As the year draws to a close Accountants all over the world should be thinking about what they are going to do in 2012 and beyond. Here is an article I wrote for our monthly newsletter which you might find useful.

Opportunities Abound

In the accounting profession today there are many opportunities that you could (and should) pursue. As an observer to the industry and having the opportunity to speak with your suppliers, alliances, hundreds of firms and your professional bodies I get to see what is going on from a ‘vendor neutral’ point of view.

I have 11 key points that you should plan/fix/alter/stop doing/start doing/implement and make happen…immediately:

1) Cloud Accounting.  My estimate is there are (currently) 3.5% of SME’s in the western world who have an internet (cloud) based accounting system instead of a server or CD based system. Although a small number this is not a passing fad. This is like internet banking 10 years ago. Back then we had cheque (check) books and passbooks and people were unsure and concerned that their information was unsafe and vulnerable. Now, what’s a cheque book?

What does this mean for you as the Accountant? Whether you like it or not this will gather in speed at a rate of knots and the way you interact with your clients will change. They will have real time information and you will as well. Once the client is ‘on the cloud’ your processing will be faster (for compliance) and you will be more efficient – some estimates are 30-40% less time for annual compliance. Will you 1) downsize the team, 2) reduce your costs to your clients or 3) refill your new capacity with value added work? I suggest all 2 & 3. Whatever you do start promoting it to your clients. It’s a good thing and the right (ethical) thing to do.

2) Generation Y. The next partners are currently 20-30 years old. Some of them in the past couple of years have already branched away from the staid traditional firm. They are sharp, technology savvy and they want faster results and are less patient. Is your firm geared up for them? If you are an old ‘fuddy duddy’ firm that is stuck in the dark ages do not expect to keep them. They will use you as a training ground and then leave to start their own firm. If you are a firm that offers modern solutions, modern environment (please please bring in an office planner to help here) and a career path then you may keep them. I found out that the average age of a partner (in Australia) is 57 right now. They are your succession plan.

3) Your current team. Many partners I meet do not truly value the intellect & creativity of their current team. Yes, they may be quiet and reserved but they have some great ideas. They just need to have a forum where they are asked, listened to and heard. If you have the team engaged and on board it makes your job so much easier. Don’t shut them down, let them speak, share the numbers and you’ll be amazed what they come up with.

4) Your own client base. This is an obvious one however one over looked and not systematically focussed on. And that is, how do we ‘put a fence’ around the client so they do not leave. That means that you analyse what they are buying from you now, you work out what services you have to offer and then systematically promote what you have to offer to existing clients. Your goal would be to have the average fee per client well over $20,000 pa and that they only ever buy (on average) less than 30% from you in total. That means you are continually innovating new services. The table below is something you can develop and analyse (with your services of course). Oh, BTW, make sure all new services are sold on value based fees – not time (what a waste of time that is to sell on time!)

Client service matrix

5) Value added services. In line with point 4 you need offer (to all clients) 7 key services over and above government regulated compliance services. We call it “the awesome 8” – the 8th one is an output of the rest. Offering help with 1) Growth of revenue or wealth, 2) Profit improvement, 3) Cashflow management and improvement, 4) Asset protection, 5) Tax minimisation, 6) Succession planning or selling, 7) Financial retirement. And then if you do that you’ll help your client leave a lasting legacy.  All services should be productised so team members other than the partners are delivering them.

Awesome 8

6) Being curious. Why is it that Accountants do not ask many questions about their client’s background, objectives, motivations & problems?  A cynic in me would say that you are supposed to know the answer to everything. Mind you, I think I am right! You seemed to be trained to provide answers to clients rather than dig for the real problem / opportunity. Try spending more time ‘zipping it’ and asking open ended questions rather than jumping straight to the ‘how’.

7) Trusted advisor status. This one gets me going. You have this implied status of being the trusted advisor. You have studied hard, you have a certificate on the wall, and you’ve been aloof (generalising here) and a bit standoffish, you’ve been reactive and offered little value to your client base – yet you still have the status. In my view this status is by title only and not earned. If you want to be the trusted advisor you need to live it, demonstrate it and actively promote it. The trusted advisor (and their business) should be running a better business than those that they advise. Are you?

8. Unmotivated accountants. What an opportunity to buy cheap fees from ‘older’ practitioners who have had enough. If the average age is 57 for a partner and they have $750K in fees with a $150K profit then offer them $500K (or less). Surely the valuation should be a multiple of profit. Many firms will close shop because of cloud accounting. Great. They shouldn’t be there in the first place.

9) Value based fees. Time based billing in arrears (I have written about it before) is a highly unethical behaviour. Team members ‘pad out’ their time sheets, they fill the available time with what work they have to do and you as the partner are incentivised to ‘drive up productivity’ – which means taking more time than needed to do the task. You will never realise your potential charging by the hour – or any unit of time – and you will not be motivated to do the task in the least amount of time (better for client) possible. Charging for the value that you bring to the table is the only way. You work out the ‘value add’, you articulate this to your clients, and you charge an appropriate fee based on your contribution to the clients financial and/or emotional results.

10) Roof top marketing. Accountants are some of the best kept secrets in the world. You do amazing work for your clients (too often when you are asked) yet very few clients know of the results you achieve for your clients. You need to shout it from the roof top how good you are. You need to continually promote how good you are via the success of your clients. You need case studies, testimonials, stories and examples of other clients you have worked with. If you are selling me something new I need social proof that you can do it. Stories help build trust. Remember this phrase “promote how good you are via the success of your clients”. Bring in some expert help (we can guide you) to do your marketing.

11) Limiting Self-beliefs. There have been 10 good ideas listed here and as many accountants read it they will nod in agreement with the concept and at the same time many (you?) will have a lot of ‘chatter’ going on in your head.

Like… “I/We could never do that we are not in the right location”. “I/We could never do that we do not have the client base”. “I/We could never do that we do not have the skills”. “I/We could never do this we are too busy”. “I/We could never do this we do not have the right team.”
Blah blah blah. Whatever is going on in your head is just an excuse. It erodes self-esteem and confidence. Self-confidence is a killer in this industry and I am convinced time based billing is the root of the issue. You have to shake out of your current belief system and become proactive. Your clients need you, they do not know what you do and if you are the least bit proactive they will think you are awesome.

A final word:

I am SOOOO excited about the accounting profession. It is at a cross roads right now. Based on our research there are 5 key things you are looking for 1) Cashflow, 2) Profit, 3) Growth, 4) Happiness & 5) Lifestyle improvement. Focus on these 11 points and get from where you are now to where you want to go. My coaching team are here to help.

I have just finished my 18th year ‘seminar touring’. Time for a rest. I am going to have 18 months of Zero seminar tours. I will still do the odd keynote address, speak at my conferences and coach a handful of firms. Just no seminar tours for a while.

I have 5 others in my business who have already stepped up to the plate to train next year which is awesome. Over the next 18 months I am going to write another book or 2, build a house, spend a LOT of time at home and also spend some time working out the next few years. My golf handicap will plummet next year as well.

I finished my last flight for business last week. I was thankfully down on last years flight numbers with only 75 flights so I will probably lose my ‘platinum’ status with limited travel next year. That’s a good thing.

So for seminar tours. See you in March / April 2013. That’ll mark exactly 20 years working with the Accounting profession. Might be a special tour!

In the past 90 days my team or I have attended a whole range of seminars and brought into our business a range of experts to advise us.

With the world changing so fast you have to keep abreast of the latest and greatest techniques and developments for building a successful business. In no particular order, in the past 90 days, we been in the presence of:

Tony Robbins – personal development
Verne Harnish – growth
Jack Daly – sales
Joanna Martin – presentations
Robert Kiyosaki – money matters
Donald Trump – entrepreneurship
Sir Richard Branson – entrepreneurship
Timothy Ferris – personal development
Taki Moore – marketing
Paul Dunn – service
Alan Weiss – consulting
Harv Ecker – personal development
Patsy Rowe – business etiquette

+ another 25 or so speakers from 3 multi day events we attended.

Often people think that they need to ‘bring in the coaches or consultants’ when you are under-performing. We are leading the world in what we do and we continually re-invest in coaching and training.

I find that no matter how successful you are you will always learn from someone – provided you are open to learning.

Attention the Virgin Australia CEO – Mr John Borghetti:

Dear Mr Borghetti,

Let me state this. I am a massive Virgin fan. I love everything the brand stands for and my wife even bought me a ticket into space on Virgin Galactic for my 40th birthday – no. 293 in the world and flying sometime soon. I even got to run with the big big boss (Sir R) in the London Marathon last year and to hang with RB for 4 days last year at his retreat in Morocco was just awesome.

So big fan yes. However, last night I was a first time customer on Virgin Australia Business Class. The seriously delayed Brisbane to Perth flight – arrived at 1:40am into Perth!

Onto the story.

I have been flying business or first class domestically and internationally for the past 17 years. I have had millions of frequent flyer points/miles accumulated predominantly on Qantas or affiliates. I do about 100 – 130 flights per year for business or leisure. Rarely am I down the back and I think I am the type of customer you are targeting with your new Business class produce.

So last night was my first time Virgin flight on Virgin Business class. I have been on all the major airlines, the best aircraft and so called best service. Virgin has some of the best service around. Sarah my flight attendant was just super. She couldn’t have been better with what she had to work with. Mind you, I would have liked to have seen her in action on a full cabin – I was the only one in business class!

Good service – not a great product.

If you want to woo the travelling business & political community you have to provide something better than your competitor(s). Not just providing young vibrant types with nice smiles and service but a better product as well: For example…

• I checked into the Brisbane lounge at 7:15pm and asked for a Gin & Tonic – response was ‘no spirits’ – beer or wine only.

• The food in the Brisbane lounge from 7:15m – 9:15pm (flight delayed out your control) was at best ordinary. Toast, soup or make your own sandwich. Cheese & crackers ran out at 8pm with no replenishment. Not sure what was there for dinner time. Some ‘time poor’ travellers like me actually use the lounge as a meal replacement service you know. The food needs to be good.

• Wine selection was pretty substandard as well – no wine glasses at one stage.

• Your new planes have seats that don’t go back very far – not sure what the pitch is but 10% would have pulled it up. For a 5 hour 20 minute flight to Perth – not good enough.

• The lamb meal was cold and when I said a ‘red’ wine a tumbler like glass appeared with whatever was in it. No selection offered.

• With new planes what an opportunity to put power for laptops and wireless technology in. Alas – it’s economy with a larger seat and multiple the times the price.

• There is no inflight entertainment – not even a drop down screen.

• And last but not least there was no pillow. I had to ask for one and 10 minutes later it seemed like the only pillow on the entire plane arrived.

As a ‘full freight’ paying business class passenger I expect more. I gave it a try but I am in no hurry (other than my booked flight home) to give it another. You need to work out who you are serving. Are you the leisure market, the commuting market or the business market?

You have an opportunity to do better. I hope you do.

Yours sincerely,

Rob Nixon
AKA – weary traveller

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.

Based on our analysis of the 540 firms included in this year’s benchmark report (to be released this week), it has become apparent that there is a new key performance indicator that all firms should start measuring.

We call that KPI the Sustainability Index.

On 1st January 2011, the first baby boomers turned 65. Millions of them are now approaching retirement, which flags succession planning as a significant issue for the Accounting profession. The Sustainability Index identifies the reliance of a firm on the partners – if you took the partners out of the equation, how much profit would be generated? In many cases, it is minimal.

In our report of 540 firms we have made an assumption that partner recovery rates average out at $275. Based on that assumption, for the 540 firms in this year’s survey, the Sustainability Index comes in around $13.

This means that if you remove partner contribution from firm profit and divide the result by the total hours paid for the entire team (including administration); the result is just $13 per labour hour contributed. Not an attractive value proposition for a potential purchaser of a firm – and a result that should have partners in some firms wondering why they bother with a team and infrastructure.

To get a more scientific result for your firm, you should consider both partner delivery and partner sales to arrive at your firm’s partner contribution.

The sustainability index is the end result of everything you do in your firm – including:

ü  Team to partner ratio – leverage

ü  Team productivity

ü  How much you charge clients per project

ü  How many projects each client buys from you

ü  Write ons or write offs

ü  Work in progress management

ü  Your efficiencies or wastage

ü  Salaries paid to team

ü  Administration structure

ü  Overhead structure

At the end of the day why are you in business? As a business owner the objective is create a sustainable accounting business that provides cash, profit, lifestyle, happiness and wealth creation.

How sustainable is yours?

Sustainability Index

Yesterday I was a participant at an Accountants technology conference in Melbourne. There were 31 technology companies who sell their products to Accountants or the clients of Accountants. The constant word – CLOUD.

It seems every technology provider either has or will be providing an internet based system. Moving from the legacy of server, CD or PC based systems to have the product / content / method hosted on massive servers in/on the internet.

I know in my business (21 people) we are currently shifting everything to the internet. Accounting, CRM, Email, Word processing, Document Storage etc. It is not an inexpensive exercise however the access, speed and versatility are the reasons why I am doing it. Having the ability to access every piece of data from any internet enabled device  will make my business more efficient and responsive.

Moving your clients to cloud accounting systems will help you and your clients enormously. Your clients will have more efficient accounting systems and access to better data and you can get access to that data very quickly. If you know what is happening in your client business you can be more responsive with real time advice.

The estimates are that it will take 30-40% less time to prepare compliance accounts (at the Accountants end) because of these new cloud based accounting systems.  This is great news for creating capacity. But what are you going to do with the time? I think you should be using the data and offering value added services. I think you should use the time to be more proactive with your clients. It’s what they want.

My prediction is that Cloud accounting systems will wipe out some of the more reactive accounting firms. The ones that do not embrace this new change will be left behind. The firms that embrace the change will capitalise on a wonderful opportunity to serve clients in a new and exciting way.

To cloud or not to cloud – that is the question. What is it for you?

I have this little test I do with Accountants to see if they are servicing their clients properly. Here it is.

Grab any clients’ income statement for 3 years, their balance sheet for 3 years and then explain the ‘story’ of the client to 2 other Accountants in your office. So tell them what the client does, how they do business, what their structure is etc. The other 2 Accountants are then to brainstorm (and you can be part of it as well) the answers to these 8 questions:

  1. What ideas do you have to help this client grow revenue or wealth?
  2. What ideas do you have to help this client increase their profit?
  3. What ideas do you have to help this client understand and improve their cashflow?
  4. What ideas do you have to help this client protect their assets?
  5. What ides do you have to help this client with succession planning or selling their business?
  6. What ideas do you have to minimise tax for this client in the future?
  7. What ideas do you have to help this client to financially retire?
  8. What other opportunities are there to provide extra services to this client that they are not already using?

Don’t spend more than 30 minutes  per client brainstorming. When you do I can guarantee that you have ideas (services) that you can take to your clients that will help them in some of these 8 areas.

These are all needs (services they should be buying) that are currently unmet. They do not know that you know the answers. The client certainly does not know what you know – otherwise they would have done it.

When you do this with all of your clients you will find that 100% of clients have unmet needs. Does it mean they will buy them from you? Not necessarily – but at least you should give them a shot at buying the service(s). Not offering additional services to your clients (especially when you know they need them) is doing your clients a complete dis-service.

You must service your clients properly. If you do not then there are plenty of ‘hungry’ accounting firms that will.