Key Drivers of Success for Accounting Businesses

This is just a glimpse of what’s inside our 2024 Accountants Benchmark Report. Dive into the latest industry trends, key performance metrics, and expert commentary from Rob Nixon.

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Success Drivers

I believe that for how smart you are, for how much value you add, and the risks you take, you do not make enough money and you work waaay too many hours!

You probably agree with that statement. But what to do about it?

The old saying is “if nothing changes, nothing changes.” If you are serious about changing your current situation, then you need to first understand your numbers, be unhappy about them, and then take action to change them!

To change, you need a healthy discontent for the present. 

It’s a 4 step process for change:

Getting the balance right between all of your key metrics is crucial to your success, enjoyment, and likely your physical and mental health.

GOAL: Some realistic numbers to strive for are >$1M profit per Partner (after tax) while the Partners are working less than 500 client delivery hours.

It’s been achieved by so many that we’ve had the privilege to coach over the years. It’s really not that hard to do – but it does take time. Of course, you need more than $1M in revenue to achieve it!

The next table has a whole series of key metrics. Based on 30 years working with Accountants around the world, the ‘Benchmark’ column is what any committed, coachable, and growth-oriented firm can achieve.

To work out your numbers, divide or multiply your numbers based on how many Partners you have. E.g.: A 4-Partner firm should 2X all numbers up to and including profit; a sole owner should divide by 2.

The list of ‘Benchmark’ numbers is only a guide. For example, a firm I previously coached does $17M as a sole owner with over 1,000 business clients.

You can make your numbers whatever you want them to be.

The ‘Closest Result In Survey’ column are the complete numbers of one firm in the survey. This firm is highlighted in more detail in the ‘Administration to Partner’ metric later in this report.

You can mix and match your numbers to suit your business model. For example, to achieve your ideal numbers, you could increase the average fee per client and reduce the client count. You could increase the AHR and reduce the hours/headcount. You could set up a team offshore, increase the headcount but reduce the salary investment. And so on and so forth.

One of the key drivers to AVOID is increasing chargeable time/utilization or billable hours. Pushing that number is a recipe for disaster, especially when it involves more chargeable time from Partners.

However, maybe you’re happy being the practitioner doing the majority of the work. That’s OK as long as you realize you have a business that will have a low ‘Sustainability Index’ score, you’ll be working long hours and your practice (this is not a business) will not be that saleable – unless you go with the sale.

The traditional model is driving time. Effectively turning the business into a labor for hire business. The more labor you have, the more hours they produce, the better it is. No, not quite.

You’re not in the labor for hire business. You don’t sell hours. You sell what you know. You sell your intellectual property. 

If you promote and drive billable hours or productive time, then you’re encouraging time padding, job hogging, time wasting, write-offs and overall, an unhealthy long hours culture.

If you operate under a fixed fee model, then you are incentivized to do the same task in the least amount of time possible. Less time on the clock, not more. 

Don’t get me wrong, I like a healthy mix of ‘time on the clock’ – around 70% for Accountants and 25% (and reducing) for Partners. That model leaves enough time to grow and develop the business.  

Productizing what you do and driving average hourly rate as high as possible (not necessarily with high pricing) while reducing hours is a far better business model for all – including clients!

 


 

PS. Whenever you’re ready…here are 3 ways we can help you improve your Accounting firm.

  1. Download the full 2024 Accountants Benchmark Report – Download here.
  2. Learn from other firms who have already ‘done it’… Click here to view.
  3. Apply to be coached by us in our Mastermind program. For firms $1M – $10M in size who want to work significantly less and earn significantly more. We guarantee the results! If you’d like to explore if this will work for you simply – Apply here.

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