In part two of this multi-media series, leading strategist Steve Pipe FCA explains the opportunities that exist in a recession for accountants to position themselves as key advice givers.
In part one we identified the 14 key facts and 11 new realities that affect every business in the UK. Those facts and realities are relevant to you as a practitioner for two reasons:
- Firstly because you are a business owner and, like every other entrepreneur, your business will suffer if you do not fully address the issues and challenges the recession creates.
- Secondly because, as an accountant, your clients look to you to help them beat the recession (after all, you are the expert in finance, and the credit crunch and recession are financial problems).
Plus, as we saw in part one, the recession creates such a fundamental and dramatic shift in the financial landscape that it would be both stupid and irresponsible to carry on as if nothing had changed.
In addition, there are also some further key facts and research findings that are specific to the accounting profession and which must also be factored very carefully into your plans if you are going to beat the recession.
The seven key facts and figures specific to practitioners
First the bad news:
- In a major research study, consultants Kato found that 60% of practitioners have already seen profits per partner decline in the last year
- Researchers Plimsoll are predicting that things will get much worse for many accountants, with sales falling by as much as 30% in 2009. more
The good news, however, is that I talk to many firms for whom things have never been better. The key to their success is that they have adapted what they do to give clients what they really want. Here again, the implications of the research are crystal clear:
- 82% of businesses want more and better support from their accountant to help them beat the recession.more
- Accountants who don’t provide that sort of support could well find their client base decimated, since 38% of entrepreneurs are seriously worried about going out of business in 2009.
- Of the clients that actually manage to stay in business, research shows that 87% will seriously consider switching accountant when they receive poor or incorrect advice from them (which probably means that if they don’t feel that you are really helping them to beat the recession, a lot of them will leave you to work with an accountant who is committed to doing exactly that).
- Historically, research by 2020 has shown that more than anything else the style of service that clients want is for their accountant to be much more proactive, and there is no doubt that being proactive is now more important than ever.
- However, in reality my own research reveals that 95% of partners are too busy to give their clients all the proactive advice they want and need and for their practices this is a time bomb waiting to explode.
The solution is really simple and really profitable
Fortunately, the evidence also suggests that the single most important thing that will separate the winners from the losers during the recession (and indeed is doing so already) is a new kind of proactivity. What’s needed is for accountants who really care about their clients to:
- Proactively start a dialogue with clients about the recession and how to beat it.
- Proactively help them to understand the facts about the recession and what it means for their businesses and their families.
- Proactively help them to create action plans for dealing with the implications of these facts for them and their family.
- Proactively help them to implement those plans and update them in the light of what happens.
Yes, I know that you do some of that already, with some of your clients but quite frankly, ‘some’ is not good enough. Every single one of your clients is facing these new realities. Every single one of them appointed you as their trusted adviser, and therefore every single one of them deserves your input.
The five natural concerns and questions
Based on my discussions with practitioners, I know that at this point there are usually five very natural and understandable questions that arise:
- Do we really have the skills to help our clients beat the recession?
Categorically yes. The remaining parts in this series will show you how to use the skills you already have to full effect, and how to supplement them in small and simple ways that will have a big impact.
- Can we cope with the extra work?
Again, the answer is yes, and future parts in this series will show you how to build it into what you already do with minimal extra effort.
- Will we get paid for it?
To which the answer is again a resounding yes, and very handsomely too! Future parts in the series will show you how to turn these opportunities into very profitable fees that your clients will be delighted to pay because you will be giving them a lifeline.
- Is this instead of everything else we are already doing?
Absolutely not. It is not instead of your core services. It is not instead of your plans to improve service standards and become more proactive in everything you do, and it is not instead of your current strategy for dealing with the recession. It is in addition to all of those things, alongside and in tandem with them.
- Is this really the main priority?
You need to answer this question for yourself. As yourself what is truly more important: addressing the gravest set of financial challenges the UK has seen in 60 years, or doing the other big things that are currently on your to do list (such as making that internal reorganisation, introducing that new computer system, settling in that new team member, gearing up for that new client, launching that new corporate identity etc.)?
Those other things are certainly important, but personally I doubt they are as important as dealing with what Warren Buffet calls ‘economic Pearl Harbour’. So by all means try to do all the important things, but make absolutely certain that you do actually do the thing that is the most important.
Why complacency will cost the average partner £100,000 in 2009 Research sponsored by IRIS and NatWest shows that the profits of the average partner in the UK are as follows:
- Average fees per partner £247,000
- Average costs per partner £169,000
- Average profits per partner £78,000
Firms that fail to tackle the issues raised in these articles may well see fee pressures reducing their effective prices by 10% and client losses reducing their client base by a further 10%.(Actually the impact could be far worse on both counts, but even with these modest falls there will be devastating effects)
Together these two 10% falls would result in the fees per partner falling by £46,930. Given that most costs will be largely fixed in the current year, the cost of the recession for the complacent is likely to be at least £40,000 per partner in lost profits in 2009 alone, and quite possibly much higher. (N.B. My thanks go to Bob Harper of More for first pointing this out and coining the phrase).
When you also factor in the impact of the loss of fees on the capital value of practices, the true cost of the recession for the complacent will probably be much higher still. For example, with a GRF multiple of 1.25, the loss of fees would also reduce capital value by around £58,000.
So the average partner could quite easily be throwing away around £40,000 - £100,000 of 2009 income and 2009 capital value; and that is just the impact on income and assets in 2009 alone. Over a number of years the impact will be even greater.
Do you really want to throw that £40,000 to £100,000 away? Do you really want to deprive you and your family of the security and standard of living that kind of money would allow them to enjoy? Of course you don’t, so let us now look at the alternative.
The £300,000 reward if you take action
The rewards from proactively helping your clients to beat the recession are threefold. Firstly, you won’t suffer the £40,000 - £100,000 loss of income and capital value that your complacent competitors will experience.
Secondly, the IRIS and Natwest sponsored benchmarking research shows that some small to medium sized independent UK accounting firms that have already tackled the issue of becoming more proactive are already earning per partner profits in excess of £300,000 (and those profits are still rising), so that is the sort of target that you should be working to as well.
Thirdly, and most importantly, you will be doing your clients a profound service (conversely, of course, if you do not help them in this way you will be doing them a profound disservice). You will be a true professional, and a true trusted adviser. You will be making a difference to their businesses, their families, their futures and to society as a whole. For that reason you will be able to walk tall and proud. Personally, that is what I came into this great profession to do; to use my skills with numbers to help people understand what is happening and help them to do something about it. Now is the time to stand up and be counted.
A final word for now
Not only does the research show all of the above to be facts, but it also shows that your firm has a very clear choice. You can ignore these facts, be complacent, let your clients down and see your profits decline. Or you can use the research findings here to proactively help your clients beat the recession, and see your profits increase.
As John Wayne once said: “Life is tough, but it is tougher when you are stupid”!
The forthcoming instalments of this beat the recession masterclass will provide the detailed guidance you need to create and implement a simple yet effective adoption plan to ensure that you and your clients beat the recession.
Free resources to help you implement your beat the recession strategy
- Free benchmarking
Benchmark your practice for free using BenchMark software. Get a free trial copy of the software, which allows you to benchmark your firm and up to five clients for free, by visiting www.avn.co.uk/benchmark
- Free training
Steve Pipe is personally inviting 100 AccountingWEB.co.uk members to join him as guests at his new Proactivity 2009: Beat the recession one day seminars.
The events take place on 22 April at Manchester airport, 14 May at Birmingham NEC and 16 July in London.
Due to the strategic nature of the seminars, they are only suitable for partners. If you are not yet a partner, feel free to forward the invitation to one of the partners in your firm.
To attend as a guest, email [email protected] will your full contact details, your chosen date and the names of all the partners you would like to attend for free (maximum of three per firm). Please mention this AccountingWEB.co.uk invitation in your email.
Steve Pipe is the Chairman and founder of AVN and a leading researcher into the commercial issues and opportunities facing UK accountancy practices.