High performing firms do it differently – they use dual screens
April 16th, 2010This article comes from Rob Nixon and makes for interesting reading. Here is one interesting statement:
When HPFs get more efficient the price does not go down with the efficiency levels – it often goes up. HPFs have intranets, electronic working papers, two screens on every desk, proper document management systems and do not have physical filing systems – it’s all electronic. They start jobs on screen, finish on screen, file on screen and retrieve on screen.
The full article is below (reproduced with permission)
High performing firms (HPFs) have high performing numbers. After researching and working with hundreds of high performing firms since 1993, here are some common numbers that I see. High performing firms are achieving five or more of these numbers….
>50 per cent profit margin before directors salaries / drawings >$500,000 profit per equity director
>$200,000 revenue per full time equivalent person (including partners)
>$200 average hourly rate before write ons (WIP generated divided by client hours charged)
>plus 5 per cent write ons (no write offs at all)
<10 days in WIP at any time
<40 days in debtors at any time
<600 hours pa of director time charged to clients
<40 hours worked per person per week
<15 days job turnaround time (from time job in to job out the door)
<25 per cent salary costs (incl. super but excluding partner salaries) as a percentage of revenue
Now not every high performing firm has all of these numbers. If you had five or more of them you would be classed as a high performing firm. There are many firms in the world achieving these results and better. I use the 80/20 rule twice in this industry to find the elite firms. Out of every accounting firm in the world, 80 per cent will do very little to improve their performance, 20 per cent will do something and only 20 per cent of those firms will achieve ‘elite’ status. So I would only class about four per cent of firms in the ‘elite’ level.
The good news is every single accounting business in the world can be at this level – if they are prepared to change. The only reason you will change is if you have enough pain in what you are doing now or you are seeking pleasure on the other side. My research indicates that over a 41 year period (1964 – 2005) that profit per partner (CPI adjusted) increased a miserable 19 per cent at the lower quartile and a paltry 40 per cent at the upper quartile. Not even 1 percentage point per year over CPI – even at the upper quartile!
Most owners of accounting firms do not achieve the rewards that their intellectual capabilities are truly worth. The traditional business model does not work as well as it could. With the developments in technology and knowledge the industry has not changed. In fact, I think it has gone backwards.
Maybe you do not want to be a HPF. Maybe you’re just looking for an easier life. Here are some of the main traits I see in HPFs. See which ones interest you. It starts with the business model. The vast majority of firms are set up like a ‘labour hire practice’ and that is not the business you are in. You’re in the intellectual property business. You sell what you know, however the majority sell their labour. So the model of charge rate multiplied by time taken is typical. The high performing firms are selling knowledge as pre-packaged services and charging on value – not on how long it took to do the job. They do a job once, turn it into a product, and then sell it over and over again on value. Not re-creating the wheel every time a new job comes in.
High performing firms run enterprising businesses, not lifestyle practices. I get a bit cheeky and say it’s time to stop practicing – you’ve been at it long enough and you should be good at by now! The difference is more than just words. The difference is a corporate model with business / general managers running the business and the directors of the business following ‘the ideal role of an owner of an accounting firm’ model. Directors / owners should only be:
1. Doing high end chargeable work for the percentage of time that interests them
2. Nurturing existing clients
3. Leadership – new opportunities, new clients, new services, sales and marketing
4. Training and mentoring team members
All four of those are high dollar productive activities. Everything else could be classed as administration tasks. HPFs have a much keener focus on marketing and client service. They know that sales and marketing is crucial to the development of the firm. HPFs give better customer service than the rest because they know that they are rewarded in direct proportion to the value they create and the service they give.
HPFs don’t take on all types of clients. They say ‘no’ to many and are very selective with the rest. They know the clients will be loyal to the firm so they want to make sure that they are good people to work with. There is an abundance of work to get, there is a shortage of qualified people, accountants are the last ‘trusted advisor’ and you get 99 per cent of your new business via referral. With all of these things in your favour why take on all types of clients?
Service offerings in HPFs are different as well. HPFs certainly do the compliance work; however they are selling additional services that the clients really want and need, which means they are keenly interested in what clients really want. They promote the services and they leave nothing to chance.
HPFs are much more proactive then the rest. They don’t wait for clients to ask. They go to them. If you have ever had the question from a client ‘I didn’t know you did that’ then you have not been proactive in servicing clients. After interviewing 1077 SME clients on behalf of 129 accounting firms the biggest things the clients said was ‘we want them to be more proactive with us’.
HPFs invest more into their people then most firms. They pay well above average salaries, hire the best people and have the best environments to work in. They make sure that the right people are doing the right task – especially accounting team members not doing administration work and they realise that team loyalty is critical to the success of the firm and they do everything they can to retain the best people.
The systems in HPFs are different as well. They invest heavily into technology realising that the proper use of technology can make you more efficient, which helps improve margins and capacity. When HPFs get more efficient the price does not go down with the efficiency levels – it often goes up. HPFs have intranets, electronic working papers, two screens on every desk, proper document management systems and do not have physical filing systems – it’s all electronic. They start jobs on screen, finish on screen, file on screen and retrieve on screen.
External help is also important to HPFs. They are not arrogant to think that they have all of the answers. They know that someone has already done what they want to do. They hire chairpersons, consultants, coaches and they network with other firms who are doing things better than them.
Lastly, HPFs implement new projects all of the time. They are constantly looking to do it better and are prepared to change.
High performing firms are different. In the next 41 years, let’s not have research that indicates that the profession has not changed. Let’s make this year the year that you start a process of making a difference.
