Revenue / Profit Planning for Accountants
Most Accounting firms plan their revenue by 1 (or a mix of) 3 ways:
Our revenue last year was X – let’s go for Y. Then do an internal work back of people X charge rates X productive hours.
Our profit last year was X – let’s go for Y. Then do an internal work back of costs, people x charge rates X productive hours.
We have X people. We should be getting X hours out of them. Let’s put their charge rates to Y and there’s the target.
All 3 ways are flawed for decent (>25%) growth. You’ll never realise your true potential and the entire process is internally focused.
There is a better way and it’s all about the clients. A client centric growth model. It too as 3 components that multiply to get revenue:
We have X clients now. Let’s increase them to X with solid marketing and sales. MULTIPLIED by:
Each client pays $X per project (each invoice average value). Let’s work on better packaging and pricing to get a higher number. MULTIPLIED by:
Each client buys X number of projects per year from us on average. Let’s add additional services and increase the number of projects per client per year.
Here are last years numbers:
No. of clients = 323 X Average project value $2,200 X number of projects 2.2 = $1,563,320
This years plan:
No. of clients = 355 (10%) X Average project value $2,420 (10%) X number of projects 2.42 (10%) = $2,079,022
A 33% increase! It’s compound interest for an accounting firm.
If you keep your costs under control, price up front and get super efficient then you’ll need fewer people and the new increase will be new profit.
Rob Nixon is an entrepreneur who has been growing businesses for 28 years. He is the CEO & co-founder of PANALITIX.
Rob's speaking work has taken him to six countries where he has spoken to in excess of 70,000 Accountants. Rob is not an Accountant, yet he has forged a niche to be the world's foremost authority on how Accounting firms can achieve peak performance. He is an entrepreneur who has been running successful businesses since 1986. Since 1994, he has been running businesses that specialise in helping Accountants run better, more profitable businesses. Accountants intrigue Rob and over the years he has trained them, consulted to them, coached them, researched them and visited thousands of them. All in the pursuit of what works and what does not work.
If you wish to contact the UK office of PANALITIX, then please call Dermot Hamblin on 0191 338 8926 or email [email protected]