Analysis of client portfolio

Analysis of client portfolio

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So I had a meeting this morning with an advisor who was asking about my client portfolio, trying to give them a summary of my typical clients got me thinking and afterwards as I had a spare 30 minutes or so (technically not spare but I did it anyway) I thought I’d do some proper analysis, putting each client into sectors, annual fees, GRF, entity type, other fee income etc.

Although I had an idea of the results (I already monitor fee income for my own cashflow purposes) it made for some interesting reading, but I also realised how anyone else looking at the headline results alone would be totally unable to compare it against other firms, or their own. Whilst it’s based on fact, there is so much subjectivity to it.

For example, my GRF only accounts for 66% of my total annual income, I do ad-hoc work for example when clients need up to date figures for additional bank borrowing, I do a great deal of forensic work, I handle tax investigations, I offer fee protection insurance, it all adds up. Although I have no guarantee of the work and specific clients won’t need it every year, I will always generate that level of ad-hoc work, should it therefore be included and classed as miscellaneous GRF or excluded? The fees on some forensic work for example may be £10k, so it’s not insignificant.

A few observations:

  1. What is a ‘client’ – 80% of my clients are Limited Companies with probably 2 directors, I counted that as 1 client, however I suspect that some firms count that as 3 (Limited Company, Director 1 and Director 2)
  2. What is an annual fee – is it simply for doing the business year-end accounts, so lets say £1k. Or is it also the management accounts during the year, the book-keeping, VAT returns, tax returns, one-off work and investigation work? I have one client for example where I provide a virtual FD service, as well as the year-end accounts etc, that generates nearly £12k per annum, someone looking at my figures however wouldn’t know that and would think I charge £12k just for the annual accounts, it certainly distorts the fee per client figure.
  3. What clients do you exclude from the average fee – I have a handful of dormant companies, for which I charge say £100. If I exclude them it increases my average fee per client by several hundred pounds, do I also exclude the tax return only clients, do I exclude the’mates rates’ clients, the small monthly payroll that I do for a clients au pair, where does it end?

So……if there are so many variables in my own figures, how on earth could I ever compare to other firms?

Suddenly, all those firms that I hear about (because they like to make themselves known) who claim to have an average fee per client in excess of £3k per annum all make sense, by tweaking the figures and including say management accounts, one-off incorporations, book-keeping and everything else, you get the headline result that you want.

Although pleased that I now have a detailed breakdown of my client base, it will make no difference whatsoever going forwards! It does however settle my own curiosity on some matters.

Anyway, those were my observations (maybe more of a blog than an AnyAnswers question); would be interested to hear from others that have undertaken their own analysis and come to the same, or different, conclusions.

In case you were wondering………….my average fee per client is £1,681.59, and you can make of that whatever you please!

Replies (7)

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Man of Kent
By Kent accountant
07th Feb 2014 14:19

Being nosey...

...how many clients do you have...?

:)

I did a similar analysis last month when I made my arrangement with my alternate official.

Counting clients - Ltd plus 2 directors SATR's = 1 client

Fee per client - I group mine by Ltd Co (active), Sole traders, SATR only, etc.

I used to forecast Ltd co new clients with fees of £1,500pa. This is probably still pretty close to the average fee per Ltd Co, although the biggest is over £10k.

Sole traders - £270 average

SATR - £235 average

Total clients -  126 (stripped out all those who had signed up but done nothing with - 5/6)

Recurring fee income this year will be approximately 87% of total fee income.

 

For a comparison - maybe you need to do one, polling AWeb members?

 

Thinking ahead - why not go to all the Tick&Bash meet ups and hand out a questionnaire...

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By User deleted
07th Feb 2014 17:15

Analysis

Clients giving up & going back to employment - rising

Clients retiring - too many

Crap clients - no comment

Clients that make work a delight - not anywhere near enough

Reasons for remaining in accountancy - dwindling

Reasons for doing what I fancy doing - increasing

Faith in humanity - shot to pieces

 

Thanks (2)
By Moonbeam
07th Feb 2014 17:31

Other much more interesting analysis

How much do you earn from your top clients in a year and in a life time? That will give you an idea of what to spend on marketing to get more of those. Do you need to ditch the little people at the bottom end?

Comparing your results to other people is less important than these sorts of ratios.

If you can end up earning what seems a fair amount of money for your very considerable skills and only working for appreciative and solvent clients surely that should be the aim of all of us.

We accountants are far too happy to spend many hours servicing clients without them paying a reasonable rate for that time. In my case, this is the year I try to concentrate on the high end of my favourite type of work and ditch the time consuming stuff that won't earn me many beans.

And what's a reasonable rate? Try checking out the legal profession, the IT world etc - the best ones seem to be able to command a fortune.

I need an extra £400k to put in my pension pot so it's urgent.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
08th Feb 2014 03:36

Analysis
Personal income: comfortably enough

Workload: my staff are so ace the business should carry on broadly the same while I am on actual proper maternity leave

Clients: mostly really lovely

That's all the analysis I need of mine :)

But the OP is interesting, especially the massaging of figures. For the record if we do bookkeeping regularly then surely that is obviously GRF?

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By petersaxton
08th Feb 2014 04:59

I did an analysis a year or so ago

and I found it very interesting. Whether it is useful to compare with others or whether are can use the information is another matter(s).

I don't consider getting rid of the small clients. Somebody may only pay me a couple of hundred pounds but they can provide a lot of referrals.

I like to compare time against revenue. Some of my smallest clients provide me with the best hourly revenue.

I'm looking to make it easier to automate this analysis so I can monitor it constantly rather than taking me an hour or so.

I would count one limited company and two directors as three clients. This gets me over 200 clients. If I count it as one client I have over 100. Should I count a client who has two companies plus his self assessment as three clients, two clients or one client? I count it as three because my practice management software gives me that figure constantly.

 

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By User deleted
08th Feb 2014 08:08

ABC Analysis

I prefer doing the old ABC analysis (done in the good old days for inventory) whereby clients would be categorised in to:

A - Most fees with least work

B- Most work with least fees

C - All others

 

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By petersaxton
08th Feb 2014 08:17

ABC

You should be able to get a revenue/hour rate from your practice management software or other data.

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