GST... The Accountants fractured fairy tale
How is it that some accounting firms are growing at phenomenal rates in 2014 and others are flat lining or in decline? To answer this question we need to rewind the clock back to the introduction of GST.
Cast your mind back to the year 2000. The Government gifted every business owner a $200 voucher to help them cope with the changeover to a new GST tax system. The voucher could be redeemed for computer hardware, software or training but it was really just a token gesture to soften the GST blow on business owners.
The ‘Gift’ Of GST
It was a turbulent time and thinking back, not many businesses benefited from the introduction of GST apart from the hardware and software vendors. Having said that, accountants were major beneficiaries. It seemed like a fairy tale because almost overnight fees jumped by thirty percent. If we use the ‘dollar for dollar’ valuation method this also meant the value of most small accounting firms also jumped up by thirty percent. Profits also spiked as business owners lent heavily on their accountant during the GST transitional phase. Accountants in public practice were booming and they cemented their role as ‘trusted business advisor’.
Several years later, GST was seen as ‘the gift that just kept giving’ for accounting firms. Quarterly BAS’s proved a much bigger challenge for business owners than first expected and most firms were busy dealing with the GST compliance explosion and the client shift from manual records to accounting software. A few years later, this fairy tale has fractured. The laser like focus on compliance has reduced many firms to nothing more than ‘compliance sweatshops’ and while they are busy, this hasn’t necessarily translated into profits. If you just offer compliance services to your clients you won’t attract your ideal type of client and growth will always be an issue. Outsourcing has somewhat commoditised compliance work and profit margins are being squeezed even tighter so you need to get marketing back on your agenda and soon!
Fast forward to 2014 and the fairy tale is fast becoming a nightmare for many baby boomer practitioners. GST disguised the need for marketing. The focus for a decade or more was to get the work out the door and we ignored the ageing client base issue. A lot of accountants still think that if they simply do a good job their clients will refer new business but a client base loaded with fifty to sixty-five year olds don’t refer like a client base full of twenty to forty year olds. Traditional marketing methods like Yellow Pages, local paper, TV and radio are in decline and in the digital age word of mouth is spread on social media channels including Facebook and You Tube.
In the digital age if you produce great targeted content, clients will come to you ... Produce great service and your clients will share your story and refer new clients. Too many accountants are living in the past and are on the designer drug called ‘hopeium’. They just assume and hope clients will refer like they did in the past. The new formula for success demands you create remarkable content, optimise that content for the search engines, publish the content, market the content through the blogosphere and social media channels and measure what is working and what is not working. Your website is your marketing hub and you need to be found online or else!
Bigger is Better?
Don’t be fooled, it’s not only small firms and burnt out sole practitioners that are spinning on their wheels going nowhere. A lot of large firms took their eye off the marketing ‘wheel’ and now find they are in exactly the same position. In fact, they are looking to buy fees to retain their ‘young guns’ and offer partnership opportunities.
Only a small percentage of firms are really active on social media channels and less than half of the accounting firms in this country have a website. Of those that have a website, ninety percent of them just list the ‘who, what and where’ of the firm. They are billboards not marketing magnets. They certainly don’t contain remarkable content and while these sites might be ‘pretty’ to look at, they won’t draw a crowd of visitors or new business. The content is shallow and often duplicated but most importantly, it provides no value to their target market.
The big firms are also guilty of sending out newsletters full of the latest tax changes and case law to their clients but here’s a wake up call - clients don’t want to do a Masters of Taxation by correspondence, they want to grow their business, their profits and their wealth. Your newsletters should be full of business growth strategies, marketing tips and the latest apps for business and wealth creation tips like SMSF’s and negative gearing.
Larger firms are generally full of baby boomer principals looking to retire in the next few years but if the firm is characterised by an ageing client base look out. Their older clients are selling, retiring and dying and they don’t have a marketing process or marketing plan in place that is filling their ‘pipeline’ with new prospects. Buyers will gravitate away from these firms and Gen Y (twenty to thirty-seven year olds) are already shying away from taking equity in firms of this type because they don’t want to invest in a ‘sinking ship.’
Here’s a bit of homework for you … write down a list of your top 20 fee paying clients in order. In the next column write the age of the business owner. You just might find that 70 percent or more of your top clients are aged over 55. If they retire, sell or pass in the next five years what will that do to the value of your practice, the saleability and the profitability? You need a marketing strategy that constantly feeds prospects into your practice and ‘hopeium’ doesn’t work.
Don’t Buy Your Way Out of Trouble
For many practitioners the ‘quick fix’ is to buy a parcel of fees but that isn’t easy as we have more than 200 registered buyers and only a handful of vendors in Victoria. Ironically, most of the vendors have the characteristics we described above so the ‘top up’ strategy is flawed with firms buying more of the same – ‘old’ fee sensitive clients who are slow payers. They might be buying clients slightly younger than their existing client database but you don’t have to be Nostradamus to forecast what lies ahead. Don’t be mistaken, the purchase option can be an effective strategy in some circumstances but it won’t fix the long term issue. You need to have marketing back on your agenda.
If your marketing and referral engines have stalled we invite you to attend The Accountants Top Gear Seminar on April 7. If you have an ageing client base or your fees and profits are flat lining then you can’t afford to miss this morning seminar. Some firms are absolutely booming and we’ll lift the lid on their marketing success and reveal the breakthrough marketing strategies that have given them a serious competitive edge. You’ll see the tools and the techniques that the fastest growing firms in this country are using to generate more leads, referrals and website traffic. You can read more about the seminar in this edition of The General Journal and it doesn’t matter if you’re a sole practitioner or four partner firm, these strategies work. You’ll get to see the components of their marketing ‘engine’ and look under the bonnet of a suburban accountant’s website that is generating more than $100k of new business each and every year. You’ll get to see the workings of a ‘marketing machine’ that is firing on all cylinders.
Until next time… keep marketing.
Click HERE to download a full copy of the March 2014 edition of The General Journal.
Other articles in the March 2014 edition of The General Journal:How to Make 2014 Your Best Year Ever
Video Killed The Radio Star (But Not The Accountant)
7 Reasons Why Buyers Won’t Buy Your Practice
Small Fish Are Sweet For Accountants
Wanted – New Breed Of CPA’s
Why Pay Dollar For Dollar When You Can Pay 5 Cents In The Dollar?