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Accountancy firm - phase 2

I'm looking some advice from others who are building up their accountancy practices.

I set up my practice and went full time just over 4 years ago.

I set in mind the number of clients I felt I could manage on my own and am just about at that number now so I feel that phase 1 is complete.

I have still got spare capacity now but rather than take on any clients that approach me, I want to be a bit more selective and and proactive in looking for clients as so far (apart from the first few) the majority have come to me as referrals.

I have a lot of small clients who just need accounts and tax returns done each year and will do for ever until they hang up their tools/pens, etc.

I have a few larger clients that need bookkeeping, management accounts, payroll, VAT returns done and I feel that's the sort of client I need to attract. I'd rather have one larger one then 5 small ones, for instance.

Is there any reason why I can't write to local businesses (say from a directory) to offer my services or how else should I go about it as advertising in newspapers or Yellow Pages, etc doesn't seem to work round here. Network groups?

Also if somehow I do manage to get a few more larger clients, I may decide to get rid of some of the smaller ones, especially the slow payers. How do I do this without feeling guilty about leaving them in the lurch?

Finally I am not looking to take on staff but if I grow large enough I would be happy to subcontract work out but I don't see that for a few years yet and that would be the start of phase 3.

Any advise would be much appreciated.

Dave

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Start practice number 2

Probably not the reply you're expecting - sell the practice and use the money and lessons you've learnt to set up practice number 2 a much higher quality practice from day one focusing solely on the type of work you want to do, and the type of clients you want to act for.

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Start practice number 2

OK you're right I wasn't expecting that!!

Thank you for your idea, that's an interesting one.

I'll think that over and see what other suggestions come up.

 

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@ Happy

That is a very good suggestion.

 

Having grown a GP firm from a few bags of rubbish to a £850k monolith in 5 years, I know how impossiable it is to transition from being a "phase 1" practice to a "phase 2" and "3" practice.

 

To the OP, sell up NOW and use the money to buy your way in somewhere that is more appealing in the work on offer.

 

Steve

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2 votes for selling up!!

I'm struggling to see how I can sell up and start up again.

1) I want to keep the best clients so I wouldn't sell those, yet those obviously would generate a good chunk of the proceeds.

2) I live in a small town and there are no other accountants in the town so all the clients that came to me because I am local will not be happy having to go elsewhere to get their accounts done.

3) Similar to 2) above, I would bump into some of my clients on the school run, it would be awkward if I have previously upset them.

Any thoughts?

 

 

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A bit more info

Again, from experiance, the moment you leave a practice, the clients forget you.

 

From the day of sale three years ago to today, I have received one call (a nosey one along the lines of "how much did you sell for") and two or three emails which I couldn't help with a they were asking for tax liabilities to pay.

 

More importantly however, if you live in a small town and there is no competition in the area, and you are going to bump into these people all the time, where exactly are the new big clients you want to attract going to come from?

 

If you are not geographically in a place that can support your ambitions, you are going to have to move or change your ambitions.

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Small town

Thank you for your comments Steve.

Regarding the small town issue, there are larger towns within 7-10 miles away and one of those includes two of my biggest clients.

Those larger towns are the areas I want to target and its how to do so is one of the questions.

 

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Practice Growth

You sound like a guy already thinking and acting in the right direction. Well Done!!!

The two advices above are both valid!!! They are both good advice!!!

Your Catchment area is small for building a larger client base, but in this internet age anything is possible.

 

 

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Phase 2

Getting larger clients is no different from getting smaller ones. The ways to do it are:

1) Mailshots

2) Telemarketing

3) Networking

4) Don't advertise

 

The problem is, you don't have the infrastructure to deal with these clients even if you do get them.

And to create this infrastructure, its going to cost you money.

My guestimate is that you are going to have to spend £50k to get from where you are now to where you want to be.

So why have the hedache and the uncertainity? Why not look for a partnership in the larger towns near you and either merge into it using your existing  clients as equity or sell up and buy into it.

If you are absolutely against that, you are going to have to:

1) Open an office in one of the large towns near you (and so loose all those clients who come to you because you are local?)

2) Take on someone to man the office (even if outsourced)

3) Take on someone to do the work - you are going to be too busy managing and selling (again, even if outsourced)

4) organise a monthly mail shot of circa 500-100 pieces EVERY month

5) organise a telemarketer to do 200 calls every day for 2-3 days per week, EVERY week

6) Get up every morning at 05:00 to have breakfast with people you don't much like at "business clubs"

7) Take every bank manager in the locality to lunch on a rotaing basis to that you are eating lunch out every day

8) Go to every golf/rotary/masionic/charity black ties dinner in the large towns near you so that you eat at home no more than 2 a week

9) get an endless supply of business cards

10) Learn to sell

11) Spend your nights and weekends checking what your guys are doing and correctly everything they have done wrong.

 

I am not just being bitter and cynical, that's the reality of trying to take on bigger clients, you need to be able to support them and to support them, your cost base is going to grow, in which case you need more of them and so on.

 

If you are really really keen to do this PM me and we can talk some more.

 

Steve

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Thanks again Steve

Thank you for your comments and your time.

I have a lot to think about now.

I don't want things to drift now, I know that if you think you are standing still then you are actually going backwards so I have to be more proactive from now on.

 

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An alternative .....!

How about not selling up and taking over the world? How about making sure you are as efficient as possible, continue to fill up the gaps with some nice quality clients, have a clear out of the poor return clients (or increase their fees) and sub out any work that doesn't earn you your top dollar. OK it lacks the opportunity to become super rich but there is a really nice income to be had if you make the most of what you obviously have a flair for. Quality of life can be great too .... nobody ever said on their deathbed that they wished they had been to more networking events!!

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@ Steve Holloway

Steve,

Thank you for adding your comment. I was - in a very round about way that didn't address the point - trying to say the same as you!

 

My major regret in my professional life was to try to create an empire by the end of next week.

 

If I had taken my time and played to my strengths, I could have developed a lovely business rather than the elephant I spawned.

 

If I had my time again - and I don't, that opportunity has past - I would stay small, hand pick what I did and have a very nice life.

 

Regards

 

Steve McQ

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An alternative ....!

Thank you Steve (Holloway).

You've really summarised where I want to go.

What's the best way to get those "nice quality clients"!!

 

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@ Big Dave

"I  have a few larger clients that need bookkeeping, management accounts, payroll, VAT returns done and I feel that's the sort of client I need to attract. I'd rather have one larger one then 5 small ones, for instance."

bigdave 1971

 

bigdave

Nice quality client do not mean the above.

 

Nice quality clients are those who don't hasstle you and pay on time.

 

The above takes you back to growth and being a big firm, which lead you to all the things I said before.

 

Steve

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Another vote for making the most of what you have

Hi Dave - these questions are usually asked by people who who need to grow their practices to cover their lifestyle.  This certainly doesn't seem to be the case here and so, having been through wild expansion for expansion's sake, and now managed reduction for my sake, my vote would be to make what you have work as well as it can (along the lines suggested by SH).

You mention you still have capacity, keep it for yourself and to plan rather than use it up on more client work.  By identifying and doing the best for your good clients you will (as you have already) gain more referrals and by identifying and losing or renegotiating with the bottom end you can gradually improve the overall quality of the practice making it a better sale prospect if that's your choice in a couple of years.  This thought process needs to take place regularly, not at an annual review, and this is where the spare capacity comes in.

On losing clients, I've found there's no short cut to just being honest & direct, say that for whatever reason the work or relationship is not working for you and so, unless things change they would be better finding another accountant after this year's work is finished.  

When I've done this in the past I've had a tiny proportion kick up a fuss (but they tended to be dustbin cases anyway) whereas the majority tended to shrug their shoulders and with the ones who just gave me grief over fees or payment every year, several changed overnight and have been great ever since.  I've always found it best to leave on good terms as you never know what might happen in the future when they are looking to change accountant again (and are the size you want) or when they come to recommend you to their wealthy mate.  This is why I would never just lever them out by putting their fees up.

Best of

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You are focusing on the wrong type of work

I also agree with Steve MacQueen in that what you have chosen are not "nice clients", but for slightly different reasons.

If you are a one man band with no desire to employ staff, the last thing you want is bookeeping, VAT and PAYE.

What you need is clients who are happy to maintain their own books using a (probably) computerised system to produce VAT returns and trial balance.

Then you can focus on producing the stat accounts/CT600 and generally the clever bit for which you can charge more, but above all being available for clients to speak to for ADVICE.

If you can build a client base of ltd companies who will pay you £1500 - £2000 for the above you  should make very decent money and not dissappear up your tailpipe.

It goes without saying they have to pay in a timely manner too.

 

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I would evolve

I would employ an assistant to do the "churn" work.  Bump up your rates and ask for cash upfront. This will "shake out" the crap clients. Then be choosy about what you do, and take on the sort of work you want and can make pay. Just say "NO" to other work. You dont need a revolution, just development and management of your workload.

Re marketing. I disagree with Steve, I will spend money on advertising. Its a bit of a gamble, but the right advert in the right place will give a good return. Lots of adverts are, very poorly written, poorly targeted or simply placed in publications with significant undifferentiated competition which is always going to crucify your return.

 

 

 

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Agree with Zarathustra and previous ....

You do not want to be too tied in to larger clients as they will use you as an unpaid FD and suck your time dry. Out of about 100 unique clients I do bookkeeping for one (two complicated!), VAT for perhaps 2 or 3 & PAYE for none apart from a few end of year returns. Personally, I find this work distracting and would rather concentrate on accounts, compliance & advice as I can always get close to my book price with as few wasted hours as possible. 

Make sure your existing clients know you want more work. Every time I have made an effort to revamp websites, change practice name/logo etc I get a big tranche of referral work land on my desk! So, maybe have a look at your image etc and think about a freshen up if for no other reason than to remind your existing client base that you are still hungry.

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Good to see an accountant focused on their OWN business strategy

Loads of good advice above (and some misleading but well intentioned) tips too.

(Eg: re Business Networking groups: BNI may require you get up very early but 4N does not - for example. And advertising IS hit and miss especially without experienced help so rarely worthwhile for the sort of work you want to attract in phase 2)

Earlier today I referenced an old blog post that is equally relevant here:

 

What services do the ‘bigger fish’  (beter clients) look for and that you can provide? 

What services would anyone want and be prepared to pay more for and that you have the interest and ability to provide.

When you are networking are your stories and examples about small clients or big clients?

Do the messages on your website and marketing material represent the right sort of bait for the 'bigger' work you want to attract?

 

Mark

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Thank you everyone

Thank you for all your comments and your time in giving such detailed replies.

There were a few things I hadn't really thought properly about and I'll sit down and think where I want to be say in another couple of years, possibly at the end of (my) Phase 2.

If anyone is interested this is what I did last night (whilst watching Dragon's Den):

 

I went through all my clients and divided them into categories (A-D). I looked at the category Ds (thankfully not many) to see if there was anything they or I would have to do to avoid me "moving them on".

I then looked at the category Cs to see why I ranked them so low and made notes for changes I intend to make to make them into category B clients (at least) rather than allowing them to deteriorate into category D clients.

Thankfully I had some category A clients who I don't want to lose and I need to get more like these ones.

The rest were obviously category B clients and these made up over 50% of my client base. These I suppose are the bread and butter clients and I would be happy to gain more of these also.

Sorry if I bored you all but this is important to me at the moment!

Dave

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