Welcome to the AccountingWEB mentoring project, sponsored by BTCSoftware. This blog will act as the hub for accountants to get advice and support from more experienced practitioners. To get the scheme rolling, participants will share their experiences with mentors put forward by BTC. Their discussions will be summarised in posts on this blog so that AccountingWEB members and practice experts can add their suggestions and advice. Register now if you would like to make contact with a mentor. If you would like to offer advice in that capacity, send me private message with details of your availability and areas of expertise. - John Stokdyk, Editor
Lessons in practice structure
The Leeds-based mentor came up with a two-pronged approach – first looking at the structure of Charles' client base and his pricing; followed by a series of tips and adjustments to become a well-oiled and more efficient practice.
In the first of this two-part series detailing their first contact, Smith examined how the practice was structured.
Having touched base briefly prior to the discussion Charles explained how over the last three years he had built up 190 clients doing everything himself and working from home alone. He added that his target was 200 clients.
“Most of my clients come through referrals, online testimonials and my website, but my biggest issue is spending all day answering emails and managing my inbox, and the days often seem to go by without doing any actual chargeable work,” he said.
Smith replied: “Even if we make Tim the most efficient person on the planet I'm not sure it would completely eradicate the problem of the 190 clients and being able to deliver to those clients.”
With a high conversion rate of 90% Smith explained that with no issues with sales and marketing, which is fairly unique in the profession, the biggest reason potentially is price.
“We know you can get 200 clients, so can you get 200 clients at a 50% increase in fees, or 20 or 30%. You're going to have 200 clients shortly, so clearly increase your fees,” Smith said.
However Charles then questioned what would happen if he went back to his existing clients and told them he was putting the prices up.
Smith explained that when you're looking at price strategy you have two projects - new clients where you say the new price and they'll either like it or not; and existing clients where it is harder to increase prices, but by no means impossible.
“It doesn't matter if you lose clients really, because you're going to get these leads through, so this isn't a factor,” he said. “If you're completely happy with 200 clients, that's your goal and we know you're going to get there so let’s get 200 clients with the maximum amount of fees with the less hassle.”
He explained that it’s not just about the money: “It's about getting those clients that you really like to deal with, you like them, they pay decent fees and they don't take a huge amount of servicing. If you can get that, then you could end up with 200 clients paying more money and actually using up less of your time.”
Smith then asked if he graded his clients and how many Ds and Es he had. Charles replied that they were spread evenly across his client base but probably made up 20% of the total.
He suggested on his 201st client, losing one of his Es or Ds, and working towards a very gradual process of maintaining 200 clients.
“It's not an overnight thing, you don't have to lose a fifth of your business, that's crazy. But over a gradual period of time the more you get over 200 you could just keep losing your Ds and Es. How do you feel about losing clients?” Smith asked.
Charles replied: “If I've built up a good relationship with them I feel like I’m being disloyal to them.
“Perhaps I need to work out a process, maybe give them an option like this is my new price, but if you're not happy with that I can give you to someone else?”
Smith advised: “Client relationships and people are clearly important to you and when we're looking at losing clients it doesn't necessarily mean we're going to completely ditch them and say ‘on yer bike’.”
If you can develop a system that's very gentle and gives them some of the reasons why they're better placed somewhere else, rather than ‘I don't want to work with you any more’, that's the first thing you can do. But the second thing you can do is actually place them somewhere and have an accountant that can deal with that sort of client.”
Charles then said he was worried that if he passed the client on they'd still phone him up. “I've more or less become friends with all of them” he said.
“You have to be clear that the engagement is transferring” Smith advised, “You might get one or two still phoning you up, but you could just very gently explain that you're not engaged with the client any more and they should really be speaking to the other accountant. From your own PI point of view you only want to be advising clients that you're engaged with, so you could potentially say that if you had a situation.”
He also appreciated that the emotion of it might be a factor for Charles.
“Even if I came up with the best system in the world to transfer your clients over, the way that you are, this might be painful," Smith said.
“You can handle your 190 clients now, but if you get to 210 or 220, which you will do and you don't lose any other clients, you've either got to start employing people to do the work or you're going to end up with quality and client service issues. Even with the best will in the world, you won't be able to deal with 300 clients, unless you're working all hours.”
He added that the great thing is he has a sales pipeline and knows he’s going to get leads through.
On average fees, Charles said he was charging limited companies £950 and sole traders £350 in fees, which Smith said was quite low: “If it sounds like your service is fantastic then I'd always be looking at increasing my prices. Those prices did feel low to me, but for me there's huge scope here because you've got your sales pipeline and your web stuff which is fantastic. You've got huge scope for structuring your practice around your lifestyle by having quality clients paying quality fees, and getting a quality service.
“You've got the numbers of people and they're getting the quality of service, but you may not be getting the quality fees.”
Charles said that new clients via referrals often expected to get the service at the same price, saying “but you only charge my friend..."
Smith replied: “The thing is you're in a position where a decision has to be made at some point, are you going to compete on price or your service?” For your own benefit, looking at how long you deal with each client, if you then look at that number it might really focus your mind on the whole thing. If you could increase your profits, decrease the number of clients, and also increase the amount of time you get back, to me that's the real thing, the goal. You've got every chance of doing it, because you're giving good service, you've got a lot of people coming to your website.
“You could just solve this whole thing by doing the structure differently. It's that simple really. Not easy though, but the more you do it the more you'll get used to it.”
Look out for part two of this discussion to find out more about timesheets, time management advice and other efficiency tips.