Why over 50% of practicing accountants are making losses
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Academically Steve is a prize-winning economist, with degrees from two leading schools. Professionally he is a UK-based Chartered Accountant. And commercially he founded a 40-person consultancy and was once chosen by a leading business magazine as their UK Entrepreneur of the Year.
His 2020 book 'Our time to RISE' contains a step-by-step...
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The full case study
For reasons of space, the case study in my article above is very much abbreviated version of the full case study that will be included in my (Summer 2011) book “The UK’s best accounting practices”.
If you would like a copy of the full 7 page version, which contains lots more “how to” details, please email me and I will gladly send it to you as a PDF
I will also email you my 2010 research paper “Nine proven ways to eliminate debtors, work in progress and low profits”
Steve
See them on the web
Also, Clear Vision’s two websites are really worth a visit since they are great examples of how to convey the message that you are different (and better, but without actually saying so)
www.clearvisionaccountancygroup.co.uk
STEVE
3 cheers (and more) for Steve
At last someone has said it.
And said it brilliantly too. Well done, Steve.
This is one of those classic posts that every firm should printout and pin on the mirror in the toilets and have it as background on every Partners PC (or Mac if they're really switched on).
Read Rob Walsh's profoundly simple comment again: "To me the most important thing an accountant can do is help a client identify and articulate what they really want out of their business and their life, and then help them to achieve it. That’s the way we really make a difference. Ultimately it is about being in partnership with your clients, and not merely having a transactional sales ledger/purchase ledger relationship with them."
It's this that underpins EVERY strategy that follows. Nothing that Rob does is a 'tactic' — he does it because he's clear on what we might call his 'Why'. It's embedded in everything they do.
And it's clear that Rob's clients believe precisely what he believes. Result? A perfect partnership.
Stunning (and important) stuff, Steve. Keep it coming.
-- Paul Dunn Chairman, B1G1
http://www.b1g1.com
Giving your business the power to change our lives
Follow me on Twitter at http://twitter.com/pauldunn
Email me at: [email protected]
Arms Length Salary
In my opinion an arm's length salary is the annual salary that you would need to pay in your area to recruit someone of equal qualification, experience and competence to replace you and any other owners of the business.
Mean, median, mode, etc
Market rate profit per partner = notional salary? I'd expect half of partners to make a "loss" if "loss" is defined as less than the mean profit share! Then there is the fact that not every partner is, or wants to be, a city partner working 70+ hours a week...
The statistics should not however undermine the real message in the post, that focusing on your clients' needs and helping them realise what they can do, what they actually want to do, and then helping them do it is going to be of far more value to them than just churning what they send you.
If work is of more value to the client, they will be less likely to leave the accountant (saving your costs on advertising, take-on, etc), less likely to ask for advice in advance or forget to pass on information (reducing time lost on clean-up work and reducing the risk of being sued) and willing to pay more - so making the accountant more profitable and probably happier as well.
losses
Wow...sounds too good to be true
Ah well Ill go back to filling in my tax returns in for a few crumbs...sigh
btw anyone got a loss making business nearby who doesnt want it so they can cut their losses...Ill have it ?
arms length salary
An arms length salary as defind in the Book of Tom equates to exactly that salary which, with no other income would make you a low rate tax payer. If you had £1 more then asa 40% tax payer that is more than an arms length salary.
As some of you may be aware the government set this rate every year in their budget
The trouble is...
that businesses come in many different shapes and sizes. Whilst most of the Dragons would not regard many small businesses as a "business" in the private equity sense of the word, those small businesses do actually exist and they do thrive. Because it takes all sorts, you therefore have "loss making" accountancy firms servicing their needs. I don't think that those loss makers are unhappy they are just working their own hours at their own pace.
I have had a lot of flack in Any Answers over the years for saying that tax practitioners should know their worth and as a result should probably charge more, but the fact is that firms do what they do because people are different. There is no right or wrong answer in all this.
Good article though, keep up the good work - good to have some motivational stuff in February!
Virtual Tax Support for accountants, see: www.rossmartin.co.uk
Benefit of clear differentiation
Excellent article Steve which highlights the benefits of helping clients get what they really want and differentiating your accountancy practice.
It's interesting that the firm has a niche practice focused on dental surgeons as well as a general practice.
Paul Simister
Arm's Length Salary
I think some of the posters are getting hung up on the mechanics of what is an arm's length salary?
It's what you'd have to pay someone else to do your job is I think the easiest comparison, considering your qualifications, experience, hours worked, contact base etc. This will differ per individual.
However, don't let this detract from the main thrust of the article which talks a lot of sense. And I don't think Steve is saying this is the only way to run a practice, just you need to think what you want your practice to achieve and how you want to run it (not necessarily doing all hours under the sun - or moon!), and then how do you put it into practice.
There's a lot of points, but an easy one to pick out that I try to put into practice - never compete just on price - there is always someone cheaper than you. Even if you get the job they'll probably moan about the fee again and eventually find someone else cheaper. Instead explain what you can do for them, explain you are NOT the cheapest option but they can see what's on offer and the benefits you can bring and that's why you not the cheapest, and perhaps give them a choice of exactly what they do require from you. Back it up with good service and doing what you've promised and you've then taken price out of the equation to a large extent.
Excellent message
Hi Steve, I'm new to this site and wanted to thank you for this article and the story, I think it's spot on. Values and beliefs, then skills, shape behaviour and those businesses that start with the right 'why' and stay focused on it throughout their activities, regardless of external market circumstances, in my experience invariably end up delivering the right 'how' and 'what' for their clients - of course 'doing the right thing for the client' does require that first of all we actually do take a genuine passionate interest in them and their businesses, have the interpersonal skills to demonstrate that, gain an understanding of the client's real drivers and then deliver on them - I'm sure that Clear Vision must be doing all of this to have had such success and it's good to hear about it! Thanks again.
The perfect practice
The article makes sense- sort of.
I could write an article telling everyone why they should drive a Maserati and what a great investment it would be, but forcing that argument along seems similar to convincing me that we should now have a business model of 33% for the fee producer; 33% for overhead; and 33% for the partner's profit. Oh, and another 33% for the "dragon".
The profit Mr Pipe is seeking should be in the staff (sorry, team) effort, not in client exploitation. The whole thing smacks of a Rah Rah motivational meeting. Take it to the States, Mr Pipe.
M
Great practice
Hi Steve - great article which is very inspirational - I have just set up my own practice and this is what I would like to aim to achieve.
Thanks
Nikki at Money Partner
Profit - or greed ?
It all depends on how you define "profit", and exactly what you're looking for.
Do you want to drive home in your Rolls while your staff catch a 'bus, or, do you want well paid happy staff?
At the risk of being called a heretic - there's a lot more to it than "profit".
Poor Staff
If the figures given are correct, then from the £700k turnover the Directors take home (say) £250k each, leaving just £200k to pay for premises and overheads, and 12 staff. Is he really paying them below the minimum wage?
The partners are also underselling themselves, earning just £164 per hour. Charge out rates at Wilkins Kennedy (CAs) are in excess of £425 per hour for partners, which I'm sure gives them a better return..
Can't believe the negativity in some of these comments....
...I really do pity you people. My firm has been working with Steve and following his ideas for the last 3 years or so and the transformation has been incredible.
Our team has grown from 6 to 16, our fees have more than trebled, we run with a positive bank balance which is more than double in number terms than the previous overdraft, we have far fewer debtors and a happy team.
To cap it all no-one had to work long hours in January cracking out tax returns for ungrateful muppets.
The team are superbly well looked after
I find it sad that people are so quick to jump to negative conclusions without knowing the facts.
For the record there is an entire section in the full case study about how happy and well treated the Clear Vision team are, which I have cut and pasted below. And I have actually been there and talked to them so I know it to be true.
As for them being well rewarded, they certainly are - since I believe most/all of the equity is owned by Rob himself. So the other 12 team members share most of the remaining c £400-£500k.
Anyway, here is the extract from the case study I promised. And as you read it, ask yourself this, do I treat my team as well as Clear Vision do?
TEAM MATTERS
In addition to their regular team, Clear Vision also has two independent non executives who attend its quarterly Board meetings. One is a nationally respected marketing specialist, and the other a retired (but still young) managing partner from a much larger and very innovative accountancy practice. “Having non executives of their calibre isn’t cheap, but you have to invest in quality, and they have made a vital contribution to our success” says Rob. “They make sure we see the wood from the trees, challenge our assumptions, ask the difficult questions we would sometimes prefer to brush under the carpet, and ensure we don’t fall into the trap of sloppy thinking. That kind of input is priceless”.
A key element of the culture and core values of the practice is openness and honesty. So all the key numbers of the business are shared with the entire team in the form of a monthly One Page Plan. “This shows our team we trust them, creates a sense of ownership, and both motivates and enables them to take the actions needed to continually make things better.”
“We don’t just leave out team to sink or swim” explains Rob. “We have developed systems to guide and support them at every turn. In fact System Builder, the software tool that manages our systems, is the brain of our business. Our systems have taken a long time to develop, test and fine tune, but they are central to our success because they allow us to do everything to the same best practice standard every time. So we never waste time reinventing the wheel, or doing things sub-optimally. And because of their power, we now literally have systems for everything, from how we do technical work to what we do to wow our clients. As a result our team are able to work quickly and to the very highest standards, which drives up quality at the same time as driving down delivery times and costs.”
Clear Vision also publicly acknowledges, celebrates and rewards the outstanding contribution of its team members in several innovative ways. For example, they have a quarterly award for the team member that gives the most ideas or wows in that quarter, and also an annual award for the team member of the year. The latter is voted for anonymously by every team member, every month, and at the end of the year the person with the most votes wins an all expenses paid four day trip for two to New York, Paris or Monaco. As Rob says “These awards involve us putting our money where our mouth is, and showing that we really do value what our people do. They also motivate us all to raise our game and really go the extra mile for clients. And they help us all to feel really proud about the things we do for each other and for our clients.”
.
Can't believe the negativity in some of these comments....
...I really do pity you people. Posted by petestar1969 on Fri, 11/02/2011 - 16:14
No one's being "negative", BUT - I'm always cynical of anything that smacks of the "happy clappy business guru" brigade. AND, there is a hell of a lot more to running your own business than smply making money - or at least there should be if you have your values right.
Right now there is a recession, less work about, or so they say. You might see that as meaning that you and your clients need to scabble about grabbing more work. I on the other hand see it as more free time to do the things in life that really matter, like being with friends and family, or just taking a little time to stop and see the world around you.
Welsh Dragon you are right... there is much more to this than mo
Welsh Dragon, as you say...
..."there is a hell of a lot more to running your own business than smply making money - or at least there should be if you have your values right.
Right now there is a recession, less work about, or so they say. You might see that as meaning that you and your clients need to scabble about grabbing more work. I on the other hand see it as more free time to do the things in life that really matter, like being with friends and family, or just taking a little time to stop and see the world around you"
It is clear in the case study that Rob's is one of the most values driven practices you will meet anywhere. And those values mean that the practice:
Consistently gives its clients what they really want (why else would they keep coming back)Consistently creates a great place to work for its team members (see my comment post above)Consistenly gives Rob a personal income of £200-£280k pa - so he and his family benefitConsistenty allows him to work 40 hours a week and take 14 weeks holiday a year - so he and his family benefit in an even more profound way
Personally I would say that is a great outcome for everybody.
So, and here's a question not aimed at you but at other readers, if you do things differently to Rob, how do the outcomes/results for you, your family, your clients and your team compare?
If your results are better, keep doing what you are doing.
If your results aren't better... I'll leave it to you to figure
High fees
Yeah, but how many of his clients are suing him cos he recommended a dodgy EBT and their moneys trapped in it or some other weird scheme at the cutting edge of tax planning...
Im blowed if Im gonna do that , get sued, have the insurance co nail me to the wall and the institute strike me off
Tom 7000 - No "dodgy" stuff
As far as I am aware (in fact I am pretty certain) not a single penny came from EBTs or any kind of "dodgy" tax planning.
That is categorically NOT what the practice or the case study is about. And it is categorically NOT what is driving their success.
See for yourself & listen to the man
I attended an AVN "open day" about 3 years ago and have seen Steve Pipe speak on a few occassions since. I am not an AVN member, however my small practice has been transformed by the open day:
Forcing me to take a good honest look at my practice, warts and all.
Eliminating time-ledger based pricing in favour of fixed fees agreed in advance and normally paid in advance by clients
Giving me the courage to resign from the clients who were high maintenance/low fee
Having rid myself of the poor quality clients allowing us to give a much higher standard of service to the remining clients
Significantly increase fees (after full consultation with the clients and in some cases staggering increases over a period of years, in return for advanced payment). The fee issue has shocked me in that the number of referals has increased significantly since fees were increased. I am convinced now that clients make referals based on service not fee levels.
All in all our client base, profitability, staffing levels and job satisfaction has increased when many local firms appear to be going in the opposite direction.
I'm not sure if Steve/AVN still run these open days but if they do I would recommend anyone who hasn't been before to go. In my experience you will gain several workable ideas that will imporve your practice. My step daughter is about to graduate from university and enroll as an ICAEW student. It is a really good feeling that she is likley to achieve the required standard of qualification and experience in good time to work in the practice for a few years before I retire or semi-retire. I am convinced that the open and other training days that I attended with AVN have helped me transform this practice into one I can hand over to my step-daughter with pride, hopefully giving her an opportunity for the future.
Some of the comments regarding Steve Pipe are, in my opinion, disappointing. My opinion of Steve, having actually listen to what he has to say, is of a man passionate about the highest level of client service and imporving the lot of accountants.
If it aint bust, don't fix it
So, and here's a question not aimed at you but at other readers, if you do things differently to Rob, how do the outcomes/results for you, your family, your clients and your team compare? If your results are better, keep doing what you are doing. If your results aren't better... I'll leave it to you to figure
Posted by stevepipehome on Fri, 11/02/2011 - 17:03
There's an old saying - "If it aint bust, don't fix it".
Just because something works for one person, it doesnt mean it will work for you.
Would YOU be happy working that way?
Would your team be happy working that way?
Is it really going to give you what you want?
Exactly WHY did you start on your own to begin with?
I'm not convinced that someone's results are "better" or "worse" - they are merely different.
My motivation was never to make bags of money - and I've achieved that aim :)
However, my motivation was to make a difference, to have freedom to do the things I really want to do (racing, photography, charity work), and I've made enough to achieved that too.
Once you have your first heart attack you realise that money really means nothing, that rich or poor we all die, and you realise that you can look back at all the good times you've had, at all the pleasure you've had, and you know what - how much money you made and your work doesnt figure in that assessment of your life at all.
So, what I'm saying is, if it works for you then fine - but make damn sure its really what you want and that you're not jumping from the frying pan into the fire.
Welsh Dragon is right again
I agree with you again Welsh Dragon on your three substantive points:
You are right when you say no one solution will automatically work for everyone. Which is why I said “Ill leave that to you to figure” rather than saying “do what Rob Walsh does”
You say that, for you, it is all about matching what you do with your motivation as a business owner. In other words it is all about your goals. And on that you are right again, since that of course is exactly what is at the heart of the case study practice. Everything they do is based around making sure their clients articulate their goals, and then create a plan for achieving them. And since that is what you say accountants should do for themselves, presumbly it follows that it would also be an incredibly valuable thing to offer to clients too – just as Clear Vision do so very well. You also say “if it ain’t broke, don’t fix it!”. And are right again. But all the evidence I see tells me that for most accountants it IS broke. Firstly there is the evidence in the article above and elsewhere that over half of them are making losses. Secondly the majority of the 800+ accountants I talk to every year tell me they are working too hard, are stressed, their health is suffering things are tough, clients are unreasonable, clients don’t want to pay, their team members are revolting etc etc - and that is on top of not earning enough money. Which sounds to me very much things ARE broke. But obviously the acid test is not what I think, its what the readers themselves think about their own situation
Finally…
I am delighted to read that you are 100% happy with your lot Welsh Dragon.
I am also grateful to you for pointing out that the questions in my comment were badly phrased, for which I apologise.
So, for the benefit of other readers, let me re-phrase them….
If you do things differently to Rob, how do the outcomes/results for you, your family, your clients and your team compare?
If your results make you 100% happy and give you everything you want out of life, keep doing what you are doing.
If your results aren't making you 100% happy and giving you everything that you want... I'll leave it to you to study the evidence properly and work out the best way of making things better for yourself.
Happy ?
I am delighted to read that you are 100% happy with your lot Welsh Dragon.
Posted by stevepipehome on Sat, 12/02/2011 - 07:12
I don't think anyone is ever 100% happy - how could anyone be happy when they have to deal with the muppets at HMRC.
Now if Mr Cameron wants to put me in charge of HMRC and gives me a supply of P45's to hand out ....................
My point is that there are 101 reasons why people set up their own practice.
Some people want to grow and have large firms,some want to stay working from home and have no desire to grow.Some. like me, started on their own because they are trying to balance the demands of two careers at once. Again, some like me, simply dont want to have to waste half their day commuting with all the other zombies.
Therefore growth isnt for everyone. For instance, to anyone considering leaving their home office and setting up in a town/city centre - one thing most people dont consider - commuting. Lets say its a modest 1/2 hour each way. That actually equates to 5 hours a week - 250 hours a year - around 40 days (8 weeks) productive time a year - LOST.
Makes you think doesnt it.
So what I'm saying is, before deciding how you want to grow your practice, first decide IF you really want to grow it.
And again Welsh Dragon I agree
I so agree with your idea that your business must work for you, and give you the life-work blance you really want.
In fact that is why, despite now employing over 30 office based people, for the last 8+ years I have not had a desk at the the business I founded in 1998 (AVN). So no commuting for me. I choose to work from home.
It is also why from January 2010 onwards I have been doing exactly what I have always advised accountants to do – ie focussing 100% of my time and energy on the things (a) I love doing, and as the business founder (b) that I am uniquely good at.
And in this brand new role I have freed myself of all my business leadership responsibilities and burdens, and instead am able to focus entirely on thought leadership (ie the thing that makes me 100% happy at work).
On a business level this is so exciting because I now spend all my time seeking out new ways for accountants to become more successful. And on a personal level it is exciting because it also gives me a shorter working week and a better work-life balance (I now only do two days a week).
I like to think that this change is a living example of the fundamental message I have always believed in (which originates from Michael Gerber, of course): ie that, having surrounded yourself with the right people, equipped them with the right systems, and set them on fire with a compelling vision, your role as leader is to allow your team to make things happen, so that you can focus on the things that make you really happy, secure in the knowledge that the business is not dependent on you or any other single person.
So in my experience you can have growth and a great work life balance, if you do the right things for your clients and structure your business in the right way. In other words, you CAN "have it all" if you set about it the right way.
And that is Rob Walsh's experience in the case study firm too - since he takes 14 weeks holiday a year and only works an average of 40 hours a week for the rest of the year.
Can I get a witness
This is getting a little bit like having a Jehovah's Witness standing at the door. Utterly convinced that he's right in everything he says, he'll agree with almost everything that you say, whilst continuing to promulgate his own version of how the universe SHOULD be run.
Careful CD, he might know where you live!
Pawncob, am I alone here in finding your comments a bit odd for
FIRSTLY Surely the whole point of accweb is to develop threads of interest and value – and we do that by exchanging ideas and insights based on facts. And yet when I do this, in a civil and polite way I hope, you seem to think I am doing something wrong.
SECONDLY As an FCA I am bound by my professional body’s code of ethics (as I presume all contributors are) to act professionally at all times. It is for that reason that all my comments in this thread are based on the facts, and not on hearsay, innuendo, speculation, guesswork, sarcasm, religious stereotyping or any other kind of mud slinging. It is also why I try my very best to stay open minded, acknowledge the valid points made by others, acknowledge when I make mistakes, and apologise quickly for them (just as I did in my 7.12am post this morning). And yet , again, when I try to abide by these rules of professional and human decency, you again seem to think I am doing something wrong.
THIRDLY I am categorically not, as I think you are implying, telling people that is "my way or damnation" – and would remind you that in my 7.12am post this morning I specifically said “You are right when you say no one solution will automatically work for everyone” and “I'll leave it to you to study the evidence properly and work out the best way of making things better for yourself.
Have I not used this thread in the way accountingweb intend us all to?
And have I not done so in a polite, open-minded and professional way?
.,
And that is Rob Walsh's experience in the case study firm too - since he takes 14 weeks holiday a year and only works an average of 40 hours a week for the rest of the year.
Posted by stevepipehome on Sat, 12/02/2011 - 11:43
That's a lot more hours than I work - maybe I should be showing him how it's done?
Or maybe I just value my own time more than I value money.
Great article Steve - shame about the wind up
Thanks for the article Steve, as usual very thought provoking. It's just a shame that the introduction before the case study was framed in a way that wound up some of AW's more vocal readers! As has been demonstrated here, many practitioners have made a lifestyle decision in the way they run their practices so this stuff just doesn't work for them.
Your article unfortunately skates over the detail of what Clear Vision actually does to earn its fees and wow its clients, and perhaps a bit more detail would have avoided a lot of the contoversy! What it does show is that some businesses will pay significant fees to an accountant if they can offer a bundle of services that genuinely enhances the value of their business. I suspect this goes way beyond the annual accounts and tax return preparation that are the bread and butter for most of us.
My question is - what else are they doing that the typical practice doesn't, and how do they do it? - are they qualified in some other way to offer business consulting, or do they just use bought-in processes and tools that any qualified accountant could use?
I'm a little confused by the case study...
Ok I appreciate the way the case study does it's business as a model is good, but these numbers seem a little strange...
700k turnover, 150 clients...£5000 average fee would be 750k...
£160k new business last year, so turnover previously 540k. Let's look at that for a moment with the statement 'he has taken home over £200k (200-280)in each of the last years. Out of that £540k he presumably paid the other director 100k+, his own 200k (£300k so far), 12 staff- say average of £25k each (300k), rental on the office space and rates, etc (say 60k), other office running expenses say 100k, for a total of £760,000, or in other words a real loss of £220K.
Then you tell us how succesful he has been over the last five years and that 50% of the rest of us are 'losing' money- your definition of 'profit' is totally incorrect. When looking at a small business such as this what is available for me to take home is my 'profit'- that's why it's called 'profit'. To superimpose some mythical figure and then say 50% of firms are making a 'loss' is utter rubbish. We're not looking at our businesses as the Dragons would- mentioning them in this context is again rubbish.
Great advert for your forthcoming 'management speak' book though. My advice to people is to read less 'management guru', 'how to be successful' (usually be writing a book?), etc books and take real practical steps towards achieving whatever it is that you want to achieve- which in my case is a small niche practice that takes up some of my time and leaves me with plenty of free time to do whatever else pleases me whilst being able to run it all from home.
Great case study about a great firm
Hi Steve
Great case study about a great firm (I had the pleasure of working with them for a period on their websites and digital marketing). I’m at a loss regards the negative comments but I think I know their real roots. I mean who wouldn’t want to be able to take the holidays Rob does and still draw his salary?
How To Deal With "C" Listers and Slow Payers and Bargain Hunters
700k turnover, 150 clients...£5000 average fee would be 750k...
Hopkins Hawg, that's because 20 of those 150 were tax-return only clients. You might be right about the numbers not stacking up in earlier years though - it sounds to me like the senior partner is very very good at hiring the right people at the right salaries. I guess if you don't have people on training contracts, and the firm doesn't have too many qualified people, then training and cpd costs are low and productive time must increase.
Steve, I've read "A Professional's Guide to Value Pricing" (and "The Firm of the Future") so have some grasp of the value pricing theory that underpins your cause. I can see how that works with the right kind of client - has to be an "A" or a "B" grade client, and a good payer to boot - but IMHO at least three quarters of the business-people who may need an accountant's services here in the UK do not meet those criteria.
Would you therefore agree, Steve, that the model you are championing can only work with a small percentage of the total market population of clients? If so, is there any plan "B" in your armament for dealing with the vast majority of the market: ie "C" grade clients and below; and sticky payers (the sort who might want to take you up on your money back guarantee - "If you're not satisfied you needn't pay a single penny")? What we in the Peanut Gallery really need is a blueprint for dealing with these slow-paying, bargain-hunting, practice-hopping, not to mention unresponsive clients who blanche at anything above a minimum compliance service and minimum price levels ie IMHO upwards of three quarters of all prospects.
btw one practises here in the UK: practice is the noun, and practise the verb. Different to the States, I know.
To be fair to Steve
I have been to an AVN presentation and to be fair 90% of what he did I did already, because Im dfferent to most accountants.
I cant bring myself to can the little guys who need help though...
because there but for the grace of god....
why are we arguing?
If, like me, you have read down the various posts to this point, one thing strikes me. Why is there so much negative knocking of Steve's article or Rob's practice.
Rob must be doing something different to mine cos his results are different - and actually I'd like some of that please! So I will read the detailed case study and see what I can apply to my practice.
Steve seems to have organised his business to give him what he wants as well - so he obviously practices what he preaches. What's more I know of a couple of other AVN firms who achieve the same sort of results and I'll listen to them, Rob or Steve or anyone who can walk the walk as well as talk the talk. Like one of the other posters I have been to Steve's presentations, and I keep going back for more because it is interesting, useful and relevant - but not necesarily easy to achieve for myself!
But to answer my own rhetorical question - don't be negative about someone else's success. I feel it shows a level of petty-mindedness . Instead try to look for the lessons and information you can learn from that success.
The numbers DO stack up hopkins-hohg
““but these numbers seem a little strange...” hopkins-hoag – 14/2/11 – 14:37
There is nothing strange about the numbers for Clear Vision, and I believe they stack up for the following reasons:
Their turnover is not £700k, it is as I said at the outset “in excess of £700k”“I’msorryIhaven’taclue” is right re how the fees relate to the 130 business clients and 20 tax clients The £160k is the annualised value of new clients won in the last 12 months – but of course, since not all of those clients were won exactly 12 months ago, and some may have only been won a few weeks ago, it therefore follows that not all of the £160k will be included in the quoted £700k+ turnover for the last yearLike all businesses, it is also likely that Clear Vision loses some clients due retirement, business sale, closure etc. And I know for fact that they are very active at asking clients to leave where the fit is not right. So in earlier years they would have had extra fees that are not included in the current £700k+ fee baseSo for the above reasons it is spurious to simplistically conclude that their turnover in earlier years was £700k - £160k = £540k. In reality it was probably very much higherThe cost assumptions you make are also too simplistic, since I believe they own their own premises, and it is quite possible that the (a) not all the team members are full time, and (b) the size of the team, and related salaries etc, has grown over time to its current level.Once you take all these factors properly into account the numbers do stack up.
And, as Rob says, the practice HAS earned him profits of £200k-£280k in each of the last five years. And I for one am not going to doubt the integrity of a fellow FCA when he says that.
It is true, Rob’s approach won’t work for every client
“I’msorryIhaven’taclue” I think you are right when you say that Rob’s approach won’t appeal to EVERY client.
But that really doesn’t really matter.
The only thing that matters is that it appeals to ENOUGH clients. (And to you, of course!)
Last time I looked there were around 4.8 million businesses (http://stats.berr.gov.uk/ed/sme/) and 20,000 firms of accountants in the UK.
So let’s be pessimistic and assume Rob’s approach only appeals to 5% of businesses (ie prudently much less than the 25% you suggested in your post) and 10% of practices, that equates to a market of 240,000 businesses served by 2,000 practices – ie an average of 120 clients per practice. And if those 120 clients pay the same as Rob’s £5,000 average fee, then each of the “up for it” practices will generate £600k in fees a year from this section of the market alone.
Now, of course, this is predicated on “only” 10% of accountants doing what Rob does. Personally I wish the % were likely to be much higher than 10%. But I fear that even 10% is on the high side, since many accountants don’t want to change, even when they accept that change would make things better for them and their clients.
And of course, if my fears are right and only 5% of accountants follow in Rob’s footsteps, then that will equate to only 1000 practices sharing a market of 240,000 clients – which at average fees of £5000 per client will equate to average turnover of £1.2m per practice.
And even if only fraction of this (say an extra £200k, £300k or £400k pa), comes your way, I suspect it will still make a very real difference to your financial position.
So even though not all clients will be interested, there is still a very good living to be made by serving the minority clients that ARE interested.
And that is the point!
What about the "lower grade" clients that aren’t interested?
Various posters have asked for some advice on how to make money from the sort of clients that the approach of the case study firm is not going to appeal to.
That is far too big a question to do justice to in a short posting here.
But it is exactly what I will be turning my attention in detail in many of the later articles in this series. So can I suggest you read those as they are published?
Interesting article, Steve
Steve, your article gave an interesting perspective on running a profitable accountancy practice. I enjoyed reading it and as a reader who worked in the corporate world, I thought it made sense about treating clients as business partners. It was also interesting to read the comments from the other readers.
Just a point about the article which mentions Clear Vision servicing 130 business clients. I suppose this means providing purely accounting services or serving "an accountant [***] business partner" role to clients? These would have to be fairly small business as wouldn't larger ones have their own in-house accounting expertise? Then again, providing accounting services to such clients would surely rule out audit services to those same clients due to a conflict of interest. Although it's been ages since I worked in public practice, would audit services yield better fee income?
Dom
Why over 50% of practicing accountants are making losses
Great story, thank you for sharing it!
Accountants making losses
An excellent article Steve. An arms length salary? I'd say £80,000.