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Am I working too hard?

Am I working too hard?

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Hi,

We are a small practice consisting of myself as the qualified accountant and a trainee who is AAT qualified. We primarily work with small businesses producing Ltd company accounts, VAT returns, self-assessments etc

The business has grown steadily and we are now at a turnover of approx £140k. However there is only so much work I can pass down to the trainee and consequently I am feeling constantly under pressure and working (what I feel to be) really hard. I am unsure about whether to hire another member of staff as obviously this will reduce my profits significantly.

How does this compare with other similar sized practices? Am I just moaning about working hard or is it time I bit the bullet and hired additional qualified staff? I didn't train in practice (I studied CIMA) so don't have any experience of working at other accountancy practices to fall back on.......has anyone else been in a similar position?

Thanks

Matt

Replies (28)

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By Maslins
25th Mar 2014 16:47

I think almost as hard as having the right amount of staff is having them at the right level.

In modern accountancy firms, there often isn't that much "grunt work" to do.  Bank recs, photocopying, entering hundreds of invoices, sorting shoeboxes are to some extent a thing of the past.  This tends to mean you need more knowledgeable people who can answer queries and spot/fix mistakes, rather than do data entry.

Does make me sad that there aren't many opportunities out there for juniors anymore, but it's the reality of it.

Have you considered taking on a part time qualified staff member?  There's websites out there which specialise in things like mums who are very bright and experienced, but can't work 9-5 due to children.  You can often get someone brilliant, doing 10-20 hours per week for a bargain price.

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By andy.partridge
25th Mar 2014 17:28

Do you want to grow?

An alternative is to put your fees up. Expect a few clients to fall away but it could well mean that you end up having to put in fewer hours without loss of income.

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By Work Clever
25th Mar 2014 17:50

I would echo what Maslins has already said but I still think there is still an amount of "grunt work" that needs to be done. How much depends on the quality of your clients and the systems you have in place to process it. If you are sure that you have built your practice on efficient systems then look at taking on part-time staff i.e. those looking to work around child care.

If on the other hand your systems aren't all they could be look at investing in those areas that will save you time to concentrate on more tasking jobs. Organising clients who may be demanding pays dividends in the end and if not do you really want their business, in which case ensure they are billed for the work involved. 

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By bigmuggsy
25th Mar 2014 19:42

Whereabouts are you based?

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By The Innkeeper
26th Mar 2014 08:59

what about

using a subcontractor?

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By ireallyshouldknowthisbut
26th Mar 2014 09:28

Matt, that is almost exactly the t/o I have felt is the maximum comfortable.

I have gone down the route of growing profit and reducing difficult clients rather than absolute growth. My main metric has been to keep t/o constant but work less hours by picking the right clients. 

My theory is either you get a LOT bigger, or you stick at around that point which for me anyway is the maximum number of clients I feel comfortable with and brings in well over £100k profit which for me is plenty.  To go up a level to say 4-5 members of staff I could probably double the profit, but with 3-4 years of pain getting there, it would kill my USP (i am serving all the clients who get crap service in bigger sized firms as its all delegate down) and quite frankly running a business of that size doesn't interest me. 

I have a qualified assistant who is 'dumbing down' to an extent in order to look after her kids, infact as of a month ago I have two part timers which works quite well with the peaks/troughs although it can get a bit confusing. Total hours of assistants is 20-30 week, mine are under 40. 

 

 

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By redman7
26th Mar 2014 09:31

junior / senior

first of all you have achieved a very decent fee level considering it's just you and a trainee so you're doing something right.

I would agree with the thoughts above about the need to have more experienced / senior staff than juniors, although it will hit your profit in the early days it should take a lot more pressure off you to continue to grow the business - assuming that is what you want to do of course

I am at about £90k of fees now and am bringing in a full time senior in about four months time who will very much be driving the business forward along with me. I would hope I will be at about £110k of fees by the time he is on board so it is a financial commitment but I am focussed on growing the practice so I think you have to invest to do that.

As I said though, it depends where you want to be, if you're happy with your earning levels as they are and just need less stress then the comments other people have made are all good: invest in systems, focus on keeping the higher profit / less admin clients, and perhaps spend more time training your employee up so you can trust them to do more higher end work....

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By mattwadz
26th Mar 2014 10:25

Thank you all for your comments.

My thinking is pretty much the same as "ireallyshouldknow" in that I have 2 options - one would be to maintain the current business turnover but improve my systems, replace difficult clients with easier ones, reduce advertising costs and hopefully reduce my workload.

Alternatively its a case of hiring a good quality accountant - part-time as Maslin suggests - and then to keep trying to grow. 

My concern with the growth route is that I think it will be 3-4 years of hard graft before I get to see any major benefits in time or money. I have just hit 40....not sure I have it in me!

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By MissAccounting
26th Mar 2014 11:17

Have you thought about how much you actually want to earn and how close you are to it or indeed are you passed it?  Last year I was going through a spell of fast growth and I was working crazy hours and needed to look at staff and better systems etc all of which was putting more pressure on deadlines.  I put everything on hold and had a full review of where I was and where I wanted to go.  Having had a taste of the crazy busy side I opted to ditch a few clients and keep it at a comfortable level.  Im never going to have that yacht in Marbella but if I could afford it I probably wouldnt have the time to enjoy it anyway!

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RLI
By lionofludesch
26th Mar 2014 11:56

Yes

Agree with MissAccounting.  There's a balance between earning money and having time to spend it.

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By whatdoyoumeanwashe
26th Mar 2014 12:24

I've enjoyed reading these comments, it's great to hear I'm not alone with my lack of ambition!

I met with a sole practitioner before I started my practice who had turnover of about £600k, about 6 staff, and he managed drawings of about £120k. I've only been going under 2 years, but I reckon in another two I can probably manage single-handed a turnover of £80k-£100k, working from home with no significant costs other than software. So I ask myself why on earth I'd want the hassle of an office and employees, just to add £20k, to my income?!

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Replying to andy.partridge:
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By andy.partridge
26th Mar 2014 12:57

Exit strategy

whatdoyoumeanwashe wrote:

So I ask myself why on earth I'd want the hassle of an office and employees, just to add £20k, to my income?!

Aside from the possibility that you might be able to improve on the model, you would be building up a significant and marketable asset.
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By Maslins
26th Mar 2014 13:14

I'd just like to add that it's not a default case of bigger business = more hard work.  If you get the right staff in at the right levels (which as I said earlier is easier said than done), you can have a hefty, growing business, without needing to work all the hours under the sun.

Obviously some won't want that, and your role will move away from "doing accounts work" to running a business, HR, IT planning etc.

Taking on staff should be easing the burden on you.  If it's not, you've employed badly (maybe wrong people, maybe you're a control freak, maybe the allocation of work between people needs tweaking).

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By ireallyshouldknowthisbut
26th Mar 2014 14:23

.

The £600k t/o pulling in £120k  profit sounds like a bad biz, but follows my rough maths of what happens with a "scale up".  The extra levels of review and staffing quickly chomp their way through the profits and unless you are actively getting a buzz out of building a 'proper' practice then I cant really see the benefit. Yes as Andy says you can sell it on, but its very much down to what you want to run. I like being a 'hands on' accountant myself. Staff issues etc dont interest me. 

Seen several prof service clients grow and make less money each year. 

Still it takes all sorts and curiously in my town I am the only one of my size. all the others are much bigger, or just seem to be PT or bookkeeping and muddle through a bit of SA type practices so enjoying the niche and exploiting it with every sale!

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Stewie
By Stewie Griffin
26th Mar 2014 15:09

£600k and only £120k profit

At a minimum, I would suggest that the £600k practice should be making £200k profit (1/3)

In todays economy, with the technologies available, I'm aiming more towards 40% profit

40% staff costs

20% overhead

40% net profit

So, if I ever managed to get to £600k I'd be hoping for nearly double his level of profit

Am I being unrealistic?

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Replying to KungFuKipper:
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By Maslins
26th Mar 2014 17:28

Bigger biz = more costs

Stewie Griffin wrote:

At a minimum, I would suggest that the £600k practice should be making £200k profit (1/3)

In todays economy, with the technologies available, I'm aiming more towards 40% profit

40% staff costs

20% overhead

40% net profit

So, if I ever managed to get to £600k I'd be hoping for nearly double his level of profit

Am I being unrealistic?

I'm sure the %s get worse the bigger you get, but that doesn't mean you're doing things wrong.  A one man band will have no staff costs, very low admin costs (work from home, no expensive computer network), so most of turnover becomes profit.  Question is if you take out a "fair" salary from the profit, what would be left, as that's the "real" profit.

I'd far rather have (not real numbers, but I reckon realistic numbers):

Turnover £600k, staff £200k (33%), admin £200k (33%), profit £200k (33%), as opposed to

Turnover £100k, staff £nil (0%), admin £10k (10%), profit £90k (90%).

I see no reason why the first option would involve harder work.  For £200k staff you've probably got a couple of full time qualifieds, a few trainees and a secretary as well.  They'll do loads of the work whilst you kick back in the Bahamas...or so the business plan says.

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By ireallyshouldknowthisbut
26th Mar 2014 17:57

@ Maslins, it depends very much on YOU and what you like doing.

I like doing accounts and discussing them with the clients

I hate staff issues, recruiting, mangement training etc. 

selling and client selection is a big part of any practice but one I am happy to keep that down to a couple of hours a week not my main focus. 

Partners in a £600k+ firm is mainly a sales role and staff manager, no time for being an accountant.

I would expect to make £200k from that set up, but can see why you might end up back at £100k if it goes a bit wrong on you.  

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By Maslins
26th Mar 2014 20:02

@ireallyshouldkn Not disputing that. I was disputing comments that you must work harder/longer hours to have a bigger business with staff.  If done well it should be the opposite.

Fully appreciate we're not all the same and it takes all sorts.  Me personally, I have no love of accountancy.  I'm enjoying building a business which just so happens to sell accountancy services.

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Man of Kent
By Kent accountant
26th Mar 2014 20:39

Work harder?

No, work smarter.

I'm in the small is beautiful camp (I think).

A continuous flow of referrals means I'm at the stage where I'm starting to creak at the seams with my current model - me, Mrs KA now and then and one subcontract bookkeeper 1-2 days a month.

I'm very reluctant to turn work away so I'm currently looking at becoming more efficient.

I've just decided to go paperless, am going to a hosted desktop solution (Hosted Desktop UK) and will also become a Virtual Cabinet and Portal user.

I think the £140k turnover figure is an accurate one for my model too, perhaps higher with improved efficiencies and higher prices (?).

Mind you give it a year and I may change my mind, but I don't think the £600k turnover business is an appealing one for the reasons mentioned above.

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By 68fw
28th Mar 2014 12:50

Vy v Vx

Regrettably a review of my time in practice (I'm now semi-retired) shows I followed the 'small' rather than large practice model - hindsight suggests it was an error of judgement.

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By David Winch
28th Mar 2014 13:01

Do You Have An Incentive?

Do you have an incentive to not work so hard?  Does your charging model reward you for working smarter and not harder?

Andy makes the very reasonable suggestion to put your fees up, but how will you do this? Will you increase your hourly rate or find bigger "problems" that take longer to fix?

What if you came up with a way of doing the work you do now in a hundredth of the time?  Would you be rewarded or penalised for finishing 99% quicker?  And I doubt taking on a hundred times as many clients would be that appealing!

If you can allow your client to benefit from the results for longer, why shouldn't you be paid more, not less?

Unlinking your charges from your time is the only way I know of that truly rewards you for working smarter.  By spending sufficient time at the outset discovering how valuable your work will be to each client, and then charging accordingly, you will get rewarded for the results you deliver, not the effort you put in.  This way you will gladly seek out the bigger "problems".

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By The Naked Accountant
28th Mar 2014 13:18

I have never had staff and recently got up to £140k t/o by working smarter rather than harder.  I have since sold some clients and now hover around £100k-£110k t/o which gives me the work/life balance that I seek.  I average about 25hrs per week.  I work from home so have very little in the way of overheads - profit is £90k-£100k.

I have a couple of good friends who have larger accountancy practices (practice #1 is 1 ptr and 3 staff and practice #2 is 2 ptrs and 8 staff).  Both of these guys take home less £ than me and work a lot more hours than me.

Practice #1 is trying to downsize in order to increase efficiency/profitability along similar lines to my own model, whereas practice #2 is happy to suffer lower profits and longer hours in order to build a larger practice for sale.  However, practice #2 has recently had to pay £35k to an ex-employee following an adverse employment tribunal (the redundancy was done by the book but he has since found out that the ex-employee has taken her previous three employers to tribunal and won on technicalities!). 

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Replying to Pukka:
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By LMP
28th Mar 2014 14:17

Small Practice.

 

 Hi, Well done on a great business model. I am doing research on small practices, so I have some questions if you don't mind.

 How long did it take you to get to £140K ?? Have you kept clients from the beginning ? Do you do other work apart from accounts prep

 What was the best way to get the work at first, did you advertise / word of mouth etc ?

 Which prof body are you and did you get much support from them to set up the practice ?

 

 thanks for your help.

 

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By pauljohnston
28th Mar 2014 14:30

Dont forget

the value of your business is to a certain extent arrived at by assuming that you are not there.  Thus the ideal model for you is to have staff and spend 4 days a week on the golf course and on Fridays popping in to sign cheques and go to the pub.

I have started increasing staff numbers and this has meant that we have erned more from our current clients just because we can offer more services.

 

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7om
By Tom 7000
28th Mar 2014 16:20

It comes to us all...

You have to choose

 

a) stay at home in the study and earn yor 50/60/100k

b) Get an office and try and earn more or just have some staff so you have someone to talk to

 

I choose the latter now Theres 20+ of us see www.ttca.co.uk ...the key to success...

Always hire people cleverer than you, it costs more but they do more, know what they are doing dont make mistakes and the clients appreciate it more

 

Then you get to the point where theres another firm for sale down the road with 15 staff and they want to know if you want to buy them....

 

Where does it end?

 

 

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Replying to djn:
Red Leader
By Red Leader
28th Mar 2014 16:33

@Tom

Well ... do you want to buy them?

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By DawnT
01st Apr 2014 09:39

Thank you. Great Thread

Thank you to all the contributors here............ I am relatively new to practice and steadily growing my client base. These posts have been very motivating and have renewed my energy for building the business quicker.

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By Viv100
01st Apr 2014 10:47

Micro

I am a micro practice at the lower end of the market... it's just me, and some part-time/casual admin&bookkeeping help.  I "take home" £15k for (on average) 12hrs work per week (which includes my own admin/practice mgt).

I have no plans to "rule the world" and I'm working around my children.

I am just as well-off as when I worked almost full time in employment with 3 sets of nursery fees to pay for (although, admittedly, I wouldn't have nursery fees now that they're older but I do enjoy the flexibility of working from home.

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