MY RESEARCH suggests that over half of all UK accountancy practices make what economists would regard as an economic loss (ie a loss once notional profits are adjusted to reflect the open market arms length salary costs the firm would have to pay to employ someone to do the work the partners currently do). And of course, losses are the market’s way of telling you that you aren’t doing things right. Fortunately my research also suggests that some firms are doing things right. And as a consequence they are getting very much better results, including:
*Doubling their turnover in the last 18 months
*Quadrupling profits since 2009
*Earning annual profits in excess of £250,000 per partner
*Transforming their life-work balance so that they work standard office hours, don’t work on Friday afternoons or weekends, and take 10 weeks holiday a year
*Completely eliminating debtors
*A 2006 start-up that has been building a client base worth over £800,000 with average fees of £5,600 per client
*And all of this in the jaws of the worst recession for a generation.
Interestingly, firms don’t have to be large to generate those sorts of results. In fact, of the 41 cases in my book 23 are sole practitioners, nine are two partner/director practices, and the remaining nine have three or more partners.
What firms do have to be, though, is better. Much better. And, based on my research, it is clear that the UK’s best accountancy practices generate better results for themselves and their clients because they are better in the following 15 key areas.
*Better intent – They don’t make excuses or moan about what the world is doing to them. Instead they take control of their own destiny. Their success is planned and not accidental. They decide what they want, make whatever changes are necessary to ensure that they get it, and persevere when the going gets tough.
*Better decision making – They make conscious, rational decisions, driven by their goals, and informed by facts rather than guesswork or pre-judgement. They do not run away from the need to invest time and money in creating success for them and their clients.
*Better measurement systems – They don’t just rely on traditional accounting measures. Instead they work out what really matters – i.e. what drives their success – both financial and non financial. They find ways of measuring all those success drivers, set targets, use the results to inform decision making and make people transparently accountable for performance and results.
*Better action – They recognise that one of the timeless keys to success is to do what you said you were going to do, when you said you were going to do it. So they have systems to ensure that action plans are created, recorded, prioritised and implemented. And they do not accept lip service, excuses or weasel words.
*Better measurement solutions for clients – They also recognise that profits are a consequence of doing the right things for the right people in the right way. So they start by making sure that their clients also get all the information they need about the numbers that really matter within their businesses, including their success drivers and benchmarking comparisons.
*Better improvement solutions for clients – As well as helping clients to measure the things that matter, they also help them create and implement improvement action plans in those areas. In particular, they help clients create and implement improvement action plans for their profit, cashflow, tax exposure, business value and personal wealth.
*Better alliances – They recognise that it is impossible for any independent accountancy firm to be able to do every specialist piece of work to the incredibly high standard that clients deserve. So they enter into strategic alliances with other specialists who will do the specialist technical work where necessary. Generally, the specialist takes all the engagement risk, and shares the fees generated with the practice in the form of a ‘payaway’.
*Better client meetings – They recognise that meetings are the equivalent of a penalty shoot out in a football tournament – i.e. the interaction that makes a profound difference to the outcome and how you are judged. So they make them more professional and dynamic by following carefully planned meeting systems, and using high impact tools, such as tax planning software, “live” at meetings to illustrate key ideas and quantify potential benefits.
*Better proactivity – For them “proactivity” is not an empty promise on their website and in their brochure. They have developed systems to ensure that genuine proactivity, of the kind clients really value, is part of the culture and habits of the firm. They have also discovered that the more proactive they are, the more additional services their clients want to buy from them.
*Better service – They understand what excellent service means to the type of clients they want to attract, and have focused their energy and designed their systems in order to deliver that. They focus on both the substance of service excellence (e.g. speed, accuracy, impact etc) and on the experiential aspect (e.g. showing genuine interest, using Plain English, ‘wow factors’ etc).
*Better clients – They understand that their time is a precious commodity, so they ration it wisely. Rather than try to please every conceivable type of client, they decide the types of clients they really want to work with, and build the practice around them. That way, they attract more of the right kind of clients, and can afford to get rid of the ‘wrong’ kind of clients. Typically, this results in them earning more money, doing more enjoyable work, and having a better life-work balance by working with a smaller number of clients, paying higher average fees.
*Better pricing and cash management – They recognise that the only sustainable way to provide a premium service is to charge a premium fee. They understand that clients hate surprise bills, and so rarely use timesheets for billing purposes. They also understand that, to clients, every bill is a value bill, since the client will not be happy unless it represents good value. So, wherever possible they use value pricing to make it crystal clear that the value far exceeds the fee. And where value pricing is not possible, they use pricing software to generate fixed prices that are acceptable to the client, and fixed price agreements to formalise the arrangement. They also use Extra Work Orders to ensure that extra work is translated into extra fees. And they collect most of their fees by direct debit, often by instalments and usually in advance of completing the work.
*Better team work – They understand that the partners cannot and should not try to do everything. They recognise that leverageable success comes by fully involving the team at every stage. Listening to them properly, and valuing their input. Sharing all the key numbers with them. Trusting them. Delegating most of the work to them, after first giving them the tools, training, systems and support they need to do a proper job. And treating and rewarding them well.
*Better systems – They do not leave things to chance, and they do not rely on their people remembering what to do. Instead, they create systems to ensure that everything can be done to the same high standard, every single time.
*Better marketing – They do not leave referrals to chance. Instead, they use referral systems that leverage their time. They don’t just look to clients and bank managers for referrals, they actively cultivate a much wider network of referral sources. And they understand that in order to get people telling others about them, they have to create a game the client wants to play, and give them a compelling story to tell. They also test a wide variety of other marketing strategies to find the ones that work best for them. For example, many of them have found that the right kind of seminars, are one of the best ways to win new clients.
Steve Pipe is a writer, founder of the AVN association of accountancy firms and an adviser and strategist to numerous accountancy practices.
To receive a 50-page PDF extract from his book The UK’s Best Accountancy Practices, Accountancy Age readers can email email@example.com © Steve Pipe FCA – 23 September 2011. You can read more about his work at www.stevepipe.com