Most Accountants are trained to be technically excellent. There is very little formal training in how to run a successful business. I have even had accountants tell me that they were rebuffed by clients when offering business improvement advice with the line ‘what would you know about running a business?’ And yet, what do you do every single day? Of course, you are running a business.
The challenge is to set your business up in such a way that it provides excellent cash flow, very high profitability, strong growth combined with the lifestyle you desire. Sadly, many accountants struggle here because they do not have the right business model in place.
Once you have access to the real-time numbers, you can offer a range of new services. Based on 23, if you are driven to make business improvement services a significant part of your firm’s revenue, you need to think about the best structure to enable that. In our 2011 Accountants Benchmark Report, we found that the median number of team members per partner in accounting firms was four accountants plus one admin per partner. This supports what I observe on a day-to-day basis. Leverage (people per partner) is a major challenge for accountants. Just last week, I was asked by a partner in a high-performing accounting firm why I thought that was the case. My response? I think accountants look at the cost of hiring great people before looking at what they would get as a result of surrounding themselves with the ‘A’ team. As it happened, in a group of 16 accounting firms, the partner asking the question had the highest profit per partner in the room (around $800,000) and the highest leverage (9 people per partner.) He has combined this with low partner productivity – around 27% - to achieve a super outcome.
If your ‘why’ involves helping clients improve their businesses, the way you set up your own business is of paramount importance. There is no wrong or right answer – except you should avoid model 3! Here are a couple of examples:
You are on your own. You have no people. Almost certainly you will be working from home. This is the lone wolf, solo consultant model. You are essentially a consultant, not an accountant. Your major focus is on winning and delivering new projects from your clients. Almost certainly you should outsource your compliance work as your time is much more valuable identifying high value projects with your clients. It is rare to see accountants making serious money under this model.
You run a small firm with a niche service offering of business improvement. Your client base should be small and carefully selected (see more on client selection later in this book.) You have a small team around you to look after the compliance side of the business and deliver the ‘grunt’ work in the business improvement projects that you sell. You might have just 2 or 3 people per partner under this model. As a partner, your focus is on selling and high-value delivery.
Typical model, 4 or 5 people per partner. This is where many readers of this book will start from, given this is the median position for accounting firms. Your existing focus will be on tax, accounting and compliance work which you use as a springboard to identify business improvement projects. Your biggest challenge will be that everyone is too busy dealing with a high volume of compliance. Also, if you are a ‘typical’ partner, you will be doing a lot of administrative work in the firm which can have a deleterious effect on your ability to be out with your clients. Your team might even complaint that if you brought back more work, it would never get done! If this is you, you need to make a decision – either go back to model 2 or up to model 4.
Growth firm. You invest in the right people to free up time to enable the partners to be focused on just three things – high value delivery, identifying and selling new projects, and leadership/strategy implementation to drive the firm forward. This means you may need:
I met Evan in 2008. He was a frustrated accountant. He was smack in the middle of model 3 and tearing his hair out. He knew that his passion and his natural skill set both lent themselves to high value work with clients, yet his legacy accounting firm structure was holding him back. After three years of hard work and many ups and downs, he settled on model 2. The firm is now Evan plus 1.5 team members. He has just 20 clients who this financial year will happily pay him an average of $65,000 each. Evan will make $1 million in profit and is loving his work and his 9-to-5 lifestyle.
This is the firm I joined in 1987. Growing at 25-30% per annum for the 9 years I was with them was no accident. There was a sales culture in the firm and a heavy investment each year in quality people, including a graduate program and a targeted approach to bring in new people at a high level, both as new, speciality partners and experienced client managers. These people complimented the excellent team members who worked their way through the ranks to senior positions. There was a serious investment in training and development and constant marketing and product development to ensure all clients’ needs were met. The firm ended up being an early acquisition of a leading consolidator of accounting firms in the UK. The investment and client focus made it a very attractive proposition for that buyer.
Your challenge is to determine where you are today and which model suits your personality, style and aspirations best. The decisions you make today should reflect the business you are designing for the future. Understanding why you do what you do and articulating that in a way that makes sense to your ideal clients will propel you forward. And it will be ideal to your clients.
About the Author
Colin DunnDirector & Co-founder at PANALITIX
Colin is a Chartered Accountant who, having spent almost 10 years with one of the fastest growing and most innovative firms in the UK, has spent the last 19 years working exclusively with the Accounting profession with a focus on helping them implement business advisory services with their clients. He is passionate about helping turn Accounting practices into Accounting businesses and holds a Bachelor of Arts (Hons) and is a qualified ACA. Colin is relentless in the pursuit of improving the performance of every firm he coaches.
Colin is the brains behind ENGAGER (previously the PANALITIX app), TRUST and Proactive Success System, PANALITIX’s three cloud applications for Accountants.
He is also a prodigious author and generator of content, primarily in the form of ‘how to’ material to enable Accountants to respond to client needs with value-based services. He is the author of the bestselling book “Accountants: The Natural Trusted Advisors.”