Benchmarking report reveals strategies that lead to highest fees and growth

A recent benchmarking study shows the average bookkeeping and accountancy firm in the UK is growing by 12% and  bringing in an average of £91,200 revenue per employee.

The findings are from  the Accounting & Bookkeeping Industry Performance Report 2018  – a survey of 939 firms servicing small business clients in the UK. 342 of the respondents were sole traders or small firms employing fewer than ten employees.

The survey  was conducted by software vendor Xero and gives a picture of how practices are diversifying, and  results achieved from different business development  strategies.  It also looks at patterns  in client management, marketing, pricing, billing, employee compensation and advisory services.

Growth from client churn and start-ups

One factor behind growth is the surprising number of small firms are switching accounting provider. Nearly half of new clients are switching from another firm – a trend that would mean around 224,000 firms nationwide are changing provider each year.

The researchers claim clients are switching because they want accountancy professionals with technological know-how who can provide cloud-based services.

The second biggest source of clients is new start-ups. Researchers claim this creates a significant opportunity for companies with a good marketing strategy.

However, accountancy practices are generally reluctant to invest in marketing. Some are not sure of what they are doing, others not sure if it would work. So most don’t try, resulting in low marketing spend across the sector.

 

The best are much better than the rest

The report didn’t just look at the average performance of accountancy firms, it also analysed the top-performing 15%.

The data showed that the performers were significantly better at recruiting clients (graph), and scored higher fees as a result (see table below). This could be attributed to marketing, business strategy or a combination.

 

Growth in client numbers by age of firm



The best techniques to grow

The report looks at twelve different business approaches accounting specialists use to grow their businesses, and analyse the results performance in fee levels and client growth.

  • The most adventurous or advanced service offerings claim the highest fees. But they brought only average levels of growth.
  • The fastest growing companies were: those one the same wave length as their customers, offering a personal advisory touch (16.7%); or those that were tech-loving enthusiasts (17.3%).
  • The one-stop-shop, we-do—it-all businesses scored lowest in terms of growth (10.1%). Though their revenue per client was £2570.

Benefits reported from offering online services

The report  looks at the benefits of moving clients to cloud based services – not surprising, given it is funded by a software company. More online clients are said to lead to:

  • Fewer regretted client departures (and more client acquisition).
  • Lower overheads and much higher revenue contribution per employee.
  • Higher employee compensation.
  • More consultancy opportunities, due to closer working relationships.

 

Advisory services

Advisory services are proving an effective way for practices to diversify and make money. The average revenue from these services was £124,6000. The top 15% scored far higher – an averaqge of £382,700.

Firms that have forged ahead in consulting and advisory services are tending to charge two blocks of fees: one for compliance, and another for advisory services. The fees for compliance work are slightly lower. But that’s because the advisory work brings almost as much income again, rather than being thrown in as a sweetener to justify a slightly higher compliance charge.


Advisory services

Further information

For more insights from the Xero benchmarking study, download a full copy here.

Appendix – the 12 business growth strategies

 

 

David Nunn is Content Manager at AAT.

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