Listen in to an early session between two of the first people to get involved in the AccountingWEB-BTC mentoring project. Manchester-based Chris Scullard, who has been running his own firm for less than a year, is getting advice from David Wall of Wall & Co, a five-strong practice near Aldershot.
Chris: I started with a completely blank slate in October 2011 and need to get the business to a size where I can pay my bills. The next priority is to grow to where I can earn a sensible living and have enough left over to develop the business. The key is to gain clients and maintain fee levels. I was guilty of not charging enough at the beginning.
I’m at that point where I’m aware of need to charge more and generate new business. If I do generate extra 10-15 clients, I can still service them without going wrong.
Because I’m such a new practice, I wanted someone to speak to about growing the practice and how to manage it as it grows. I worked at PwC and in business and never worked in small practice. There are plenty of mistakes I could make that I hope to avoid by talk to someone with experience.
David: The trouble with running any business is that you’re isolated, with your head down and you don’t step back and look at it. If I can help Chris, he’ll help me by discussing things.
Chris: I tell clients to take a step back and look at where their business is going, where they want to be and what the infrastructure would look like to get them there. I’m as guilty as anyone at not doing that.
This process in place will force me to do that and make me accountable to do things that are good for me. It’s good to bounce around ideas and gain experience.
David: Likewise - it’s useful to have someone starting off at beginning. It will make me think about things we’re not doing. We’ve already had discussions here about things we’ve discussed. It’s a two-way thing.
Chris: In our initial chat, we talked about the way you developed your practice and fee income, mainly through relationships with clients and people who became good referrers.
David: I’m not necessarily able to say what the right thing to do is. It worked here - but my business started off with a portfolio of clients I was already working with. One consideration is what you're aiming to do. What’s your plan for the business?
Chris: I don’t want to be doing the technical work in a few years’ time. I want to run an accountancy business, and move away from doing the accounting work. That will involve employing people to do the work, and I’ll handle relationships. I will need to more than double the fees I’m making now to justify paying staff.
David: With our practice we have five people generating income, but I doubt if our profits are greater than my ex-colleague, who makes as much on her own with her mum doing a bit of typing. With a team in place, you need to win a lot of work to replace those costs.
Who would be your ideal clients?
Chris: Because of my finance director background I want to deal with young, ambitious businesses that are going somewhere, whose owners understand the value of management information and using their accounts as a key tool in managing their business, rather than the accounts simply being something that needs to be done to meet their compliance obligations. For example, clients who I do budgets and forecasts for, who work out what they want and set targets to make that strategy happen. I find them more interesting, and you can charge them very nice fees too. I’ve got 3-4 already. I’ve also got half a dozen small traders who get me to do their tax return and one or two of them drop into my lap every month. I don’t want to build my business around them, but I’m not in a position where I can turn work down. As long as the work is profitable and the client isn’t a pain, it’s’ worth doing. You never know who will give you the most.
David: That happened with some of our bigger clients, who came from referrals from smaller clients. Someone who’s a £200 tax return client might introduce you to someone who’s a very valuable business.
With referrals you need to ask how deeply you want to get involved. I don’t think we’ve ever said to clients, “Is there anyone out there who would be interested in speaking to me?” That’s my nature as much as anything else. Profit maximisation is the theory of any business - we advise clients about this. But I’ll hold my hands up and admit I haven’t done it very well!
Chris: I need to expand my network to get to know the right sort of people. How do I do that?
David: There’s no magic formula. Whatever you do in life, you meet people. Some clients here have come through the Brownies and the football club I play for. I was a member of the Roundtable and around 8-10 one man limited companies I dealt with came from that.
A number of professionals in similar situations have sent us a disproportionate amount of work. Through a book keeper we also became involved with a lady who sold a business and became a mentor herself. She’s involved in Association of Business mentors and has been a very productive source of referrals.
We were involved with a client’s bank manager who specialised in government-backed loan guarantee schemes. Because he knew we were able to do good accounts, he recommended us to other businesses. That was a chance situation.
Chris: The key to referrals is your relationship with other people. I wouldn’t want to be asking for referrals in every email, but there’s a place in formal meetings where you can ask if they know of anyone else who might be interested, particularly if you give good advice.
David: It’s not just about providing service to client. It’s that personal relationship.
I also wanted to ask if you employ a telemarketer.
Chirs: I have done, but with limited success. It depends on the type of clients you’re after. They’re OK for sole traders and tax return jobs, but you need a few of them to make a return. I’ve realised in the short time I’ve been doing this that the majority of my business will come from word of mouth, whether via clients, IFAs or banks. But I won’t rule out other marketing activities.
I need to work out a structure for how I’m going to go and get the business I need. What do I need to put in place to maximise the referral potential of people I know? I need to think I’m doing everything I can. I don’t want there to be someone I know who might benefit from my service going to another accountant.
I’ve got a pretty good idea what I want do with referrals, but I would like to explore workflow management. I’m very keen on making sure I’ve got the processes and infrastructure in place to deal with an inflow of work before it happens.
David: I can certainly explain how we work here and keep track of things.
David and Chris ended their conversation with a short discussion about buying and selling blocks of fees, which isn’t on the cards for the mentee yet, and an agreement to look at the operational side of his business in their next encounter. We will return to them in a month or so to see how the discussion prorgresses. Until then, what advice would you give to Chris to help manage referrals and grow his business?
About John Stokdyk
John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.