Once you’ve achieved your £100,000 turnover target the obvious next step is to keep growing. But with growth comes extra work.
When AccountingWEB member and practice owner Mark Telford left his full-time finance director role, he pursued that notional £100,000 figure as a benchmark for success.
While on a short-term contract in 2011, he started thinking about having his own accountancy practice but he knew that the success of that practice would depend on getting to a sufficient income that would match his full-time employment salary.
With that dangling carrot, Telford smashed his £100,000 target within the first nine months. Through a combination of consultancy and compliance work, Telford hit the figure he needed pretty much straight away and closed his first year at £150,000.
But then Telford’s rapid growth plateaued. He stayed between £150k and £165k for the first four years. Being comfortable, he turned a lot of prospects away and sacked unsuitable clients.
But things changed. “Between October 2016 and March 2017 I suddenly started to get a steady stream of good referrals that I just couldn’t turn away,” he said
“The way new business works is that it’s a gradually surge – I like to use a wave analogy – if you’re facing out to sea, you see it coming and can ride the wave as it gets to and passes you. If you’re facing landwards it comes crashing down over you, knocking you off your feet.
Content seriesView full content series
“July 2017 saw me knocked off my feet”
The problem with scaling your practice
To apply an Oscar Wilde quote to the difficulties of scaling an accountancy practice, "there are only two tragedies in life: one is not getting what one wants, and the other is getting it”.
This should ring true for many practice owners who have felt the joy of reaching their desired turnover goal, only to have that euphoria quickly cut short by the exasperation of trying to scale the practice further.
This was cited as a common headache in an Any Answers thread last year on how long it took sole practitioners to reach £100,000 turnover. Summing up this feeling, AccountingWEB member Marks brushed off the first 20 months to reach £100,000 as “relatively easy” but it’s getting to £500,000 that’s far more difficult.
It’s a problem many firms wrestle with when trying to scale much past £100,000. Atleastisoundknowledgable has been stuck at £150-200,000 for four years though, despite hitting £100,000 within 12 months.
Mark Telford’s story is similar to fellow AccountingWEB member Glenn Martin. Both left their FD positions for the green grass of their own practice. “I wanted a better lifestyle as the job owned me and I worked too many hours,” Martin said of his reasons for going it alone, and the £100,000 target would continue his lifestyle.
When the current setup creaks
Like Telford before him, Martin has now hit the point where he now must make some big decisions. He broke through the £100,000 ceiling in year three when he billed £140,000. But he admits that although he could double again as there is certainly enough work available his “current setup is starting to creak a bit”.
He’s deferred making a decision on a bigger office or more staff in order to double in size again until another day. Instead, his plans align much more with his lifestyle.
“My focus now is less on new client recruitment but upselling to existing clients who buy extra services,” he said. “I will take on new work if it's right for me, and priced correctly.”
After being knocked off his feet, and at one point taking work with him on holiday, Telford knew he had to change things. “At that point, I committed to changing things – I took big steps to improve processes,” he said.
Telford’s post-£100,000 plateau and work overload shows why ambitious sole practitioners without the right processes are likely to struggle. But now, two years later, Telford is back on the growth track and looking to pass £300,000.
He decided to look into outsourcing, which after a few dips he committed to fully in October 2017, and he also trained his bookkeeper so she could manage more regular work.
His team now consists of a part-time bookkeeper/accounts assistant and a newly appointed accountant who is also filling the practice manager role, freeing Telford to focus on process improvement and to explore business development services through The Gap.
Take a step back
Taking a step back ready to move two steps forward is a common post-£100,000 strategy. After stepping over the £100,000 finish line AccountingWEB regular Michael Beaver wrote: “We now have the good problem in that we have more work than resources and are suspending growing our client base in order to ensure we have the resources to service the existing base properly, and put the foundations in for growing more.
“Focusing on getting that critical mass of clients who can and will refer you on is what should do the trick.”
AccountingWEB member Maslins tried articulating just why the post-£100,000 period conjures so many growing pains. While growth was fairly easy for him after the initial hard slog of getting clients and the business model in place, it is slower now that it was five years ago.
While competition and policy changes in his IR35 niche has played a part, he stated that he has now become involved in side projects rather than remaining solely committed to the practice growth goal. “I no longer have any desire to hit any particular financial targets. Owning a huge company isn't a goal of mine, though no disrespect to those where it is.”
Next stop £1million?
But once £100,000 is ticked off the bucket list, surely the next logical step is to have a £1m practice? After all, scaling your practice is a bit like chasing the end of a rainbow. The end is never in sight.
Though some relish the thought of achieving their practice’s next financial goal, Glenn Martin is not one of them.
“Currently I have no desire to have a £1m practice. I'm probably too old to be bothered to deal with 20 staff and all the problems that come with it,” he said.
Having already felt the bite of scaling a practice, Martin has a far more manageable goal in sight, without overhauling his practice. “My aim would be to get to around £300k to £350k income, with a small team where I could make £220k to £250k profit and still only work my 40 hours but never weekends. Then pass it on to a manager with a work-out arrangement.”
It’s not something that appeals to Telford either. “I never really had a growth mindset other than hitting that notional £100k salary figure. After that and the plateau during years two-to-four, it turned into how can work more efficiently.”
Though the practice owners covered in this article are all ambitious, Telford and Martin both far more enjoy the work-life balance their turnovers affords them, rather than scaling for growth-sake. After escaping the always-on culture that goes hand-in-hand with scaling, they both now see process improvements as far more important than sacrificing their lifestyles for growth. And that better lifestyle that the £100,000 target allures shouldn’t be forgotten when scaling a 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.