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The Growth Equation You might be Overlooking
As accountants and bookkeepers, we often equate growth with acquiring new clients. But what if significant growth opportunities already exist within your current client base? Enter the "Power of 5" – a concept that could transform your practice without the constant chase for new business.
The Power of 5: A Simple Framework for Growth
The Power of 5 focuses on five key drivers that, when optimised even slightly, create compound growth effects:
- Leads
- Conversion Rate
Customers = Leads x Conversion Rate
- Average Sale Value
- Number of Transactions (or Frequency)
Revenue = Customers x Average Sales Value x Number of Transactions
- Profit Margins
Profit = Revenue x Profit Margins
While leads and conversion rates matter, let's focus on the goldmine many of us overlook: extracting more value from existing relationships.
Quality Over Quantity: Reassessing Your Client Base
Before pursuing new clients, ask yourself: Could your practice be more profitable and enjoyable, with fewer clients?
Consider implementing a Net Promoter Score (NPS) survey to gauge satisfaction, but remember that the most valuable insight comes from how clients vote with their wallets. Happy clients purchase additional services and refer you to others.
Optimising Your Average Sale Value
We've all seen it: when accountancy firms are acquired, the first lever buyers pull is pricing. Yet many of us hesitate to raise our rates, even as inflation erodes our margins.
The risks of maintaining outdated pricing are significant:
- Your team eventually demands well-deserved pay rises
- Your margins steadily compress
- When you finally implement increases, clients face multiple years of adjustments at once
The solution? Small, regular price increases. Annual adjustments feel reasonable to clients and maintain your profitability.
Capturing Missed Revenue: Finding the Leaks
Think of these as revenue leaks that, once plugged, immediately improve your bottom line:
1. Unbilled Work Beyond Scope
We identified a major issue: work completed but not included in client proposals. Our solution was implementing "work orders" – mini-project scopes that clearly outline additional services.
To build team confidence, we permitted zero-value work orders initially. Client responses typically fell into three categories:
- Immediate approval
- Client handling the work themselves
- No one completing the task
This process trained both our team and clients to better value our time.
2. Software Cost Recovery
Are you properly passing through software costs to clients? Many firms lose significant revenue through:
- Outdated pricing after subscription changes
- Administrative friction in updating client charges
- Incomplete tracking of software utilisation
Using Socket's Price Monitoring, you can easily see what you are paying vs what your clients are paying for software.
3. External Data Verification
Cross-reference your billing against external sources. For example, compare registered address services against Companies House records filtered for active and dormant companies. You'll likely discover unbilled services.
4. Volume-Based Pricing Adjustments
When underlying service volumes change (additional employees on payroll, increased transaction processing), prices should adjust accordingly.
I once mistakenly absorbed volume increases while maintaining flat pricing. When the client's business slowed, they immediately requested fee reductions. I had focused on the headline value rather than the margin. Though we eventually lost the client, the freed capacity quickly placed us in a better position.
Increasing Transaction Frequency
If you're billing annually, consider transitioning clients to monthly retainers with direct debit arrangements,even if just for software costs initially.
For compliance-focused practices, shift from year-end accounts to offering VAT return reviews. This delivers two benefits: increased work frequency and opportunities to maintain cleaner records throughout the year.
Do your clients know your full service range? Do your team members? We've all lost clients who left because they didn't realise we offered solutions they needed.
As your team builds confidence, expand into monthly, weekly, or even daily services—from bookkeeping to supplier payments and credit control.
Expanding Your Service Offerings
Know Your Services
Create a comprehensive inventory of your services. Ensure both your team and clients understand everything you offer. The knowledge gap might surprise you.
Strategic Upselling
Identify natural service extension by using Socket Insights.. If you're handling payroll why not offer them Telleroo? You might also look to offer an additional service like paying suppliers too? This delivers additional value to a related service that they might not have considered.
Leveraging Technology for Growth
Implementing these strategies requires systems that create visibility and efficiency. Modern practice management technology can help you:
- Create and manage work orders
- Implement bulk pricing updates
- Monitor and report on pricing trends
- Analyse client profitability
With the right tools, transforming your practice becomes significantly more manageable.
Your Hidden Goldmine
You might not need new clients to grow significantly. By focusing on your existing client base and optimising operations, you're likely sitting on untapped potential.
In fact, you might benefit from parting ways with difficult clients to create capacity for serving those who truly value your work. Hesitant? Consider using strategic price increases to help make those decisions.
Remember, mastering these strategies in your own business not only drives growth but equips you to offer valuable insights to clients, further cementing your role as a trusted adviser.
Are you ready to unlock the value already within your practice?
