Prediction # 8 – Clients will demand additional services

Clients are getting smarter and more business savvy. They have fast and inexpensive access to information through the internet and various industry associations. If they know what an accounting firm can offer they will start asking for it. After surveying over 7,000 business people they have told us that they are looking for 5 key service offerings over and above compliance.

  1. Growth – help with growth of revenue and wealth
  2. Profit – help with understanding and improvement
  3. Cashflow – help with understanding and managing
  4. Asset protection – help to protect all assets
  5. Succession – help with selling part or all of the business at some point

Progressive accounting firms can and should be offering these services to all clients. Your clients should know about all of your services. If you do not offer them another firm will.

Prediction # 6 – Unmotivated accountants will fade away

Like any changing business model those that are not motivated to change will fade away. There are thousands of partners making a tedious yet comfortable living adding no value to clients. This the crux of the current issue. It is too comfortable in the industry. As a partner you can make $200k – $400k without much effort. As the industry changes the motivation needs to change as well.

Prediction # 5 – The next partners will want faster results and be less patient

There is a definite ‘needs requirements’ difference between the so called generation Y,X and baby boomers. Around 90% of all partners are either Baby Boomers (current age 46 – 60) or Generation X (current age 30-45). As I generalise the baby boomers are less resistant to change mainly because they have their asset base sorted (or they should have). The next generation (X) are building assets for their future and are keen to adopt new ideas.

The next group of partners to come through, generation Y (current age 20-30), are a different breed. There has been much written about their needs and style. Hasten to say it is a faster moving generation than the previous two. The have grown up on the internet and other technology. When they become partners over the next few years they will want faster results and be far less patient. They are not going to wait for years and years to get a return on their investment.

Prediction # 4 – There will be less firms but larger firms

The accounting profession is still a ‘cottage industry’ made up of primarily small businesses. Even in Australia where it is a (approximately) $14BN industry with approximately 10,000 firms only (approximately) 400 firms have revenues over $3M. There is also an estimated 45% of all current partners over 50 years of age.

There are too many firms and far too many small sole practitioner firms. According to industry statistics approximately 65% of all firms employ less than 5 people. There should be half as many firms yet they should be larger in revenue. Many of the current partners should not be partners. If compliance is to become a commodity then some accounting firms may not be interested in continuing in their current format. To thrive accounting firms needs to offer a broad range of services (see prediction 12) and as such they need to be of a larger size with a broader range of people offering those services.

Prediction # 3 – Compliance will become a commodity

Because of predictions 1 & 2 general business compliance will become a commodity. There is a market for businesses that provides commodity services. They are typically volume / price driven markets.

Compliance will not go away completely. It would be foolish to think so. How else is the government going to check that you’re paying the correct taxes? As it becomes a commodity there will be less ‘mystique’ around what accountants currently do for their money.

Prediction # 2 – Governments will simplify compliance

We can debate all day long the effectiveness of any given government at any time. My view is that the government exists to serve the people. In serving the people it collects taxes and then spends the collection on facilities to make our lives better. That’s the theory!

Governments want to be re-elected – all the time. Because of this driving force they want to please the people they serve. When it comes to business owners it is my belief that they will continue to find new ways to simplify the red tape and compliance that business owners have to go through. This will drive less need for the traditional accountant.

The accounting profession has been in existence for a very long time. After 16 years working with the profession in 5 countries I have determined it has been doing the same thing for a very long time.

A very long time doing the same thing over and over again – and expecting a different result.

During partner pontification time partners tend to ponder the possible future:

“Maybe this is the year that we reduce our write offs”

“Hopefully we can get all our lodgments done on time”

“I hope we earn more money this year”

“I wish the clients would send in their work when they said they would”

“Maybe, just maybe, the clients will refer more business this year”

“I know we can reduce our WIP and debtor balances for good”

“There is so much untapped potential in the client base”

“Productivity should be much higher – what do they do all day?”

These results are a possible future but not a probable future under the current business model and the same business methods.

If you want a different result then you must first make some different decisions and then put in place some different actions.

The typical accounting firm is a solid (but under performing) business. The clients are loyal, the revenue is mostly recurring and by and large the government determines what work you have to do with your clients. Although solid, this style of business encourages apathy.

There are many outside forces that will determine the future of the accounting firm however the main force that will determine the future is your desire. If your desire to achieve different results is strong enough then you will make some changes. If you have little desire then you will continue doing the same thing you have been doing – and you’ll get similar results.

I think the model of the accounting firm needs to change. For the sake of the clients and the people who work in it – it needs to change. Clients are typically underserviced – they want you to be proactive and offer them more. The people who work in the business are generally not rewarded enough for how smart they are.

The outside forces are listed in my 12 predictions of the future of the accounting firm. My predictions are based on working with many hundreds of accounting firms over a 16 year period and understanding the market implicitly.

Prediction # 1 – Technology (web based) will drive business efficiency in compliance.

There are already web based accounting systems for the business owner to use. There will be many more. As the technology and internet connection speed improves the functionality will improve as well. Part of that functionality will be where the software will seamlessly ‘integrate’ in with the various governments taxation departments.

As the integration happens it will be easier for businesses to get their compliance work done. This will mean less need for the traditional accounting firm who offers little value – other than the preparation of financial statements.

Adding to the great work by Jim Collins in his book Good to Great I have developed a visual which will help keep you focussed. The premise of the visual is answering 3 very important questions and then living by them as your business develops.

  1. What are you passionate about?
  2. What can you be the best in the / your world at?
  3. What drives your economic engine?

It took me 4 hours to answer these for the first time! However, when I answered them it became very clear what I needed to do. Here are my answers:

  1. What are you passionate about? Improving the financial position of our clients
  2. What can you be the best in the / your world at? Understanding the industry that we work with
  3. What drives your economic engine? Net profit per client

These 3 answers were picked for the following reasons:

Improving the financial position of our clients. Nothing fires me and my team up more when one of our clients does well. Its what we live for. These days with 5 coaches and hundreds of clients we are hearing success stories all the time. It could be a profit turnaround, an internal win, a client win, a celebration of some sort – all which leads to helping our clients improve their financial position. It’s what we live for. On average our clients are 93% more profitable (profit per partner) than the average of the industry. They didn’t start that way – we helped them do it.

It helps with decision making as well. If the new idea that we want to take to our clients does not help them improve then we will not do it. We are extremely focussed on helping our clients improve their financial position. And I must say we’re darn good at it as well.

Understanding the industry that we work with. We cannot be the best coaches, trainers or publishers in the world. Many will lay claim to that. What we can do is understand our clients like no one else. We are the best the world at understanding the accounting profession. Not how they do their technical work and what they deliver to clients – but how they run their businesses. We are speaking and working with accounting firms every single day – it’s all that we do. We do not deal with legal professionals or other professional service firms. Just accountants. We love accountants! The more we understand about our clients the more credible we become and the more focussed we are at achieving answer # 1.

On decision making. If the idea we have (or someone else’s idea) is not about directly working with accounting firms then we will not entertain it. For example let’s say someone came up with a technology idea for the general business community that they wanted the accounting profession to onsell to their clients. Good luck – not for us.

Net profit per client. My business is a ‘for maximum profit business. It needs to make a good profit margin so it can continue to innovate, re-invest and have the best people in the world serving the clients. So any new idea we take to the clients must return a good margin to us. Many ideas that people have are nice ideas with lots of effort but little return.

If you have 1 & 2 working but not 3 (and you’re in C) then you are charity. If you have 1 & 3 working (and you are A) then you are not focussed. If you have 2 & 3 working (and you are in B) then you are not enjoying what you do. The key to this model is getting all 3 working in sync.

Spend some time working out your answers – you’ll be glad you did.

Success Zone

Over the next couple of months there are number of events which will help you run a better, more profitable business.

Friday April 30. Free Teleseminar – The Future of the Accounting Profession.

The first one was booked out in 5 hours with over 300 firms registering. So a second event has been scheduled for 3pm (AEST) on April 30

On this teleseminar I will be handing down my 12 predictions on the future of the profession and what you need to do right now to prepare for that which lies ahead. I will also be unveiling a new business model that will revolutionise the way you do business. Do not miss this exciting opportunity to get a head start on the rest!

Here is the agenda for this ‘not to be missed’ teleseminar:

  • What is wrong with the current business model
  • What is right with the current business model
  • My 12 predictions for the future of the Accounting profession
  • Your new organisational chart unveiled
  • Your new services model unveiled
  • Your new financial model unveiled
  • How to implement the new model

This is a ground-breaking announcement that will have you either very excited about the future or very worried.

The details for the teleseminar are as follows:

When: Friday, 30 April 2010 at 3:00 p.m. (Australian Eastern Standard Time)
Duration: Up to 1 hour
Where: Your telephone
Who: All key decision makers in your firm
Cost: FREEPlease note that Telstra Conference Call charges do apply
To Register: Click here and enter your details to confirm your place

If you miss it (or you are outside of Australia) will put a link up for download.