Categorising your accountancy firm’s clients for the future

Do you ever think about how your practice and your client base might be impacted in the next few years by changes in technology?

Historically most clients stay with their accountant for many years. They generally move only when they feel their accountant doesn’t care enough about them, puts their fees up significantly or messes up.

What we are likely to see more and more of over the next few years concerns what I might call ‘simpler’ clients, deciding that they don’t need an accountant any more. It won’t be long before they decide that it has become so easy to go the DIY route; and that their accountant doesn’t provide sufficient peace of mind or added value to justify continuing to pay them an annual fee.

In this context I would suggest that it makes sense to consider the impact of such changes on your client base by categorising your clients in terms of the level of service required, the amount of time they take and their future value to the practice.  I have summarised this approach as follows:

  1. Complex (or sophisticated) clients – those that require advice to resolve issues on a regular basis
  2. Ambitious clients – those that recognise they benefit from your business advice, but whose affairs are not very sophisticated or complex
  3. Typical OMBs – the majority of  ‘Owner Managed Business’ clients
  4. Sole traders, consultants, contractors – those swapping their time for money and whose growth is therefore limited by the hours available.

This is quite distinct from more traditional categorisation approaches, such as the ABCD client types I have referenced before:

  • A = Best clients (however you define them)
  • B = Those with the potential to become A clients
  • C = Those who are no trouble but are unlikely to become A clients
  • D = Those you’d rather not act for.

Most accountants know only too well who are their D-list clients 😉

Each accountant will set their own criteria for ‘best’ clients. Fee levels may have a bearing but so too may other factors such as the range of services required, each client’s attitude to you and to paying decent fees as well as their propensity for referring other good clients to you.  Clearly you want to nurture and keep in touch with your A-listers. Many, if not all of them, will be Complex or Ambitious (as defined above).

The distinction between clients on your B-list and C-list is less crucial. If you ever get this far, the value comes in identifying those B-listers who, with some encouragement could become A-listers. And those C-listers you want to retain even though they aren’t contributing very much. Crucially, they are good payers and nice to deal with so should not be confused with D-listers.

In contrast, the four new categories I have highlighted are intended to focus attention on those clients most at risk as compliance work becomes more commoditised, as clients become more familiar with cloud accounting systems and as AI further simplifies the role of the traditional accountant.

My conversations with sole practitioner accountants suggest that the vast majority of their clients are in categories 3 and 4 above.

Looking at them in turn:

Sole traders, consultants and contractors –  The liklihood is that these clients will have less need, than they do now, for accountancy support in a few years’ time. Much of the recurring compliance focused service they get from you will fall in value due to the increasing popularity and ease of use of bookkeeping apps and new simplified tax filing obligations. And so the fees that such clients will be prepared to pay you each year will also be lower (or maybe non-existent!). Chances are they won’t be paying more than now or requiring much in the way of ongoing advice.

Typical Owner Managed Businesses – Much the same will be true here as for the sole traders etc. I distinguish them though as they could grow, so they may have more potential for additional services and advice. They may also need help with more frequent enquiries from HMRC. The question will be whether you can ensure they appreciate the value of the advice you can provide to them and that they are willing to pay decent fees to you for such advice.

Those clients you want to encourage and retain are those in the first two categories (Ambitious and/or Complex). The sooner you start focusing your attention  on winning and retaining such clients the more confident you can be that your practice will survive and thrive in the future.

To what extent do you currently attract and advise Ambitious clients who recognise the value of your business advice (and are both willing and able to pay for this)? And also those ideal (for many) clients, whose affairs are Complex such that they regularly require your advice on a range of issues? These might include: property/business acquisitions, sales, HMRC challenges, specific tax incentives, anti-avoidance rules and so on. If you do not consider these to be areas of expertise at the moment I would encourage you to expand your skill set so that you are better placed to retain these clients in the future and to win new ones too.

Larger firms have long recognised the importance of focusing on clients who fall into the Complex and Ambitious categories. Historically though this has been because the smaller and less complex  clients are less economic for bigger firms to service. Imminent developments in technology mean this could well become the same for smaller firms too.

Does this analysis resonate with you? If not, how would you  categorise your clients for the future?

What’s next?

Once you have categorised your clients you can start to forecast the likely impact on your firm’s finances and resource requirements. Historically you may have assumed that little will change in the foreseeable future. I have echoed these views for a long time now. But we are now approaching a tipping point. You can probably continue with those assumptions for another couple of years but I’d strongly encourage you to forecast what might be happening thereafter. Then you can start planning now so that you don’t lose out or have to panic as you play ‘catch up’.

If you’d like to have a chat about how you can promote and build your practice so that it is sustainable into the future, feel free to book a call with me >>>

Why your current client base may not survive into the future. A new way of analysing an accountant's client base. Click To Tweet
By | 2018-01-23T09:27:15+00:00 January 23rd, 2018|Accountants, Future|

About the Author:

Mark Lee FCA is an accountancy focused futurist, influencer, speaker, mentor, author and debunker.

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