Mark Lee talks to accounting consultant Jason Dormer about the key areas where small firms of accountants and bookkeepers consistently fail.
Having founded his own award winning accountancy firm in 2005 - starting as a sole practitioner working from home, and growing it to a company of six trading from its own purchased premises - Jason Dormer knows a thing or two about making it in practice. His latest project, Seahorse (UK) Ltd, is an advisory service aimed at helping start ups and existing small firms of accountants and bookkeepers through the difficult first stages of establishing themselves, right through to growing and developing their client base.
“Being a good accountant or bookkeeper isn't enough to make you a good business person”, he says. In the early stages, it's important to recognise your limitations, as well as what you can do well, and try to work on those. While many issues are unique to the individual setting up their practice, there are a few common errors that Dormer has seen time and time again. Below, he outlines the top five slip ups.
1. Missing the bigger picture
“I made a big mistake when I set up my accountancy practice”, admits Dormer. “I personally did all the operational work, administration, client inception, liaising with HMRC, marketing, strategic work and even answering the telephone all day. I was a busy fool”.
This experience taught him that he needed to invest in staff in order to grow the business, and he subsequently hired another accountant and an administrative assistant with good marketing skills, which freed him to systemise the operational work and work on other aspects of the business.
“I wanted to get out of the trap of doing client work full time and neglecting all other areas”, he says. It's not an uncommon problem for start ups, but while finances may be tight at the start, practitioners shouldn’t miss the bigger picture. “Client work is only one aspect of the business and you can't be as successful as you want to be without ensuring that every aspect of the business is given sufficient attention”, he says.
"Although we advocate value pricing, some firms prefer traditional time based billing, which we respect. However, on asking several start up firms what their profit requirements are annually and then what their charge out rates are, it becomes clear that the profit requirement cannot possibly be reached", says Dormer.
"It has surprised us that some accountants and bookkeepers are not paying sufficient attention to this vital area of their business. Some firms are not putting their skills into place with regard to pricing".
3. Lack of planning
Dormer says he was surprised at the number of firms operating without a business plan and with no clear direction of where the firm is heading. "Without clear goals and objectives, success cannot be accurately measured", he argues.
"We feel that marketing is one of the most important areas for any business and in this current economic climate, even more so. Many firms are not pro-actively marketing their business. This can be remedied for relatively low cost, usually with considerable return".
5. Empathy with clients
"Our research indicates that the main complaint about accountants and bookkeepers is that they're not in tune with clients' requirements. This is easily resolvable and can be fundamental to a successful long-term relationship between firm and client. Some clients want pure compliance work, whereas others value hand-holding and availability, pro active business and tax advice, regular updates, or just a friendly chat from time to time (without the jargon)".
"Owners of small businesses can lead a lonely existence and sometimes just want a sounding board. Each client is different and a successful practice should establish exactly what the clients' requirements are from the initial meeting. Additionally, clients may be increasingly reliant on their accountants in the current business climate and will expect them to be more pro active with regard to credit management and control, budgeting, cash flow planning and other related services".
Challenges breed opportunities
"There's no doubt that this is a testing time for both start ups and existing firms - insolvencies are up and the construction industry is on its knees. Clients who are managing to trade through the recession and more cost conscious than ever before, whilst at the same time demanding more from their accountants. Clients will no longer stay out of loyalty if the service and price and is not what they demand".
The good news, argues Dormer, is that every challenge brings with it new opportunities. "Firms that keep their costs down by maximising efficiency through software, systems and resources, whilst providing value added services on top of their compliance, work will continue to prosper".
He also suggests that learning to market your firm efficiently, as well as networking and developing strategic alliances is essential, "accountants who do this will continue to obtain new and profitable work".
"The current economic climate gives us all the perfect opportunity to show what we are made of and reiterate the importance of the accounting profession to the wider business community. Firms who continue to support struggling businesses will reap what they sow when the good times return".