For some it’s easy. Within the first 12 months, they’ve already banked their first £100,000 in revenue. For others, the sought-after target takes longer to achieve.
Now sole practitioners have chalked off self assessment season for another year, they’re able to pursue practice growth ambitions without any client chasing distractions. For many sole practitioners, a key early milestone is that first £100,000.
Therefore, it’s only natural that practice owners look to their cohorts for the benchmark of success. So last summer the AccountingWEB community compared notes on Any Answers. As always, the length of time varied from member-to-member. While AccountingWEB regular Marks found the first £100k relatively easy, Ann Accountant said she “happily took her time to get there”. While late bloomers like Red Leader trekked towards the £100,000 turnover target after seven or eight years.
However, not every new practice owner breaks the ceremonial champagne bottle on their first £100,000. In fact, many sole practitioners like AccountingWEB member JDBENJAMIN never reach that £100,000 level, preferring instead a better work-life balance. “I started my practice 19 years ago, but have never come close to £100k fees, as I'm one of those who would rather have extra free time than more money, and I don't want the hassle of employees or an office away from home,” they wrote.
For Mark Telford, his practice hinged on hitting that figure. When he decided to go it alone, he left behind full-time employment with the company car, pension and medical cover perks that come with it. Telford explained his pragmatic approach to AccountingWEB.
“The success or failure of the practice in the first few months would depend on whether I could get to sufficient income to match my 2009 employment salary – simple as that – none of this ‘I want to help business owners’ nonsense. In my head I initially though £125,000 of annual fees would get me there.
“To be perfectly honest, through a combination of consultancy work and compliance I hit the figure I needed pretty much straight away and by month nine turnover was £100k. Over the next 18-24 months, I was able to almost completely eliminate the consultancy/contract (day rate) type work.”
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It’s all about survival
Like Telford, AccountingWEB regular Glenn Martin also clocked off from his life as a full-time employed FD in search of the better lifestyle. While the dream is to achieve the security of the £100,000, Martin said his first year was all about survival. As such, he found it unavoidable but to take on low-priced work.
“Things started off slow, and you have to hang in there. I thought of giving up more than a few times and I tried not to think too much about the first 12 months as it was tough,” he told AccountingWEB.
It wouldn't be until the second year that he expected to be on his way to achieving the better life that first set him off down this path. For this, he earmarked the £100,000 turnover figure as the point where the risk of self-employment would provide a financial benefit. Things started to get better and confidence grew, but it wasn’t until the third year that he broke through that monetary ceiling.
How hard can it be?
So while the rest was history for Telford and Martin, other practitioners have found getting out of the gates as fast as possible comes at a risk.
Adopting a “how hard can it be” attitude, AccountingWEB regular Maslins ignored the advice of finding a niche and went their own way. But his ‘why would I rule out potential clients’ approach ended up stunting his firm’s growth: “I was trying to be everything to everyone. No doubt because of these things it was very slow progress at the start! For me was more like 3-4 years to get to £100k,” he wrote on Any Answers.
All roads lead to £100,000
Searching for an exact formula for the length of time it takes to reach £100,000 is a bit like asking how long is a piece of string. Each practitioner has their own story and circumstances. Everyone has different priorities and models.
But for the most part, regardless of how long it took, the firms that do hit that turnover all share many of the same methods - practice growth initiatives that often correlate with the attributes of the successful Accounting Excellence shortlisted new firms of the year.
Go get a niche
Many new firms have attributed their early success to signing up to a niche. Last year’s new firm of the year Paykeeper launched themselves into the franchises sector. It proved to be a smart move, helping the firm double its revenue. But is niche the only way to go for a new firm?
"The most important thing is that marketing budget goes somewhere where it can have an impact. The easiest way to do that is to say I focus on one particular kind of customer because you can find the places where they are and market to those individuals," PayKeeper's founder Kieran James told AccountingWEB.
Paykeeper wasn’t the only niche last year, with three shortlisted firms cornering a niche in sectors such as the restaurant industry and healthcare.
The Any Answers thread echoed these findings. After the initial hard slog, Maslins found his niche just as FreeAgent and cloud computing was taking off. With his business model in place, he said: “growth from then on has been fairly easy”.
Elsewhere on the thread, AnnAccountant took the measured, client service approach to attain £100,000 turnover. Building a relationship with clients really is playing the long game, but as the evidence shows, these initiatives eventually pay off, leading to more impact on growth and profitability.
“I have a relatively small number of clients who each get all the time they need from me, and who all need help with various things that, all in, means each client contributes a reasonable amount to my turnover,” said AnnAccountant.
“It takes a certain amount of time, admin and mental capacity to simply have a client on the books, so they need to be spending more than a couple of hundred a year for that to be worth my while.”
Client service is a pillar of the Accounting Excellence awards – there’s a client service award after all. and it's no wonder new firms continue to get their foot up through client service.
Last year's shortlisted new firm flinder demonstrated this with its bespoke approach to client service, holding biannual, independent feedback sessions beginning three months after first engaging them.
Marketing and websites
But the award for the fastest AccountingWEB member to achieve £100,000 turnover goes to James Green, who took six months back in 2001. And what got him there? According to his comments on the thread, he concentrated on marketing above all else.
Marketing is seen by many practitioners as a necessary evil. For Glenn Martin, he looks back at his first three years hiking towards the £100,000 turnover with the only regret that he didn’t invest in marketing sooner.
“I didn’t get a decent website up for 18 months and wasted too much time and money on poor marketing (I still have about £2,000 worth of leaflets in my garage at home),” he told AccountingWEB.
Instead, he feels that a red-hot website, professional marketing advice and social media help from the get-go would have accelerated his growth. “I reckon if I had this in place from day one, I could have signed up £100k worth of work in less than two years maybe less.”
That’s not to say that any of the above are the only routes. As more firms decide to down tools as digitalisation bites, there is an opportunity for firms to expedite their £100,000 target through buying a block of fees. In one such example on the thread, Michael Beaver said: “What worked for me was about six months in I bought a block of fees of around £45k, spent a good deal of time making that work. I found that that group of clients was the critical mass that I needed to get enough referrals to grow bigger.”
But growing bigger begets other problems. What you do once you hit £100,000 turnover is another story altogether.
Next week we’ll look at how practitioners have dealt with the growing pains that comes with growing your practice.
The entry process for the Accounting Excellence Awards 2019 is now open. In the Accounting Excellence awards, practice growth in revenue, fees and profitability are all evidence of a successful entry, and this is particularly represented in the New Firm of the year, small firm and fast-track firm of the year entries. Click here to find out more.
About Richard Hattersley
Richard is AccountingWEB's Practice Editor. If you have any comments or suggestions for us get in touch.