In March 2007 the ACCA UK conducted an inter-firm comparison survey of 163 ACCA firms. The results can be seen at http://www.accaglobal.com/documents/interfirm_results.pdf. The survey gives us an interesting insight into the current state of play for many firms in the accounting market place. Most firms have clients who take tax compliance services (including VAT returns, payroll and tax returns) and accounts preparation, with relatively low numbers representing audit work and business advisory/strategic planning. Not surprising, I hear you cry, given the current audit exemption limits.
Interestingly, 23% of the firms asked still consider audit to be a core service, with over 60% of firms still maintaining an audit licence even though they have few or no audits. But what about the so-called added value services, the subject of so many courses over the last few years? The survey shows that, for 62% of the firms asked, client commissioned optional work was less than 10% of their fee base. So, having had years of ‘boot-camp’ and ‘Business Navigator’ and a whole list of other added value services, accounting firms are, basically, still selling accounts and tax.
Many practitioners will now be saying, “We sell what the clients want; and they want accounts and tax.” Fair enough, but is there another way of looking at this? Do your clients buy accounts and tax because that’s what they want? Or do they buy accounts and tax because that’s what you sell? If you offered a range of different services, would you sell more to your clients?
There are number of issues underlying this area, some of which are covered by the ACCA survey. For example, profitability per partner: 48% of the firms asked said this was less that £50K per partner; 32% said it was less than £100K per partner. Is it worth it? One of the ways to improve profitability is to offer bespoke services that can be charged at a higher rate. Standard accounts and basic tax compliance work has low ‘value’ perception to the client and so is cost sensitive. Specialist or bespoke work has a much higher ‘value’ perception and can result in a higher margin for the firm.
Another area is the proactive/reactive debate. Many client surveys show that one of the key things clients complain about is that their accountants tend to be reactive, not sufficiently proactive. The ability to offer bespoke services to clients is often seen as being proactive and increases client loyalty to the firm. The survey asked ‘How much competition do you face from unqualified accountants?’ Of the 163 firms asked, 15% said that they faced significant competition; that unqualified accountants undercut them; and that clients are cost driven. A further 45% said that they faced some competition from unqualified accountants.
The survey would also have us believe that firms think it is important to diversify fee income into client optional/value added services. Nearly 30% of the firms asked are actively seeking consultancy work rather than compliance work and a further 41% of the firms see diversification as important.
To successfully diversify the firm’s income you need to go through a number of key steps:
- Identify and understand the needs and desires of your market place and client portfolio.
- Consider what support services you have the skills to deliver and align these services with the market that you are working in or aiming for.
- Identify specific services and build a profile of the benefits that the client will gain from them. Decide the process for delivering the services within your firm so that quality is consistent.
- Create marketing brochures that are service specific and highlight the benefits that clients will gain from these support services.
- Make sure that all individuals within the firm are aware of the support services and the types of client you expect will buy them.
- Go out and tell your clients, your prospective clients and the world about your support services and how good they are.
Marketing is key to the success or failure of the firm’s ability to sell support services to clients. For many professionals, marketing is a dirty word. I often hear ‘I am a professional, not a salesman!’ What many individuals fail to understand is that marketing is about communicating to the outside world all the good things that you can do for them as their accountant. Assuming that you believe in the quality of what you, do why keep quiet about it? It should also be about the benefits that you, a qualified accountant, can offer over and above those offered by the unqualified accountant. I see nothing unprofessional about being proud of the quality work that we can do.
The survey indicates that 60% of the firms asked spend less than £1000 per year on marketing. If firms are serious about selling more added value services they need to review this area and increase their investment in marketing.
Some firms will say that they have cost sensitive clients who are interested only in the basic compliance and accounts services. This is true of a sector of the market place, but all firms have clients who are value sensitive rather than cost sensitive. One of the reasons that firms end up with cost sensitive clients is that they market to cost sensitive clients. If most of your new work comes from referrals, who is referring you? If it’s your cost sensitive clients, you should not be too surprised that their friends are also cost sensitive. The skill is to turn a cost sensitive client into a value sensitive client. How? It’s easy: find time to listen to your clients.
Clearly you do not have time to listen to all your clients so you should profile your client base and target the better clients or the clients you believe would benefit from added support and can afford to pay. Then find an opportunity to visit them when they are not too busy and have time to chat. You can open the conversation with a really reckless statement like ‘How are things going?’ Then do the most important thing: stop talking and listen to your client. Most will happily talk about the business problems they face today. You are listening for an indication of areas where you can help. Later on you can explore these areas with the client to see if he has a sufficient desire to tackle the problems with your help. The ability to listen enables you to build a bespoke support package that meets that client’s needs; is seen as proactive; and builds loyalty so they are less likely to leave. Their perception of you, the provider, becomes more value sensitive and less cost sensitive.
Some of you will now be saying, “That’s fine but I am far too busy with my existing clients to do this; anyway I would not have time for the added work that it might generate”. That’s fine, but ask yourself, ‘Is it profitable, this work that I am so busy doing?’ Many practitioners fool themselves by hiding behind the ‘I am busy so it must be alright’ smoke screen that blinds them from seeing the truth about low profitability. It is also important to realise that to run a successful business you need to find time to run the business and not let the business run you. The survey indicates that many firms could do better when it comes to added value services, but the change has to start with you.
Adrian Gibbons
November 2007