Accountants shouldn’t spend money on marketing

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Mark Lee interviews Patrick McLoughlin, a marketing expert, who explains why accountants should stop spending money on marketing

ML: Hi Patrick, when we spoke on the phone you told me about your campaign against accountancy marketing. Not the message I’d expect from the owner of an accountancy marketing agency. What’s it all about?

PM: Well Mark, it’s so frustrating watching accountancy firms, especially the smaller ones, continually waste time and money on ‘marketing’. My campaign was sparked by a conversation with the managing partner of a practice in the North East. After explaining his marketing intentions to me I asked him what return on investment he was targeting.  His response was along the lines of “we’re sticking to the plan, it’s not about increasing revenue”. 

Unfortunately that’s the norm. Marketing communications is important for the largest firms with substantial budgets, but for the other 99% of UK practices it’s hindering their growth.

ML: So are you saying that marketing is a waste of time for accountants?

PM: It’s not that it’s a waste of time Mark, but its impact is negligible.  I would love accountants to ban the word marketing and focus only on new business development.

ML: Funny you should say that. When I started talking with accountants about non-technical topics I recall being advised never to use the word ‘marketing’ in the titles of my talks. So I think I know the answer to this question, but how would you distinguish marketing from business development?

PM: Simply that business development focuses on ROI (Return On Investment), attracting new clients or increasing fee levels in a firm. So you only focus on activity that you can measure and forecast a return from. Really, new business development is closer to sales, than to marketing.

That means no more branded tax cards, chasing Twitter followers or template newsletters. It means all marketing investments and returns are measured. If you employ marketing staff in-house or use external help, you only do so with a clear and measurable forecast return. If they don’t achieve an acceptable return, then I’m afraid they have to go.

ML:  Wow. That is all quite revolutionary. In your view, what ROI should an accountant expect from their new business development?

PM: Well, before we look at the level of ROI, let’s decide how we are going to measure it. For the few firms that do measure it, it’s usually based on the first year’s fee from a new client. 

ML: I think I can guess where you’re going with that.

PM: Indeed. The problem is that it really distorts the picture as most decent firms retain new clients for a number of years. So, the return on investment in securing a new client should really be measured over the lifetime value of the client. Not simply the first year’s fees.

Imagine that John is considering whether to invest in a new business development campaign. He wants to secure 10 new clients willing to pay an average fee of £2,000. The campaign requires an investment of £10,000. John looks at the numbers and turns the project down because, after factoring in his costs, he “isn’t even going to breakeven”.

And yet, the reality is that John’s average clients, who pay him that sort of fee, generally stay clients of his for at least seven years. So the investment of £10,000 should be buying him fees of £140,000. The comparison isn’t 2:1 (£20,000 of fees for an investment of £10,000) but 14:1. That’s equivalent to paying just 7p in the pound for new business! 

ML: I can see the logic there although I’m sure the other concern is that the investment in business development may not be as successful as was hoped. Mind you, that’s always the way with marketing costs generally; even more so when there is no specific objective in mind.

PM: The idea of looking at the lifetime value of clients can totally transform how you look at ‘marketing’. It switches your mindset to how much can I afford to pay to attract a client? That feeds back into the practice and focuses the firm in two crucial areas. Firstly, how can I increase the GRF and the value I provide?  Secondly, what can we do to improve client satisfaction to increase the average clients’ time with the firm?

The more you can improve those two numbers, the more you can afford to pay to attract a client. And, if you can afford to spend more than your competitors, you’ve effectively cornered your market!

ML: You’ve told me what firms shouldn’t invest in, but what kind of activity is going to bring new clients to their doors.

PM: Well it’s not a one size fits all kind of thing. Amongst the services we offer is telemarketing, but that’s only going to work for a minority of accountancy firms. Last year we put proposals out to well under 50% of the firms that approached us for telemarketing support. We told the others that we didn’t think it was right for them.

The focus has to be on lead generation, be that traditional forms like direct mail and telesales or inbound / digital marketing. I know a firm that generates a stunning ROI from seminars. The difference is their events focus on winning new business not increasing awareness. That means everything from the wording on the invites to the follow-up is measured, tested and improved.     

ML: I know you share my view that accountants can help themselves by doing more to stand out from the crowd and to distinguish themselves from their competitors. Care to share some thoughts on this before we finish?

PM: My best tip is to identify and understand your ideal clients. They are the clients that appreciate that special difference a specific accountant or practice brings. To these clients fees become a secondary issue. All we have to do then is profile them and target their mirror images, ie: those organisations that match, but don’t yet know the difference that specific accountant can make.  It’s only then, once you understand your ideal clients that you should start your new business development.

ML: Thanks Patrick. You’ve shared some valuable insights and advice there. I wonder what readers of AccountingWeb will make of it.

 Patrick McLoughlin runs A4G.

Mark Lee
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14th Mar 2016 13:21

Regarde! L'empereur a de nouveaux vêtements.

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14th Mar 2016 13:43

First Tab is going to have a seizure when he reads this.

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14th Mar 2016 17:57

.

I had to read a long way to see this was an advert for telemarketing.

Bit like getting a call from a telemarketing firm  "so what are you selling?" I always ask.  And they just wont tell you for several minutes. 

 

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15th Mar 2016 12:42

Really???

ireallyshouldknowthisbut wrote:

I had to read a long way to see this was an advert for telemarketing.

Eh? Really? You really think this interview was intended as an advert for a service that Patrick refuses to provide to half the people who approach him? And where the bulk of the interview addresses other topics containing advice and insights to help accountants stop wasting money on tactics that won't provide a positive ROI?

What a bizarre approach to adopt. Just as worrying is that some other readers seem to agree with you (judging by the 'thanks' you've received).

Maybe it's me but I do feel that some readers have nothing better to do than to complain and criticise despite the best efforts of authors and commentators to share insights, ideas and observations intended to be of value to some, perhaps many, readers/members of Accountingweb.

I was taught that if you can't say something nice, don't say anything at all. I try to adopt the same approach online. I wish others did too. Having said that it's perfectly valid, in my view, to take a contrary stance and to argue a case that an author (incl me) is misinformed, making unwarranted asumptions or otherwise out of date with their comments/advice. 

Mark

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By Glennzy
14th Mar 2016 19:09

@Cheeky
Has FT fell off his bike as it must be 2 weeks since he posted a blog or daft question.

I thought he would be all over this like a rash.

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14th Mar 2016 19:29

The headline grabbed my attention, but then I read on

The CIM's definition of marketing is: "The management process responsible for identifying, anticipating and satisfying customer requirements profitably" and when I came across something similar 20 years ago, the lecturer said that, in a service industry [like ours], where we have an established client base it makes little sense to waste money on marketing campaigns, our market and potential for growth, through recommendation and getting more out of what we have, was sitting in front of us.

Yes, a new entrant has to get a foothold, and so, if starting from scratch, will have to think about some of the above stuff but once you have even a modest client base, it pays dividends in every area of the business to concentrate on the best ones, the ones you want more of, ascertain what makes them tick, what they need (even if they don't know it yet) develop the Relationship with them, do the best job you can, and you'll either find more stuff you can for them or they will recommend other like minded people.

From my 20 year old book it still rings true that marketing is not just something that goes on from the edge of the business outwards to customers or potential customers, it goes back into the business as well, everyone working for the firm, has to be signed up to the ethos and methodology.

Over three decades in practice I've wasted money on every kind of marketing, but keep coming back to the fact that 95% of new clients have always come from referrals and that most of my my largest fees, per client, have come from work that doesn't involve year end accounts and tax returns.

Just Google something like "using existing client base for marketing" it's nothing new.

 

 

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16th Mar 2016 17:50

Wasted Investment

Too true

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By tom123
14th Mar 2016 19:31

4Ps

All I can remember about Marketing is the 4 P's - Price, Product, Place and Promotion.

I picked it as a degree option (hoping for an easy ride) - and it was all statistics.

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14th Mar 2016 21:26

Real Life. Real Problems.

I skim read this article, as I always do when it comes to practice gurus. I just cannot bear to read anything written by practice gurus (cheeky has a point ). My key reason is that people involved have not started an accountancy practice with zero clients and build a client base. They do not speak from a perspective of hard experience.

As most practicing accountants would agree, building a client base from nothing is the most difficult thing to do. At the same time the most satisfying. 

Talk is easy. I can talk to a few accountants (okay more than a few) and write an article. Hell, even provide training courses.

All my client based is built on marketing. No networking. It is only now I am getting referrals. Though more clients come through marketing. 

Glennzy, my bike and I are okay. I am blogging on firsttab.co.uk now. Just not had the time recently to post one of my off the wall questions on any answers. Best to give the moderating team a well-deserved rest.

 

 

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By mrme89
14th Mar 2016 23:06

Practice Gurus

FirstTab wrote:

I skim read this article, as I always do when it comes to practice gurus. I just cannot bear to read anything written by practice gurus (cheeky has a point ). My key reason is that people involved have not started an accountancy practice with zero clients and build a client base. They do not speak from a perspective of hard experience.

As most practicing accountants would agree, building a client base from nothing is the most difficult thing to do. At the same time the most satisfying. 

Talk is easy. I can talk to a few accountants (okay more than a few) and write an article. Hell, even provide training courses.

All my client based is built on marketing. No networking. It is only now I am getting referrals. Though more clients come through marketing. 

Glennzy, my bike and I are okay. I am blogging on firsttab.co.uk now. Just not had the time recently to post one of my off the wall questions on any answers. Best to give the moderating team a well-deserved rest.

 

 

 

I thought you liked practice gurus ... up until one blocked you on Twitter?

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By Glennzy
14th Mar 2016 23:42

@ FT
It's good to know you are ok, I have been worried sick.

Are you going to the Digita Synergy event.

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15th Mar 2016 00:08

Digita Synergy event

Glennzy - worried sick. LOL. 

I am not going to Digita event this year. Depending on the agenda, I will attend next year. 

I will try and attend Accountex. If you attend, I will see you there.

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15th Mar 2016 04:31

A quick question

Aren't experienced and expert accountants doing a DISSERVICE by NOT serving more clients? 

Technology, fortunately, is moving towards more robust routine "processing" automation, thereby freeing up precious time for talented accountants to help more clients live their financial lives better. 

After reading several comments, I was wondering of we ever think "Did this Doctor ever had a lung congestion for which s/he is going to treat me?". Would a laundry owner, for instance, think "look, this accountant has never owned and operated a laundry so I can't go to him/her"?

There IS a specific value that people bring to table when they have dealt with several others like us, to bring out an intelligence that we may simply miss. Whether we "value" that value enough to engage such consultants is a personal decision for all of us to make. 

I am not a direct consultant to accounting firms but with sheer experience of working with several accounting firms, and because my clients know that I work with several other accounting firms, my clients regularly ask me for "consulting" advice on business processes, technologies used, marketing trends, marketing technologies trends, productivity and efficiency advise, and so on. 

I hear a lot of "sales pitches" all the time. It is a FREE education for me as learn from salespeople (and consultants) on how they demonstrate value, what words they use, how they "look me up" in advance, how they try to figure out what my needs might be, how they use which of their skills to "create" needs in my mind (where none existed before), etc. 

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15th Mar 2016 05:54

Lifetime value of client

is lifetime profit value, not sales value.  Just to be strictly accurate.

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15th Mar 2016 11:50

100% agree

mr. mischief wrote:

is lifetime profit value, not sales value.  

Spot on.

I did consider spelling this out in the interview but space constraints prevented this. Patrick is aware of the point too.

The distinction is less significant of course for sole practitioners with no staff or contracting costs.

Mark

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15th Mar 2016 10:51

Indeed, mr.mischief, Patrick McLoughlin does not seem to......

......understand that point. It is of crucial importance as it totally changes the arithmetic. The lifetime value of an average client as a multiple of profit will usually be less than the average marketing cost of obtaining that client, other than through referrals. I suspect loads of us small practitioners have tried every sort of advert and discovered this the hard way.

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15th Mar 2016 10:58

Read intently and fell into skimming. Only when I got to the comments did I realise it was telemarketing. *Sigh*

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15th Mar 2016 11:24

I wonder what readers of AccountingWeb will make of it?

Shite!

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15th Mar 2016 11:31

I am probably bonkers

But I thought it was a well written article! I'm clearly out on a limb here!

The main thrust is to target good quality clients rather than everyone and then do your best to keep everyone you like. Sounds sensible to me, particularly as I need to keep building the portfolio.

If you've got all the clients you need, then Paul Scholes' approach makes perfect sense.

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By Glennzy
15th Mar 2016 13:32

@Mark

People like us guys need facts not hypotheticals.

The example in your interview sounds appealing when explained but is that actually likely to happen.

Is the £2000 fee "priced right" or is it priced to win it from the existing client.

Is the 50% cost of 1st GRF a standard for telemarketing, as that is valuable information.

what return should you expect from a well run PPC campaign

What return from SEO is a standard.

A lot of the article refers to ROI but what are the expected returns from this which others such as myself could bench mark against.

The articles are written to set a hook, as opposed to provide factual information which is why people switch off as another sales pitch.

Whilst the best clients are from referrals the downside is they are un controlled what most people would like is other methods in place to produce a steady stream of referrals.

If i was to say i would like to get £30k of new fees this year what would cost be for that?

The answers to these would engage people more to the article.

 

 

 

 

 

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15th Mar 2016 14:58

Thank you to everyone who read and commented on the interview.  

There are no ground breaking revelations in the discussion. This is from Gale Crossly and Debbie Stover's excellent book, ''At the Crossroads':

'A few years ago, Inside Public Accounting's Benchmark Report noted that the average fee growth for firms in the survey was approximately the same, whether the firm had marketing professionals on board or not.'

This is certainly my experience too over the last 18-years I've spent working with accountants.

I was surprised how our conversation could be interpreted as an 'advert for telemarketing.'   I explained clearly that telemarketing only works for a minority of firms, therefore, obviously, it fails the majority.  

 

Unless a practice has extensive experience in working with and attracting clients paying £3,500+ p.a. in fees I would recommend you AVOID TELEMARKETING.  It's a very expensive route to new business and only effective for firms that add considerable value to their clients' businesses. If you are not currently attracting substantial fees from non-compliance work AVOID TELEMARKETING.

Telemarketing does deliver a stunning R.O.I. but only to those whose compliance services are not the dominant factor in the support they deliver.

That is why I decline to work with many firms and instead recommend they work first with a consultant or talk to AVN.  I do this because I genuinely want these people to be successful.  I'm sure you all feel the same way about the business owners you come into contact with.

From my experience AVN do a great job in helping firms to improve their clients businesses and wealth by helping them package valuable new services.

Please understand I have no interest in AVN other than trying to help firms to grow their fees and their margins.  

 

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15th Mar 2016 15:53

Hmmm... good marketing, bad marketing

Is this article saying that you should stop spending money on marketing, but spend money on marketing?...hopefully on things that make you money.

And, have a plan and make sure you try and aim your messages at those that are most receptive?

Sounds like marketing to me.

However, I would also suggest that you have to invest in your brand. You need to be able to communicate effectively and efficiently, there is a requirement to think about how you present your firm convincingly online, the extent to which you are comfortable with social media, looking after and communicating with existing clients...all of it hard to pin down when it comes to hard ROI.

Marketing is just as much as expressing the way you want to be perceived by clients, prospects and referrers as new business from new sources. I agree with Paul Scholes that focussing on existing clients pays - so go spend some money on making it even easier for them to market you.

 

 

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15th Mar 2016 16:12

Seems to me

that the more you concentrate on marketing (or whatever you want to call it) the less time you have to do the REAL work with the client so that they refer other business to you. The proof of the pudding is in the eating not the steam coming out of it.

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15th Mar 2016 17:44

Perfect marketing
I know the secret to perfect marketing.

However, as its a secret, I cant tell you.....

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16th Mar 2016 09:17

@Tom

I know a guy who will publish your marketing secrets. For a small fee I could put you in touch with him.

Now, Mark, that's what you call "added value marketing".

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13th Jun 2016 15:34

Sadly, your so called expert is to marketing, what Dame Edith Evans is to non-ferrous welding.

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