If you want to grow your accounting firm, you may think the answer is to take on more clients. New clients may add profit, but attracting new clients can be both a time-consuming and costly process. There are sales initiatives to coordinate. Marketing campaigns to run. And plenty of networking, schmoozing and warming up of prospects and targets to do.
But is this the only way to grow your practice? In fact, there's great value in forgetting about new clients and putting your money and energies into retaining your existing clients.
It seems like common sense to focus on attracting new clients if your plan is to grow the firm. More clients = more engagements, more fees and more revenue streams, after all.
But how much does it actually cost you to win over these new clients? It can cost five times more to attract new clients than holding on to the valued clients you already have costs. Focusing on new business may sound like the answer, but in reality it’s an expensive and time-intensive way to expand your practice.
Research into client retention from Bain & Company and the Harvard Business School found that a 5% increase in customer retention could increase profit by 25% to 95%. That’s a startling stat when you first read it. By focusing on taking care of your existing clients, and making sure they remain satisfied customers, you can greatly increase your profitability.
So what can you do to push client retention as a growth strategy?
Let’s think about the actual return on investment that you get from your very best clients. And let’s also reflect on the true value you add for these top clients.
The Pareto Principle states that 80% of consequences come from 20% of the causes. If we apply this to accountancy, experience will tell you that the majority of work and revenue comes from the top 20% of your client base. These are the valued clients who are in it for the long haul.
Good clients tend to:
- Know and understand the value you’re bringing to their business
- Come to you for advice, trust your judgment and engage in higher-value work
- Be willing to pay higher fees for truly valuable work that drives their success.
If you can nurture this top 20% of clients, the rewards will become clear. Better working relationships, increased productivity and bigger fees – to name just a few benefits.
The top 20% of your clients are the icing on your portfolio cake. If you can retain them as customers, there’s huge potential to take on new projects and expand the business.
But how do you narrow down the good from the bad clients? One practical way to do this is to review your current portfolio. Give every client a grade, based on how closely they fit your concept of the firm’s ‘ideal client’.
Divide your client base into A, B and C clients:
- A = ideal client: these are the clients you love working with. The ones who listen to your advice and who see the value that you bring to the business. They’re the clients with the broadest range of projects and services – the clients you want to hang onto.
- B = average client: these clients are fine to work with, but really only ask for the most basic services. You do the accounts and basic compliance, but they’ve not yet realised that higher-value advice is a thing you can offer. You want to turn them into A-clients.
- C = bad client: these are the difficult clients. The ones who don’t follow your procedures, are late with filings and where the working relationship is less than perfect. They pay the smallest fees but take up a large chunk of your business time.
It will soon become obvious who your A and B-clients are. Focus your time, attention and business development on these valued clients. And look for any opportunities to start a new project, expand an engagement or move a promising B-client into the top 20%.
Then, when the opportunities arise, part ways with the C-rated clients and remove this drain on your time, resources and effort. It’s brutal, but if the relationship isn’t there, you need to cut them free.
When you understand your top clients’ ambitions, business goals and pain points, you can offer better advice. And with your time-wasting C-clients gone, you and your team have more business hours available to build these relationships.
Talk to your A-rated clients and find out:
- What they want to achieve in the next 12 months
- What their current hurdles are to achieving these goals
- Where they most need your help, advice and support
- Where they feel you could improve or refine your services.
The answers you get to these questions are the fuel for your advisory fire. Armed with this deeper understanding of each client, you can work more closely with them. You can provide solutions to their biggest challenges. And you can help drive them towards their largest goals.
The more invaluable you make yourself to the happy A and B-Clients, the less chance there is of the client jumping ship. And that’s great news for your client retention.
On the surface, accountancy may be about numbers. But being a good accountant and business adviser is all about being great with relationships. It’s a people-based sector, where giving brilliant client service builds the foundations for the firm’s growth and prosperity.
At MarketFinance, we know the important role that accountants play in every small business’ success story. We work closely with our business advisor partners to offer the resources they need. That might be the latest thought leadership for small business thinkers. It might be amazing access to loans and business finance for their clients. Or it may be our regular educational and networking events and webinars for accounting partners.
We’ll help you keep that top 20% of your client base happy and supported, so you can build long-lasting, productive relationships. That’s the true key to practice growth.