How well are you doing? It is often hard to tell whether your practice is growing, holding the same or shrinking. By simply tracking billing revenue and number of clients you may not be seeing a clear picture. There are a number of key questions to ask yourself to better understand the health of your practice. The top ten might include:
- How much was my gross billing? How did this change versus last year?
- What is the average revenue per client? How did this change versus last year?
- What were the # of tax returns filed by type?
- Do you segment your client base? Common segments might include:
- Active clients
- New clients
- Inactive clients
- Business versus Individual client base
- Clients by age
- Clients by life cycle
- Clients by billing amount/profitability
- How is your active client base performing versus last year? # of returns? Billing amount?
- What is your retention rate of clients from last year? How does this compare from previous years?
- What is the average life of an active client?
- What is the life-time value (profitability) of the active client base?
- How do your new clients find you?
- Why do your clients leave?
Certainly, asking the questions is important, but spending the time to get this information is a waste if you are not prepared to take action upon your learning.
Growing Your Practice
Set Goals. Before making any grand plans, you will need to decide what the goals for your practice might be.
- Perhaps you are happy with the size and scope of your practice. In that case, your goals might be centered on retention of the current client base.
- Perhaps your goal is to specialize in Schedule C filers. Then you'll want to target small business and home-based businesses.
- Perhaps you are interested in rapid growth or in growing your electronic filing.
Whatever the case, it is well worth the time in the off season to decide what you would like to be and then set appropriate goals to realize your vision.
Understand Your Point of Difference. The act of growing your practice is directly related to understanding who you are to your clients and deciding what makes you different from all other practitioners in your area. Remember, there is a reason clients return to you year after year. In other words, why do your clients choose your service versus someone else? Here are some possibilities:
- Your Location
- Your knowledge of relevant tax and accounting information
- Your fees
- Your availability
- Your turnaround
- You manage to save them money
- Inertia (yes, this is a valid choice)
- Something else?
Research. If you do not know why your clients enjoy using your firm, perhaps you should field a client survey each year to determine how well you fare in the eyes of your client base. This ongoing survey also allows the savvy professional to measure the satisfaction of your customer base over time.
Example. Joe's Tax Shop routinely asks clients to rate their overall service on a five point scale; 1=excellent; 2=very good; 3=good; 4=only fair; 5=poor. At the end of the filing season Joe averages this question and finds the average for his firm this year is 2.32. Upon review of last year's survey he finds the average was 3.15. This gives Joe a top line indication that, on average, his 750-client base is more satisfied than last year. If the average were 4.2, Joe would want to dig into understanding the possible problem(s).
Put Your Knowledge into Action. Once you've decided what your point of difference is and what your goals are for your practice, you'll need to decide what action you should take.
This is where your practice segmentation comes in handy. If you start by segmenting clients as Active clients, Inactive clients, and new clients you have the beginnings of a very fertile way to maintain and grow your practice. Look at each segment on it's own merit:
Active Clients. If your retention rate is high, you can assume that your current activities are doing a nice job in keeping clients. But if your active client base is declining, you need to think about taking special steps to understand why and take action to change the trend.
Note: In service businesses like accounting and tax preparation, it is much more expensive and time consuming to find a new client than to retain one you already have. Unfortunately, most firms spend more time and money trying to find new clients than taking care of the profitable clients that they already have.
Some ideas to create a favorable impression with your current client base:
- Thank you cards
- Birthday cards
- Client personalization (Record names of children, pets, and grandparents. Make note of any hobbies or special situations...record all this in a client file and review them prior to any appointment).
Inactive Clients. First and foremost you need to understand why a client did not use your service last year. At the very least a note or phone call telling your past client that you missed them is in order. It will give you an opportunity to recover the business and, at a minimum, understand why they went somewhere else. Be prepared with an offer to get them to come back to your offices. Some ideas:
- A free tax planning session
- A review of their net worth
- A free budget review or W-2 review
Note: Only try to recover high value clients. It is absolutely appropriate to fire a customer or "allow" a non-desirable client to fire you. As long as you understand why you are taking the action.
New Clients. If your firm goals include growing your practice, you will want to establish a program to get the right prospects to put your firm on their short list. In this aspect you can learn from some mighty marketing companies like Proctor and Gamble. The principals are simple, yet few apply them with any regularity.
- Determine who you are and what makes you different from other alternatives.
- Decide whom to target. Define your ideal client...this is your target market.
- Position yourself to this target with your point of difference.
- Build awareness. You may be the best tax professional in a 100-mile radius of your office, but if your target client does not know you exist you do not stand a chance.
- Build impressions. You cannot get someone's attention by one simple message. You need to make sure that your name is in front of your high potential customers as many times as possible. It might take the form of referrals from other clients, or it might be phone calls, newsletters, advertisements or an integrated mailing campaign.
Note. Large consumer marketing companies learned the frequency technique many years ago. They often use a communications yardstick that measures how many times their target customer sees their message over a four-week period. Remember Mr. Wipple "please don't squeeze the Charmin", that frequent message built a large consumable paper business.
Generate Trial. Give your prospective clients a reason to come to your office and try you out. Do not under estimate the value of having a possible client drive to your office and begin to establish a relationship with your firm. The accounting and tax preparation business involves sharing a private part of most clients' lives...their financial condition. Anything you can do to make this easier will aid in landing the business. As with inactive clients, try using an offer to generate the first visit. Some ideas:
- Free planning session
- Free review of last year's taxes
- 10% off filing this year's taxes
- Free give away...calendar, etc.
Timely Follow-up. If you see a prospective client, be sure to follow-up your conversation with a note and a phone call. Never forget to say thank you for their consideration. While it may feel uncomfortable, you would be surprised how many forget this simple business principle.
Hint: Ask your current clients for referrals. Word of mouth testimonials are often your best advertising.
Using Digital Tools
Web Sites. Web sites are becoming a necessity for today's accountant. And while web sites have not yet proven their worth as an effective "regional" selling tool, they have become a vital tool to provide service to your client base. But to be effective you must:
- Announce your new web presence to your client base on your letterhead, business cards, and other client communications.
- Use your web site to promote your expertise.
- Drive potential clients to your site so they can see exactly what they get when they choose your services!
- Use your website to build community. Clients that frequently use your site will feel more loyalty to your practice. Use some common tools to attract frequent visits:
- Tax topic answers
- Due date calendar
- Secure information transfer service
- Accept client payments
- Provide helpful links
- Promote/advertise your firm
- Financial calculators
- On-line tax update newsletters
Think of your website as a storefront that is always open and always ready to promote your practice.
Email. Gathering client emails and using them in your communications is another cost effective way to enhance your retention. Some common uses of client emails:
- Monthly firm newsletter
- Confirm appointments
- Thank you and birthday greetings
- Notify clients of missing information
A Final Thought
If you are to remember one secret to building a successful accounting firm consider this: Every time you touch a client, whether it is a phone call, a note, a visit, a tax return or a greeting on the street remember, you are making an impression. And EVERY "impression" counts. The sum total of positive impressions generally means more business.