After 24 years advising Accountants all over the world I am seeing that there are many factors that set the high performing Accounting firms apart from the regular performing Accounting firms.

The high performing firms could be summarized as:

  • All clients are buying everything they need that helps them achieve their goals
  • All client / government deadlines are met ahead of time – not a mad rush at the end
  • The team are humming and working cohesively together – and not working (actually being at work) more than 1800 hours per year
  • The business is growing at a healthy ‘double digit’ pace each year
  • Profit before partner salaries is well above 55% and…
  • Partners are not working long hours – their stress levels are low

To run a high performing firm that yields an excellent profit is NOT about Partners and Team putting ‘the hours in’. Quite the reverse. The high performing Accounting firms that are consistently high performing are working considerably less and earning considerably more.

In fact, I have a firm I am coaching right now that introduced a 5 hour work day. They introduced it 18 months ago. They have 45 people and they said to the team if you can do your regular 8 hours of work in 5 then you can work 5 and get paid for 8!! They’re running at 54% profit this year.

And the reverse is true as well. I see countless firms doing crazy hours as if it’s a badge of honor. It doesn’t necessarily mean high profits. In the past 97 days I have interviewed 103 firms on their financial performance. Of the 103 firms the average profit before partner salaries was 34% YET the average ‘client time’ per Partner was a staggering 1229 hours per Partner per year. That means the Partners are charging 1229 hours each which means they’re working 2200 – 2500 hours per year.

That is crazy. Those sort of client hours is not running a business – it’s running a practice. There is limited sustainability in the model. What would happen if the Partners were not ‘charging their time’?

Do this exercise. Add up all of the partners time charged and multiply that number by the average partner charge rate. That should give the total revenue contribution from the partners. Now take that number off your total profit (before Partner salaries). What’s left is the contribution from the rest of the team. What is left is what your business will deliver if the Partners are not involved.

For most firms what is left is not much. Another way to think of it how sustainable is your firm without the Partners?

It’s very easy to prop up profits in an accounting firm – just get the partners to do more chargeable time. It’s certainly is a way for increased profits, it’s just not a very good one.

When I coach a firm this is where I get the Partners to spend their time. I have them follow my 30:60:10 rule. After coaching 434 firms and adding >$850M in profit to them, I believe this is the best use of Partner time. It is very specific:

30% of Partner time (around 500 hours or less) is delivering high end client work. No compliance. Only advisory work priced on value based fees.

60% of Partner time in a sales role. Meeting prospective clients to win new business and building relationships with existing clients. The purpose being that all existing clients are buying everything they need that helps them achieve their goals.

10% of Partner time in a leadership role. Driving performance of the business.

The 30:60:10 rule is ALL about only doing high dollar productive activities. The right people (in this case the Partners) doing the right things to drive the business forward and build a sustainable business not an unsustainable practice.

For everything else you can hire people to deliver the how. The right who’s can deliver the how.

How many ‘who’s’ are you away from total freedom?