As those who are old enough might remember, the federal government gifted every business owner a $200 voucher in the year 2000 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 who had become ‘tax collectors’ on behalf of the government.
It was a turbulent time for business owners and accountants alike. Thinking back, not many industries benefi ted from the introduction of the GST – but, for accountants, the new system seemed like a fairytale. Almost overnight, fees jumped by 30 per cent and, if you apply the traditional ‘dollar for dollar’ valuation method, the value of most small accounting firms also rose by 30 per cent.
Business owners leaned heavily on their accountants during the transitional phase after the GST’s introduction, and it cemented our role as ‘trusted business advisers’. In the early stages of the new tax system, the profession was booming.
Several years later, the GST was still seen as the gift that just kept giving for accounting firms. Quarterly BASs 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.
But within a few years, this fairytale began to fracture. The laser-like focus on compliance work reduced many firms to
nothing more than compliance sweatshops. They remained busy, but many firms failed to translate the work into bigger profits.
Ageing client base
Fast-forward to 2014 and the fairytale has turned into a nightmare for many baby boomer practitioners.
The GST boom disguised the need for marketing. Some firms even pulled up the drawbridge on new clients, and the total focus for a decade was to get the work out the door and meet the deadlines.
In the process, these firms ignored the fact that their client base was ageing. As a result, today we find a large number of firms – including sole practitioners, small firms and even larger practices – have a client base loaded with 50 to 65-year-olds, still primarily focused on compliance issues.
These clients don’t refer like a client base full of 20 to 40-year-olds; they aren’t connected to people starting businesses like the younger generation; they don’t have a wide social network anymore; and they are generally in wind-down mode. Firms expecting large numbers of new referrals from such clients are on an old designer drug I often refer to as ‘hopeium’.
Some firms respond to this problem by moving into acquisition mode, aiming to prop up their fee base, retain their
young guns and offer them partnership opportunities. But in Victoria, for example, we have more than 200 registered buyers and only a handful of vendors. And often this top-up strategy is really buying more of the same problem: ageing, fee-sensitive clients, who are slow payers.
This is an expensive option, with prices of firms with annual revenue under $800,000 still attracting ‘dollar for dollar’
sale prices in metropolitan areas. Ironically, those firms often have the same ageingclient- base issue.
Attracting the online client
You now need to target your ideal type of client and produce quality original content for your website, blog and social media channels. You need to deliver great service, so your clients share their story and refer new clients. You need to measure what is working and what is not working.
Incredibly, fewer than half of the accounting firms in this country have a website – and of those that do, 90 per cent
just list the ‘who, what and where’ of the firm. These billboards are not marketing magnets and they certainly don’t contain remarkable content. While some of 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. These sites are built by graphic designers, not marketers. And they provide no value to their target markets.
For instance, most larger firms send their clients newsletters full of the latest tax changes and case law. Here’s a wake-up call: clients don’t want to do a master’s 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, as well as wealth-creation tips around tax-effective strategies like self-managed super funds
and negative gearing.
The Gen Y challenge
Mid-size firms full of baby boomer principals looking to retire in the next few years aren’t immune from this generational change.
Being larger, they aren’t as agile as the smaller firms. The partners’ meetings focus on debtors and work in progress, rather than niche markets, blog topics and marketing. Bigger firms often don’t see the ageing client base issue coming because the partners are responsible for their own fee parcels, but if all the partners are in their late 50s, then they could see large numbers of clients selling, retiring and dying over the next few years.
The regeneration of new and younger clients is not a quick or easy process and it requires strategic planning and the right online tools. These bigger firms might find they are arguing over the value of their equity when the young guns see the age profile of the top 30 clients. Often, these clients mirror the demographic of the exiting partners. Gen Y accountants (20 to 37-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.
As an exercise, 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 per cent or more of your top clients are aged over 55. If they retire, sell or die 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 funnel.
Relying on ‘hopeium’ is a flawed strategy.
