Revenue

  • Branding / Leads. The function of marketing is to generate high quality leads – either from new or existing clients. Branding is very important as well. However when you get involved with marketing and hire marketing people make sure the money you are spending gets a return. Your brand probably needs a makeover and you also need to do activities that actually generate enquiry. Your marketing activity should make you money not cost you money.
  • Services productised. Every day you generate IP in your firm. What happens to it? it more than likely gets locked in a client file somewhere never to be seen again and then started again from scratch the next time that type of work needs to be done. I am being facetious! I know you have templates and processes for compliance and tax work. What about everything else? The more you productise your services the more efficient you can be, the better service you will deliver and the more money you will make.
  • Sales process / skills. Accountants are lousy at marketing but good at sales. Once we teach you. Think of sales as servicing. Making sure each client has what they need from you to achieve their goals and objectives. You do need skills in interviewing, language & questioning techniques. You also need a predictable sales process. Think of sales like workflow management – step by step process.
  • Value Pricing. To price a job upfront is not value pricing. Value pricing is setting a price based on your contribution to the clients outcome. If you can save the client $250K in tax paid (and you know that in advance) then what’s wrong with charging $25k to do that? A 10:1 return is a great return in anyone’s language. Charging by the day or the hour will keep you in the poor house.
  • Retention rate. There is no point in getting loads of new clients if you cannot look after the ones you already have. You must work out ways to retain your clients for the long haul. If you have a client that pays you $10k per year and refers 1 client per year that is worth a similar amount then that direct client is worth $200K over a 10 year period – plus inflation! You need to look at the lifetime value of each client – not just this months transaction.
  • Average project value. Each time your client buys a project from you is an opportunity to add value, up-sell, and make sure the client is paying an appropriate price based on the value you provide. Pricing remains a hidden gold mine in an Accounting firm. 99.9% of firms undercharge for what they do. The right price is just before “NO, I do not want to pay that amount of money for that”. What your client is really saying is they do not see value in what you are proposing. It’s not until you get a lot of push back do you know if you have hit the threshold. Do not assume what the right price is – test it and listen.
  • No. of projects / client. Accountants can offer huge amounts of value to their clients. If you have done your job right then your clients will be buying a large range of services from you each year. Most clients buy around 2 projects per year from their Accountant. Based on what clients need and what Accountants can provide that number should be an average of 4 or more.

Roadmap 3

People:

  • People mix / selection. You’ve probably heard the term ‘get the right people on the bus in the right seats on the bus’. Nothing could be truer. There are hundreds of thousands of great people you could employ – they just currently don’t work for you. The better your people the better your business. Do not accept anything but the “A” team. Get rid of the cancerous terrorists on your team. They will want to recruit others into their little gangs. Give everyone a chance to be coached – then fire fast if they are not with you.
  • Capacity model. Are you building capacity before you need it? Most Accounting firms do not. They seem afraid to hire the $100K plus person in fear of no work to get a return on the salary. A $100K person is really only $400 per day in hard costs. With the amount of opportunity out there and the amount of low level work that a partner does I am sure you could find $2k per day in work for this person to do! Hire the good ones and you’ll generate the work.
  • CSC Admin team. Most firms run their administration team at 10-15% of their total headcount. Somehow partners have a belief that because the administrators are not ‘charging time’ then they are a cost and therefore ‘not worthy’. My research shows that Accountants spend around 20% of their day doing administration work. If you hire more administrators (what I like to call Client Service Coordinators – CSCs) and delegate those tasks to them – then the Accountants capacity can increase and you can do more work for less cost. Some of the most profitable firms I know have their administration headcount at 30% – 40%.
  • Training / Development. Your professional bodies/associations demand 30-40 hours each year of ‘professional development’ and nothing on personal or business development. This is crazy. It is breeding more technical accountants but not better people skills or business skills. Make sure you invest heavily (weekly) in non technical training. Your business will better off for it.
  • Implementation process. An idea worthy of implementing should be implemented. Many Accountants have great ideas and they just go by the by. To implement any idea you must allocate the time and do it. You need a structured process. A list of actions, to do’s and projects is just that. Yes, start there but do not FTI – fail to implement. They will not implement on their own. Give the worthy idea to someone on your team to implement. Most partners of Accounting firms are lousy implementers. They are best seeing clients and selling.
  • Management / Leadership. Q. Where did a partner of an Accounting firm learn how to manage or lead? A. Hmm – from the partners they worked for. So where did those partners learn how to manage or lead? You guessed it. From the partners they worked for. Management is not leadership and leadership is not management. Leaders need to inspire by being inspiring. Accountants are supposed to be the leaders of business. Would you like to be lead by you?
  • Team performance. It’s very simple to see how well a team in an Accounting firm is performing. Just look at the revenue per full time equivalent person (FTE). That is a measure of the entire team – including administrators and partners. Most firms have revenue per FTE at around $125k – $175K. That’s very very low. If the leadership, people mix, methods, pricing, services, efficiency and clients are close to right then revenue per FTE should be well over $300K person. What’s yours?

Roadmap 2

Workflow:

  • WIP / Debtors. The objective is to have the minimal amount of work in progress and debtors (receivables) at all times. With profit, low WIP and debtors will guarantee great cashflow. Ideally WIP and Debtor days combined (lock up) should be well below 40 days of revenue.
  • Productivity / Average hourly rate. Traditional firms focus on productivity (charged time into available time) and this it WRONG to focus soley on this. It typically means the more productivity you have the slower you are going. Average hourly rate should be increasing every month. It is a function of how much you charge and how efficient (not productive) you are. If you have productivity at around 75% per Accountant you’ll be doing well. AHR should be over $400 per hour – but not based on charge rates.
  • Write on’s. Traditional firms who price in arrears will have write offs. It is discounting before billing. What advise would you give a client about this? STOP IT. It is complete waste. Price the job upfront, put an hours budget on each job and drive the time down – you’ll achieve write ons every time.
  • Systems / Technology. You should not have paper files. Every system you run should in the cloud. The technology is here today where you can run your firm from a mobile device. How good are your systems? How cumbersome is your current system of doing work? Spend the money and get the results.
  • Pricing up front. You know how much the job is worth. So price it upfront and tell the client. It’s common courtesy. Send them an email, a letter or have them sign a form that indicates the scope of the work and the price. If the scope changes you can always go back. Once you have priced the job then (as well as being great client service) you are now directly incentivised to be super efficient. Every project, no matter how big or small – MUST be priced up front.
  • Policy / Processes. As the owner of the firm it’s your business – not your teams or your clients. It’s your name on the building, lease, mortgage, loan, credit card or insurance papers. You are taking the risk. As such you should set the rules. If you want to be paid upfront then go for it. If you want to fly first class and your team in coach – then do it. If you chose not to start a job until all the information is in – then set the rule. The one who makes the rules wins the game.
  • Efficiency model. Most Accountants over engineer jobs. Do you really need the report and the extensive preparation at the start? Do you need to fill in a 20 page checklist. If you are focused on charging time and productivity then logic says to pad the job out and do more than needed. However, not a good look for the client. They pay more! Price the job upfront and then get rid of time wasting activities and “bin” excessive tasks.

Roadmap 1