed, CEO of MYOB and Rod Drury, CEO of Xero. Both these companies are leading the charge in SME accounting systems. As per the interviews MYOB’s AccountRight Live is in pilot with SME’s and accountants, and will be ready to go to market as soon…

Revenue Profit & Cash in an Accounting firm – video # 13 – People to Partner ratio

To increase profits per partner you have 4 key strategies only: 1) Reduce costs whilst maintaining revenue 2) Increase revenue whilst maintaining low costs 3) Reduce the partner headcount whilst maintaining revenue and low costs 4) Maintain partner headcount whilst growing revenue and lowering costs Many “high profit percentage firms” have low leverage of people…

A project is not the annual fee with a client. Annual accounting is a project. A business plan is a project. A finance proposal is a project. A tax return is a project.

What is your average project value? It’s simple to work out. All you need to do is divide the number of invoices sent into your revenue for the year. If you have multiple invoices for one project then that should be classed as one invoice.

Your average project value multiplied by the number of projects per client per year will equal your revenue per client.

It’s a great way to look at your client base. If you have a very small average project value (but lots of clients) you will have a large administration function just for invoicing. The objective should be to increase the average project value whilst increasing the number of projects that each client buys from you each year.

If your business clients are not spending at least $20,000 with you annually and buying at least 4 projects from you (therefore average project value is around $5,000) then I think you are under-servicing your client base.

I have written an extensive report on Accounting firm performance. You can download the full report here.

Enjoy video # 11.

Most firms have high retention rate per client. That means their clients stay clients of the firm for a long period of time. Somehow the Accounting profession has got most of their clients bluffed that it is hard to change Accountants. It’s actually not.

Partners will argue that clients remain with the firm because of the great relationship they have with their clients. I beg to differ. How can you have a great relationship with someone when you see them once or twice per year?

Imagine what your relationship would be like at home if you only saw your life partner once or twice per year? For some of you reading this it would be better!

I do not think retention rate is high because of great service, relationships, value for money or services offered.

I think retention rate is high because the Accountant knows about the clients financial affairs.

The reason Accountants have high retention rate is because of financial intimacy.

Most people do not speak openly about their financial affairs – it’s a very private matter. And if they only speak to a couple of people about a very private matter a lot of trust is built up. Not relationship – trust.

Your clients trust you to not tell others. So they don’t leave.

However, the real measure is how happy they are to be a client of your firm. I think that metric is based on the number of referrals you receive each year per client. If you divided the number of referrals (enquiries) you get annually into your total client base this will give you a startling reality of how happy your clients actually are.

Now the flip side to that is they want you all for themselves and they do not want to refer! Possibly.

Focussing on building relationships (retention rate strategies) is not about increasing the retention rate number (it’s already high), it’s about making memorable experiences with existing clients so they buy more from you and refer more to you.

You should be aiming for a retention rate of 95% and at least 1 referral per client per year.

I have written an extensive report on Accounting firm performance. You can download the full report here.

Enjoy video # 10.

We teach a 12 step (sales) meeting process to Accountants. If followed to the letter then a conversion rate (enquiry to sale ratio) will be around 80% – in a short time period (say less than 60 days).

Before we teach this tried and tested method we hear things like:

“I had a great meeting – they will definitely be a client”
“I met this potential client and I get the feeling they want to be a client of ours”
“I met the general manager of this business and they want to switch to us”
“I am so pumped – this prospective client is worth at least $50K per year to the firm”
“I met this person at a networking function and they moaned about their current Accountant – they are ready to join us”

It’s all rubbish. Unless you have a proper ‘pipeline management’ system and structured meeting system you are simply going on gut feel. Not good enough for forecasting new revenue!

If you have all the buyers in the meeting, you purposely develop a relationship, you understand the background of the situation, you find out their clear objectives, you attach measurement milestones to achieving them and you understand the value you bring to the table then you might just have a chance of winning the business and accurately projecting your conversion rate.

First you need to monitor what it is now. Based on an enquiry received (by whatever means), what percentage do you close in a reasonable time frame?

If you have a high conversion rate now based on limited sales skills or process then you are probably not charging enough.

If you charge appropriately based on value and you follow our meeting process then you should be at 75% or more.

I have written an extensive report on Accounting firm performance. You can download the full report here.

Enjoy video # 9.

Every business needs new enquiries for new clients. You can get new enquiries either:

1) Reactively or
2) Proactively

Most firms follow option 1 and wait for enquiries to come through by the way of referrals from existing clients. Other than being a very slow path to growth there is nothing wrong with it.

If you are proactive about it then you will adopt marketing techniques that encourage your target market to make an enquiry with you. Most Accountants I know do not want start-up businesses (due to the majority of them having the inability to pay) so that means that the client you want is already serviced by another Accounting firm.

A client will leave their current firm (or join another) because of 2 reasons only:

1) Service – not being proactive, sloppy customer service, limited communication/relationship
2) Services – perceived value for money, looking for more but not offered

For you to encourage new enquiries you have to offer multiple ‘experiences’ with you. Can the prospective client hear you speak at a conference, meet with you, read an article etc.

Some firms need more clients than others. As a rule of thumb you might be losing 10% annually (attrition or letting some go) so you should at least aim for a net 10% increase which means a 20% growth rate in new clients to cover the loss.

If you need 20% new clients and your conversion rate is 50% (not following our system) then you need approximately 3% of your current client count in quality enquiries – each month!

I have written an extensive report on Accounting firm performance. You can download the full report here.

Enjoy video # 8.