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DISCLAIMER This report is representative of a value-added service to our clients and the profession. Whilst every care is taken in the collection and compilation of data, the benchmark is interpretive and indicative, not conclusive. Therefore information should be used as a guideline only and should not be reproduced in total or by section without written permission from PANALITIX.

Due to the volume of firms participating there was limited validation on data entered by survey contributors and some contributing firms had to be excluded where significant amounts of data was missing or where those firms significantly skewed the result (outliers).

Please note that on occasions small sample sizes can lead to “quirky” results, i.e. the spread of the underlying data may be significantly skewed.

Only 9 Numbers - UK Accountancy Profession Benchmark Report.2015 © PANALITIX Pty Ltd

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Dear Accountant,

In October 2015 at the 2020 Group annual conference I asked 103 UK Accountancy firms to fill in a research survey. The 103 firms answered nine key questions about the performance of their firms. The questions are the critical nine questions, that when implemented as a strategy, dramatically increase profit, capacity and growth of any size firm.

In other words, when an Accountancy firm implements the nine strategies they get better numbers, create more time and have delighted clients.

This report unveils the critical strategies, what they mean and more importantly what you need to do to implement them into your firm.

It’s important to point out that the size of the

firms varied dramatically. The survey group of 103 firms ranged from a brand new start-up firm with little revenue, right through to £24M. The average revenue was £1,400,712.

Regardless of the size of firm the 9 strategies are relevant.

I have been advising Accountancy firms for over 20 years around the world and I have seen hundreds of strategies implemented to grow and develop a firm. To narrow it down to the critical nine was no easy task.

To make it easy for you I grouped the nine strategies into three categories:

1. Profit improvement2. Creating capacity3. Growing revenue.

Each category has three strategies only.

The way to use this report is to go with a ‘leap of faith’ when you read my commentary. I am only drawing on what works... and some of the things I say upset some people. As you’ll discover, sometimes I have a ‘blunt’ writing style and for some people it’s an acquired taste. I tell it the way it is and I don’t waste words. If you’ve not experienced my style before I hope you enjoy it.

When you read the report you’ll naturally ‘benchmark’ your results against the 103 firms surveyed and you’ll see how you compare. It’s human nature. Some of your numbers will be worse and some better.

Your current numbers are quite simply what they are. You can’t turn back the past but you can change the future. In a fast-changing profession, the strategies you’ve used in the past may not be

the right strategies for the future.

Once you’ve read the report make sure you contact the PANALITIX team (full contact details at the end) and ask for a consultation on exactly how we can help you get better numbers, more time and delighted clients. We have the technology, the methodology and importantly the implementation process that will make an enormous positive difference to the way your firm performs. Oh … and the consultation is completely free.

You see, it’s not about running a better Accountancy practice. It’s about running a better Accountancy business. It’s time to stop practising, you’ve been at it long enough. You’ve got a business to run.

LET’S GET STARTED

PROFIT IMPROVEMENT

Some firms think the holy grail of profit is to get/demand more ‘chargeable time’ from their teams. The concept of ‘productive time’ is one of the worst ways to drive profitability. It’s counter intuitive to success. Yes, another 100 chargeable hours per team member, per year does go straight to the bottom line if it’s all billed. The problem is that if you promote ‘more time’ put onto the WIP then you’re promoting inefficiency and ‘time padding’.

If you are pricing in arrears then you’re effectively saying to the team go slower, find some more work in the job that the client may or may not need and over engineer the job. You’re effectively ripping the client off by putting more time on the clock than needed.

The promotion of chargeable hours puts undue pressure on your team and creates a bad conversation with your clients. Imagine if they found out exactly what your team actually did for them minute by minute!

I do believe you need a healthy mix of productivity (around 70% for the fee earning team and 30% for partners) however it is not the focus for profit improvement. Some firms believe if they can get the partner-chargeable hours up then they’ll make more profit. Yes you will. Partners have the highest charge-out rates and you could probably squeeze another 200 hours a year out of each one of them. But is it the best use of their time? I think partners should split their time up like this:

• 60% of time selling, networking, nurturing – looking for new business opportunities• 30% of time doing high end client work based on value-based fees• =10% of time in a leadership capacity – driving performance of the firm.

Promoting chargeable time means you’re promoting yourself as a ‘labour hire’ business and that’s not the business you’re in. You’re in the intellectual-property-selling business. You’re in the business of selling what you know. Not selling labour.

I believe the top three ways to create profit are:

1. Eliminating write-offs2. Pricing up-front3. Value pricing.

IMPROVING PROFITS BY ELIMINATING WRITE-OFFS

The data was compelling. The UK Accountancy

profession really enjoys writing work off. They seem to be really good at it as well.

The average was 18% of all work was written-off before being billed. For the 103 firms surveyed it was a whopping £19,502,400 written-off every year. The average was £187,523 per firm.

I was working with a large firm once and they had A$1.6M (circa £750,000) in write-offs. To make my point I found a picture of a house in their area worth A$1.6M. I then explained that they were destroying the value of the house every year. I told them they’d have more fun if they actually bought the house, set fire to it and have a party whilst drinking excessively.

Once they got the message, we set about changing the process and they eliminated write-offs (and moved to write-ons) in 6 weeks flat. I should have charged them more!

I would imagine that £187,523 could buy a small house in some parts of the UK. Some firms in the UK are destroying the value of a house every year. Some are destroying a luxury car!!

Really! This is just wastage of the highest order. The firms who use our resources and implement our ideas do not have write-offs – they have write-ons. There were 16 firms (out of the 103) who had no write-offs. I am not sure how you get exactly ‘0’ so I am assuming they either didn’t know or they don’t keep time sheets.

Write-offs are a curious thing in the profession. If the average is 18% then I think it’s actually much higher than that. You see, your team will be writing-off before you get a chance to. They’ll be making judgement calls as to how much time goes on the WIP as they’re doing the work. Often they’ll stop the clock and continue doing work because they think the job might blow out a bit in price.

I found some firms in the UK survey actually ‘budgeted’ for write-offs in their annual job planning process. How bizarre! They’re expecting to fail before they start. Why not budget for ‘write-ons’ and plan to succeed? You get what you expect.

You will always get write-offs when you operate in a ‘price in arrears’ model and/or a ‘chargeable time’ model. They are easy to eliminate. Here’s a five-step process:

1. You commit to scoping and pricing

every piece of work in advance and communicating this with clients in writing, and then the client signs off on it2. The price is based on value and not based on a charge rate system3. You have an ‘hours budget’ only on each job – not a pounds budget4. You get super-efficient with every client job and take time out of the job – reducing the chargeable time5. You stick to the scope of works only – everything else is outside of scope and needs to be communicated and agreed with the client before proceeding.

So there you have it. You price up-front, you notify the client, you get super-efficient, you drive the time down and you take the write-up. You do that with every client and you’ll end up with write-ons for the year.

I asked the 103 firms to set a 12 month goal for each strategy. The 12 month goal (average) for these 103 firms was STILL 5% written-off or an average of £91,539 – a saving of £95,984. You could probably buy a top of the line Range Rover for that. At least it’s better than ‘torching’ two of them every year!

If you want to make instant profits then change the process and STOP IT.

IMPROVING PROFITS BY PRICING UP-FRONT

The old system of pricing was to hire some Accountants, give them each an hourly rate (which was calculated based on a salary-multiple of some sort), give them some work to do and then they work away keeping the time. Then what popped out the end was the price.

Imagine the following scenario with a new client and you.

Client: I’ve got this great idea for a new product and I’m wondering how much to price it at. What would you recommend I do?

You: Well that’s hard to answer, let me tell you how we do it in the Accountancy firm. What we do is apply a charge rate to each of our Accountants. We get that charge rate based on their salary level. The more we pay them the higher the rate. We then split an hour into 6 minute ‘units’ and effectively divide the charge rate into 10 so we get a ‘unit’ price. Then the Accountant gets started on the job and then based on how many ‘units’ of time they do we multiply that through and voila we get the price.

Client: What the…..?

You: Oh yes, every client project has a different price and we don’t really know what the price is until we get to the end. We price assuming the charge rate was correct and the time to do the project was correct.

Client: That was no help at all.

Pricing in arrears by the hour is such a ‘last century’ business practice. It’s a perverse way to price. Not only is it a really silly way to price, you are actually rewarded for how inefficient you are.

The question I get all the time is ‘how do you know what the right price is’? The only right price is what the marketplace is prepared to pay for it. If they keep saying ‘yes’ too easily then the price is wrong. You have to test different pricing structures and packaging to see what your market wants and how much they’re prepared to pay.

The specific question I asked of the 103 firms was “What percentage of client projects are priced up-front and the client is notified?”

The average was 54% of client jobs are priced up-front and the range was from 0% to 100%. There were 10 at 100%. They had their clients on fixed-price agreements on a monthly direct debit. The average of 54% is a good start and there is a long way to go.

The best way to commit to pricing up-front is to write to your clients advising them of the change (we have a process for that including all the template letters you need) so you are held accountable. Then from X date going forward every new project is priced up-front.

The old system was to have a charge rate as an input to get to the price. Now the charge rate is an output. The old system you were incentivised to be inefficient. When you price in advance you are incentivised to be as efficient as possible.

The new system is - you price the project up-front, you take time out of the job and the average hourly rate pops out the end. When you price up-front why do you need the charge rates anyway? They are surplus to requirements. Once you get the hang of pricing up-front, get rid of the charge rates but keep the time sheets. Have a time sheet with everyone on £1 per hour.

Once you free up capacity, you then resell the capacity based on value-based fees and you’ll increase your profits dramatically.

IMPROVING PROFITS WITH VALUE PRICING

Why is a bottle of water 50p in a supermarket and £3 (or more) in a 5 star hotel mini bar? Same water – vastly different price.

It’s really simple. That’s what the market is prepared to pay for it under different circumstances. The supermarket had loads of water and the mini bar had two of them.

It’s been said that value is in the eye of the beholder. To me that means the market place determines the price. You might have a bit of an idea what the project is worth but until you articulate your value and gauge the reaction, then you just don’t know

To value-price means you’re pricing a project, not based on any time input or charge rate input, but on three factors:

1. Your value belief – do you believe it’s actually worth more?2. Your value contribution – is your intellectual property making a difference?3. Your clients’ value perception – are you articulating your value eloquently enough?

Of the 103 firms the average was 28% of client projects were value-priced with no reference to charge rates. Only seven of the firms had their

client work 100% value-priced now.

If you have a compliance project that has been done before, you have ‘price parity’ with it. You might think it’s worth £10,000 but if the client has only been paying £3,000 for years then all the value articulation in the world’s not going to sell that client on £10,000.

With new projects, you have no price parity. Clients have not bought that project before. So based on your belief system, your contribution (which needs to be scoped out in advance) and the clients’ perception, then pick a price. It’ll be wrong and you’ll get better at pricing.

All services that have value in them should be value-priced (compliance has little value for example). When you value-price projects your profits sky rocket and so does your average hourly rate. When you have your consultation with us make sure you request to look at our value-based fee-selling system.

As a result of write-ons, pricing up-front and value-pricing your average hourly rate (profit margin) should be increasing every month. It means you’re getting better at pricing, getting better at being efficient and getting better at delivering higher value services at a value-based fee.

Your new profit model now looks like this:

30 HOURS TO COMPLETE

£3,000 PRICED IN ADVANCE

£3,000 NEW PROJECT

£6,000 TOTAL CLIENT FEE

30 HOURS TO COMPLETE

£200 AVERAGE HOURLY

RATE

10 HOURS TO COMPLETE

£300 AVERAGE HOURLY

RATE

20 HOURS TO COMPLETE

£150 AVERAGE HOURLY

RATE

£100 AVERAGE HOURLY

RATE

£3,000 PRICED IN ARREARS

x1

x2

x3

x4

=

=

=

=

PROFIT MODEL

CREATING CAPACITY

If you run a traditional firm you’ll be probably be obsessed with billable hours or chargeable time. That means you are focussed on being a ‘labour-for-hire’ business.

A labour hire business needs labour to hire out. That means hiring people at a reasonable rate, ‘marking’ that rate up and then ‘reselling’ the labour to your clients. Do that over and over again and you’ll have a successful Accountancy business. So you think.

The problem with this model is you need lots of labour. Lots of labour means a bigger office space, big payroll and big headaches. The problem is you’re not looking for other solutions to create capacity. You’re only looking for more people.

No wonder there is a shortage of talent in the Accounting profession. Everyone wants to hire an Accountant because they think they need lots of labour to do the current task.

There are many ways to create capacity outside of hiring more (expensive) labour. Over the years many firms have looked at more efficient ways to complete client tasks. New technology has enabled them to do this. Most firms I know have multiple computer screens on each desk and run a ‘less paper’ office environment to be more efficient. And granted, they do get more efficient and create more available time to do client work.

The problem is this. If client work has been priced in arrears then I guarantee you the charge rates have not increased in accordance with the new found efficiencies. If you are 50% more efficient (and you price in arrears) I would be willing to bet that you did not double the charge rates.

As firms get more efficient, but the process is not properly managed, what happens is either (or all):

1. The client price goes down with the efficiencies2. The team find more work to do for the client and charge the same amount of money3. The team fill the available time with what work they have to do.

And consequently the capacity was not realised properly. At this point in time we still need humans to do the majority of the Accounting work. We certainly need them (at this point in time) to do the advisory work. However, huge and recent technological advances mean we can take an enormous amount of labour out of every client job and thus create capacity. When you

create real capacity you can reduce your team headcount or reduce the working hours. It is far better to increase the client base or increase the service offerings to existing clients. Either way... it’s all profit.

The best three ways in recent years I have seen to create capacity is to:

1. Have your clients be on a ‘cloud’ based accounting system2. Focus on reducing the turnaround time of work3. Focus on less time on every single client project.

Let’s create some real capacity!

CREATING CAPACITY WITH CLOUD ACCOUNTING

The question was asked of the 103 firms ‘what percentage of your business clients are on cloud accounting’?

Being a relatively new technology (3-5 years old) the numbers were higher than I was expecting. The range was from 0% - 100% (2 at 100%) with the average at 11% of current clients on internet based accounting systems. What was super exciting was the focus for the next 12 months where the average goal was to move 35% of clients to cloud accounting. To put that into perspective the 103 firms have 6,733 on cloud accounting now and plan to have 24,024 clients (including new clients) on cloud accounting within a year.

If this is a trend across the entire UK profession, then the accounting software providers should be thrilled to know that they might expect a tripling of business this year!

Clearly this is a strategy the UK profession is embracing. And so they should. Having your business clients on cloud accounting is proven to be a more efficient system for both client and Accountant alike. When a client is on a cloud system the ‘time taken’ at the Accountants’ end can be up to 60% less than through other systems. What are you going to do with all that capacity?

Globally, there is a massive push for the SME market to transition from their desktop accounting software to an alternative cloud based accounting application. Based on public information we believe that the following markets have already made this switch to cloud based accounting applications:

• 35% of New Zealand SME’s• 20% of Australian SME’s• 10% of UK SME’s• 5% of USA SME’s and• 2% of Canadian SME’s.

Modern day business owners are demanding real-time information not only to make critical strategic decisions, but also to stay competitive in their respective markets. Similarly this applies for Accountants who need to adapt and evolve their service offerings, or else risk a significant decline in revenue and profit over the coming years.

The following are key trends impacting accounting firms globally:

• As accounting systems provide real-time information, Accountants are not required to provide as much data integrity services. • Accountants are no longer required to re- key financial information from one source to another and consequently spend up to 60% less time preparing annual accounts. • Clients are aware of such cost savings and their willingness to pay fees for less non- value-added services is reducing at a rapid rate.• This creates a market for the new savvy, nimble, marketing orientated Accountant who can promote and deliver value-added

advisory services to a marketplace that really does value the service.• Regulators are improving the flow of financial information in terms of lodgement interfaces whereby SME cloud- based accounting applications can send financial data directly from the cloud, bypassing the traditional accountant.• This results in the annual compliance ‘bread and butter’ services becoming commoditised and Accountants facing severe fee pressures from clients and prospects.

Accountants who don’t update their business models and who don’t offer new value-added services face a diminishing client and fee base.

An example of such industry forces are evident in the trends of New Zealand-based Accounting firms that have recorded dramatic falls in profit compared to CPI. Profits have fallen below the 5% year on year growth projection as a result of efficiencies gained through cloud technologies and the lack of re-invention by the Accounting profession.

Practically, the profit decline is a result of Accountants failing to re-invent their service offerings and interactions with SME clients once they switch to the cloud.

If Accountants want to remain relevant there are four things they must do right now:

1. Embrace and promote cloud technology 2. Transition to a ‘price up-front’ business model and enhance internal efficiencies3. Train their teams in soft skills such as relationship building, customer service, finding opportunities and sales skills 4. Transition to offering their clients value- added services using real-time financial information: information that will actively make a difference to the client’s business.

Cloud accounting is proven to create capacity. The question is are you going to embrace it, promote it and insist on it?

With the real-time data, like cloud accounting provides, you can become the real-time Accountant. Not a redundant data Accountant. No-one wants one of those. We want a real-time Accountant.

CREATING CAPACITY BY REDUCING TURNAROUND TIME

When a client job (with its raw materials) comes into the shop, you log the job, do the job and send it back out again... sometime in the future.

It’s a great measure of customer service. “How fast do I receive my product”, is what your clients are asking. Just like when you order something over the internet, you want it as soon as possible.

It’s very hard to judge if one Accountant is any better than the next. We have to trust that you are technically correct. We can measure you on service however. Turnaround time is an awesome measure of service.

When I asked the question of the 103 firms “what is your average turnaround time of compliance work” I have a feeling the answers were generous. The range was from 5 – 180 days with the average being 46 days.

Really? It takes nearly two months on average to get my product completed. I have a feeling if the true number was measured (from when the first piece of information came in) it would be more.

Here’s how turnaround time impacts capacity.

You see, the longer the job is ‘in the shop’ the more times it is ‘touched’. The more times it is picked up and put back down. The more time it is in the shop the more ‘open jobs’ there are at

any one time which means more ‘familiarisation’ of the job every time it is picked back up again. All adding to inefficiencies and more time needed which means less capacity to do more.

I went into an Accounting firm once and asked ‘how many open jobs do you have right now?’ It was 8 months into the new financial year so they were in full production. They went into their system and tap, tap, tap on the keyboard they generated a report. There were 440 open jobs open for 20 Accountants. That’s 22 open jobs per Accountant. I said ‘let’s take a look’. We went into the back room – the engine room – and I could see the open jobs. There was paper and piles of it all over the place. There were low rise piles and high rise piles. ‘Wait there’s more’ said one of the partners. He opened the double cupboard and some of it fell out onto the floor.

I was at a dinner party a couple of days later and I meet the Dentist. I told the Dentist the story. He said ‘no wonder they’re inefficient, that’s like me, a Dentist, having 3 patients on the go in 3 different chairs – I’d make mistakes’.

To dramatically reduce turnaround time (10 days or less is what our best firms achieve) you need to overhaul the entire workflow process. After years helping firms do this I developed a bulletproof 18-step workflow process. It involves everything from information gathering to pricing, to job planning, to actually doing the client job and finding opportunities for the next project.

Our best clients are following our 18-step workflow process, having visual management job planning (cool whiteboards), daily (less than 10 minutes) workflow meetings and they are creating capacity by getting the client work in and out the door faster.

I am happy to see that the 103 firms have a target of 27 days (average) this next 12 months. It’s better but not good enough. A new system and process like our 18-step workflow process will be needed to achieve this target.

CREATING CAPACITY WITH LESS TIME ON CLIENT WORK

As well as reducing turnaround time you can create enormous amounts of capacity by havingfar less time spent on each client job. In other words being super-efficient with the task at hand. I am always bemused how efficient someone is when they have a major self-imposed deadline – like a 4 week holiday. That last week before you go away you are just ‘on’.

Actual ‘median’ Profit Per Partner compared to 5% growth

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$-

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

5% Growth

Actual Profit Per Partner

Source: businessfitness “Good, Bad & Ugly” annual benchmark report for New Zealand Accounting firms• In 2004 the actual median profit per partner was $176,163• With a 5% (CPI growth plus a small margin) added each year the profit per partner in 2014 should be $286,951. • Sadly the actual profit per partner is $190,409 in 2014.

© PANALITIX Pty Ltd - all rights reserved.

Meetings are short, emails are short, you are succinct and more gets done in that last week than the previous three. How do we maintain that level of efficiency and focus all the time?

Most Accountants I’ve met (you may be different) over-engineer jobs and spend far too much time than needed on each client job. Under the old system of ‘time taken multiplied by rate-per-hour’ you are not incentivised at all to be super- efficient and take time out of client jobs. When you are efficient the price typically goes down with the efficiency.

The following question was asked of the 103 firms “what percentage of client projects are completed within the budgeted hours allocated”? The answer to the question will indicate how efficient these 103 firms believe they are.

The range was from 0% - 92%. The average was a paltry 51%. That means that these firms believe that (on average) only half of all jobs are completed within the allocated hours. Does that mean if your write-offs are 15% then 35% of the time is not going onto the clock in the first place? Does it mean that client work is 50% over-priced because you believe you should be more efficient? Hmmmm.

Clearly there is a major efficiency problem in the UK profession when it comes to client work. Is it possible that this is the main reason why profits

are quite low and so much labour is needed?

Assuming you are pricing up-front, the measure of efficiency (based on top performing firms) will be three fold:

1. Your ‘average hourly rate’ (revenue over client hours) – should be >£1502. Your revenue per full time equivalent person (everyone) – should be >£125,0003. Your actual hours versus your budgeted hours – should be <75%.

Point three means that if you budget 40 hours for the project it should be done in 75% of the time – so 30 hours or better. The question asked meant that only 51% of client jobs are under budget. This is NOT good.

I do not believe the problem can be solved by more training or different people. I am sure you have good quality people right now who are smart and well trained. You may get some ‘tweaks’ with better training and different people but not a dramatic improvement.

The problem needs a new approach. The problem needs to be attacked in five ways:

1. Gather all the information before starting2. Self-imposed deadlines communicated to teams and clients3. One job at a time worked on with

uninterrupted time4. Productisation and systemisation of everything5. Your clients on a cloud accounting system.

To create capacity you don’t need to hire more people. In fact, if you get super-efficient in what you do then you could have less people for the same revenue.

Our preference is you create capacity and (assuming your people are good) you re-sell the capacity with higher-end work to new clients or existing clients.

GROWING REVENUE

The old model (and current for many) of growing revenue was based on the following equation:

People x Productive time x Charge rates – Write-offs = Revenue

It’s a model that is predicated on getting more people (where from?), having more time charged per person (if that’s going to work), higher charge rates (often the salaries go up as well) and less write-offs.

Yes, you can definitely grow your revenue under this model. You’ll end up with more people, bigger offices and not necessarily more profit. But you will have more revenue!

It’s a model that is very internally focussed. Where is the client in all of this?

In my experience if you have a client-facing revenue model, and be super-efficient with productised business advisory services, then you’ll grow revenue and grow profit. And the cool thing is: the clients will love you for it. They are better served in the process.

This is the new model:

Clients x No. of projects per client x Average project value = Revenue

This model means you have the right type of clients buying everything they need that helps them achieve their goals at a fair fee-per-project based on what everyone believes the value is.

It is a completely client-focussed revenue model.

To get to this client-focussed business model there are three areas to focus on:

1. Number of business clients – of the type you want to have2. Average fee per client – projects per client x project value3. Business Advisory services – holistic approach to your client.

GROWING REVENUE

NUMBER OF BUSINESS CLIENTS

How did you get the clients you have? Did they just turn up or did you target them as clients? Do you have clients that you would rather not have? Are 100% of your clients your ‘best buyer’?

When it comes to clients, there are two types of Accountancy firms:

1. Those that have clients by default2. Those that have clients by design

The first group sit back and new clients just happen. Clients turn up by referral and the firm accepts them as a client. After a while the firm acquires a group of clients which are from different industries, different sizes, different locations and all have different goals.

Some partners of firms will argue they are generalists and they are there to serve all.

My belief is that you should have a laser-focus on whom you chose to serve and what you serve them with. It is your business - not your clients’. You should decide who is a client and who is not. You decide the trading terms - not your clients. You decide what you deliver - not what you’re told to deliver.

It is also my belief that you should have your clients in niche markets. Meaning you should target industry sectors (who you want to serve) and get super-focussed on developing intellectual property to really serve those markets. I have four criteria on selecting niche markets:

1. Are there lots of them?2. Do they have the ability to pay?3. Does your intellectual property help them?4. Are they enjoyable to work with?

Think of it this way. If you had a room full of your ‘best buyers’ and you were speaking to them about becoming a client of yours - then what would they look like? What are their demographics, size, industry type, behaviour and even age?

Again, it’s your business not your clients. You decide who you work with.

From the 103 firms in this report the average was 589 business clients. The range was from two – 7,000. What was really exciting was the goal was to increase the client base by 14% over the next 12 months.

To increase your client base by 14% won’t happen

on its own. There will need to be some marketing to create interest and then a sales process that converts them into new business.

There are hundreds of ways to create interest or leads. There are many things that work for Accountancy firms and many that don’t work. Based on helping Accountants for over two decades to market their businesses I am going to summarise creating leads into eight key areas:

1. Becoming a thought leader – developing content in areas you are passionate about2. Content marketing – giving away valuable content to your target audience3. Web dominance – dominating the web on all channels4. Social proof – promoting how good you are via the success of your clients5. Getting published – articles & comments in other people’s publications6. Direct response marketing – referrals, email, social, reports, responsive mail7. Event marketing – webinars, seminars & conferences8. Clever use of technology – using the best of technology to create leads.

To be effective in marketing your firm you will need some marketing help. You’ll need to hire a marketing coordinator or get an external marketing agency to help you. When you have your consultation with our team make sure you request a copy of a marketing coordinators position description.

Not all clients are equal. You need to decide what type of clients you want and then go get them.

AVERAGE FEE PER CLIENT

The average fee-per-client is made up of the number of projects your clients buy from you multiplied by the average fee per project.

A project is defined as a singular task or job. End-of-year compliance is a project, a cashflow forecast is a project, a new company set up is a project whist tax planning is a project. Here’s how you work out the numbers:

1. The number of invoices raised will be the number of projects sold – if one project has multiple invoices then group them together to form the number of projects sold2. Divide the number of projects sold into revenue – this will give you the average fee per project – say £1,500,000 / 1,200 invoices = £1,250 per project

3. Divide the number of projects sold into the number of clients – this will give you the number of projects per client – say 1,200 invoices / 600 clients = 2 projects per client.

To get the average fee per client multiply the number of projects sold per client (2) by the average fee per project sold (£1,250) = £2,500 per client.

The average fee per business client from the 103 firms was £2,654. The range went from close to zero to as high as £25,000 per annum.

The 12-month goal was take the average fee per client to £3,870 – a 46% increase. The increase will either come from the number of projects per client or the price per project.

My guess is that with an average fee-per-client of £2,654 is that most clients are under serviced. Most clients need to buy additional services from you – they just don’t know it yet.

I think 100% of Accountancy firms should live under the following mantra...

All clients are buying every service they need that helps them achieve their goals.

It’s the only noble thing to do. I think that it is a duty of care of a trusted advisor to make sure that every client is buying every service they NEED that helps them achieve their goals. To get to the right services list you must first have a goals conversation with clients. I challenge you to meet with 100% of your clients over the next 12 months and have the

following conversation with them...

“Mr & Mrs X – for the last X years we’ve being doing your taxes and the ‘have to’ services that the government mandates we must do. We’re evolving our firm and offering a broader range of services that really help our clients achieve their business and life goals. We’re systematically meeting with every client so we can thoroughly understand their current situation and thoroughly understand their goals for the future. From there, for some clients, we’re matching new services that help them achieve their goals. So I am wondering if we can have that conversation – where you are now and where you want to go”.

If you had that conversation with every client you will generate more business. You will be servicing them properly and you will be delighting them.

Based on my experiences the additional services they buy from you will fall under eight categories. Some will buy one, some will buy three, and very few will buy all eight. We call these The Awesome 8.

BUSINESS ADVISORY SERVICES

I like to call business advisory services any service (provided to a business) that is over and above compliance services. Compliance services are the ones you ‘have to do’ for the various Government agencies.

Around the world compliance services are getting commoditised and getting cheaper for a client… at least it should be cheaper. In my opinion, it’s one

of the most expensive, useless products a business owner has to buy.

Think about the report that is compliance. How does it really help me? Yes, if I don’t do it after a number of years I may go to jail. Not a good look. Compliance is an historical report written up eloquently that, by the time it gets to me, is redundant data. Accountants are fantastic historians – writing up history. What value is there in redundant data?

As a business owner I don’t want advice from anyone that deals in redundant data. I want advice from someone who deals in real-time data. I want a Real-Time Accountant – not a Redundant Data Accountant.

If you have switched your clients across to a cloud-based accounting system now you have the opportunity to have a better conversation with the client based on real-time data. Now you have an opportunity to offer much deeper, richer and more rewarding business advisory services to your clients.

Of the 103 firms in this survey we asked the question ‘what percentage of revenue is in business advisory services’ and the range was from 0% - 75% with the average being 14%. So that means compliance is 86%. The 12-month (average) goal is to double business advisory services to an average of 29%.

Clearly the UK profession wants to get more involved in business advisory services. Which is great news for you and your clients.

With these new services (based on real-time data) we think you should stay close to the numbers and offer ‘financial-based business advisory’ services. Because you are staying close to the numbers you

can also ‘productise’ and ‘systemise’ the service. You can then ‘push it down a few levels’ so other people in the firm can deliver the services.

If you decide to offer consulting services that are difficult to be productised (consulting services are typically customised bespoke services) then you’ll need people with ‘grey hair or no hair’ to deliver the services.

So what services could you provide? Here’s a list that we have already productised that you can rollout to your clients with minimal time involved:

1. Business Performance Review2. Growth plan – revenue, profit & cash3. Planning session4. KPI monitoring program5. Virtual management accounting6. Cashflow forecasting – cash, profit & balance sheet7. Management control plan8. Profit improvement program 9. Management reporting program.

You can take these already productised ‘products’ and brand them yours and deliver them to your clients. You can make a massive difference by delivering services to your clients that really help them.

This report and subsequent study is all about helping you getting better numbers, more time and delighted clients.

Now it’s up to you to take action.

CLIENT

GROWTH

PROFIT

CASHFLOW

ASSET PROTECTION

TAX MINIMISATION

FINANCIAL RETIREMENT

SUCCESSION

ESTATE PLANNING /

LEGACY

THE AWESOME 8

“ALL CLIENTS SHOULD BE BUYINGEVERY SERVICE THEY NEED

THAT HELPS THEM ACHIEVE THEIR GOALS”

TAKING ACTION

It’s nice to read the commentary and get inspired. That’s not going to change much. The next steps are to take action. What does that mean? It means that you must first realise that the strategies that got you today’s results are not the strategies that will get you to your desired results.

If you want to achieve a different result you’re going to have to implement different strategies.

We’re here to help. We have the technology, the systems and the support to help you build a great Accountancy business. A business that rewards you and your clients.

We’d like to help you. All you need to do is enter your details here and one of our team will be in touch to guide you through a step-by-step system that helps you achieve better numbers, more time and delighted clients. There is no charge and no obligation for the consultation.

I hope you enjoyed the research study. My team and I are looking forward to helping you run a better business.

All the best,

ROB NIXONCEO & Founder // PANALITIX

P.S. You’re welcome to find me, and connect with me, on the social media channels and read my blog – www.robnixon.com. You’ll find a lot of free intellectual property there. Also, I’d love to hear from you on the results you achieve by implementing these (and more ideas) – email me on rob.nixon@panalitix.com.  

ABOUT THE AUTHOR - ROB NIXON

Rob Nixon is not an accountant. Yet he has forged a niche to be one of the world’s foremost authorities on how accounting firms can achieve peak performance.

He is an entrepreneur who has been running successful businesses since 1986. Since 1994 he has been running businesses that specialise in helping accountants run better, more profitable businesses.

Accountants intrigue Rob and over the years he has trained them, consulted to them, coached them,

researched them and visited thousands of them. All in the pursuit of what works and what does not work.

His speaking work has taken him around the world where he has spoken to in excess of 150,000 accountants. Currently his products and strategies are used by accountants in over 20 countries. His landmark ideas and strategies are adopted by thousands of large and small firms all over the world.

In 2005 he created the revolutionary coaching model called coachingclub - which enabled firms to be accountable, to consistently learn and to share ideas amongst their peers. So far over 800 accounting firms have graduated from his coachingclub program. The vast majority of firms have doubled or tripled profits because of the program.

He is the author of 2 bestselling books “Accounting Practices Don’t Add Up – Why they don’t and what to do about it” and “Remaining Relevant – The future of the Accounting profession”.

Both have received rave reviews from Accountants and industry professionals from around the world.His most recent book, Remaining Relevant, went to no. 1 on Amazon in its category on the release date.

In 2014 he released a ground breaking cloud software solution called PANALITIX. Thousands of Accountants around the world currently use PANALITIX to get better numbers and delight their clients. PANALITIX helps Accountants dramatically increase their profits, capacity and then supercharging revenue with value pricing and business advisory services.

Rob is a keen golfer, adventurer and cyclist. He is ticket holder no. 293 to go into space on Virgin Galactic and he lives in sunny Brisbane, Australia with his lovely wife Natalie and three children.

ABOUT PANALITIX

PANALITIX has passionate people who believe in the future of the Accounting profession. It is a software company founded and owned by Rob Nixon, Colin Dunn, their team members and their clients.

As an unlisted public company it has many investors who are Accountants and industry veterans, like Mike Chisholm, Paul Dunn and Ric Payne, who are also board members and advisors.

PANALITIX exists to provide a cloud-based software and content platform that revolutionises the way Accountancy firms around the world operate.

To deliver business advisory services Accountants need to first create capacity and PANALITIX helps create the capacity by training Accountants (through its e-learning platform and support structure) how to systemise the workflow, pricing and people management process.

Once capacity is created PANALITIX helps Accountants with marketing and selling process and methodology.

The holy-grail is getting a firm into a position where it can deliver business advisory services. PANALITIX helps Accountants to capitalise on the cloud accounting revolution and become the real-time Accountant, not a redundant data Accountant.

Every day PANALITIX consolidates accounting data from an Accountants small business clients into a dashboard so Accountants can see the real-time performance of their clients. The online solution not only provides the alerts, planning tools and forecasting it also provides the content and methodology on what to do about the data.

PANALITIX is a solution that helps Accountants get better numbers, more time and delighted clients.

You can enquire today by clicking here.tails – UK and global

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