How to build a super-profitable advisory firm
We recently noticed some very interesting tweets on “How to build a super-profitable advisory firm” and after reading and digesting them we felt it was worth a conversation with the “Tweet” source- a forward thinking accountancy firm, the WOW Company.
As accountants, they’ve worked with hundreds of small businesses over the years, from start-up to £5m turnover and with this in mind we asked them to share their thoughts and experiences with the community, we are sure you will find this an interesting and informative read.
“We’re constantly fascinated by the difference between those that make it big and those that just tick along, so we thought we’d find out what separates these two groups and share with you the things you need to be thinking about if you’re serious about building a super-profitable advisory firm.
Get cash in quicker
Some quick tips to get your cash in quicker (particularly relevant post RDR):
- Ask for deposits – Do not start work on a project until you have been paid a deposit. If the client is not willing to work in this way, walk away. They will only be a nightmare further down the line.
- Staged payments – Don’t leave a massive payment to be made at the end, split the project up into its key milestones and look to invoice regularly throughout.
- Reduce your payment terms to ‘by return’ – If you give 30 days credit, you cannot start asking for the money for 30 days. This is crazy – it is the banks that should be lending to businesses right now, not you! Change your payment terms on invoices to ‘by return’ and you’re then able to ask for the money sooner.
- Be upfront – State your terms in your ‘terms of engagement’ document. It won’t stop clients trying to negotiate, but at least you can start the discussion on your terms, not theirs.
- Retain leverage – Don’t e-mail over the final report or complete the pension transfer until they have paid for it. Once the project is completed, you’ve got no leverage.
- Have a system for getting cash in – Review your debtors at least once a week and allocate time to make phone calls to get the cash in. If you’re not comfortable doing it, find someone that is.
Really get to grips with the numbers
Unless you really understand the important numbers in your business, you’ve got no chance of increasing your profit. And we’re not just talking about understanding your accounts here. There are everyday numbers within your business that will be crucial guides to how you are doing. We help our clients set up dashboards for their businesses, to ensure you are regularly reviewing the numbers that are important to you.
Every business is different, so we’re offering 30-minute telephone reviews for any small business who needs help setting up their dashboard. Get in touch if you’d like to arrange this (no charge for this initial chat).
Prioritise sales & marketing
We’re Accountants, so we’re not going to start dispensing marketing advice. However, when we did our research, we noticed that the clients that make the most profit mentioned that a key turning point for them in their growth journey was when they decided to prioritise sales and marketing. We spotted a number of common traits amongst the top performing advisory firms. They all had the following:
- An individual responsible for sales and marketing (it didn’t fall in between 2 directors).
- Allocated time to complete sales activity, e.g. every Tuesday & Thursday, or the first 2 hours of each day.
- Targets for generating opportunities, e.g. number of meetings required per week.
- Kept track of the key stats, e.g. where the client heard about them, number of meetings, value of assignment, conversion rate, final project value.
- A plan – Not ‘War & Peace’, but a simple one page plan that showed them what they were going to do this month to generate clients.
Do you prioritise sales and marketing in your business?
Make your projects more profitable
It’s one of the biggest challenges that advisory firms face: Delivering great client service, whilst still making a profit. We see so many firms walking the tightrope between keeping the client happy and ensuring that the scope of the job doesn’t creep beyond the original boundaries – how many times have you said yes to the question “Can you also help me with this?” but then not charged for this additional help? The reality is that there is no simple answer to solving this challenge, but there are lots of little things that you can do to help you achieve more profitable assignments.
Much will depend on how you are doing things at the moment, so get in touch to discuss how you can create more profitable projects. We’ll happily spend 30 minutes on the phone chatting through a few ideas that we have up our sleeve.
Get out of the day-to-day
This is easier said than done, but unless you step away from the coal face, you’ve got no chance of generating sustainable profits. We noticed that the top performing clients we surveyed were masters at delegating and building teams around them that could do the work. The founders were brave when it came to recruiting (they did it early) and were constantly looking ahead to help plan what resource they’d need, including investing early in apprentice paraplanners and training them up for the future.
If you feel that you’ve not got the right team around you to delegate to, then you need to do something about it…. and fast. You’re also going to have to get really good at letting go of the day-to-day tasks, to allow you to concentrate on the bigger picture.
If you’d like to build a super-profitable advisory firm and are looking for an accountant to help you get there, get in touch via firstname.lastname@example.org
Peter Czapp; thewowcompany.com