Every business owner wants to understand the value of their business. But what does a great business look like with real enduring value?
Here are 5 simple steps to manage and track how your accounting firm is creating future value.
1. Maintain and grow your existing client base
Growth can really only occur by organically attracting more clients, delivering additional services to existing clients and or acquiring clients / fees (think acquisition) or having additional partners join your firm.
A simple mantra that a number of quality accounting firms are adopting is to focus on servicing clients that are genuinely seeking ‘advice’ and ‘multiple services’ through the one location or client contact. This maximises value for the client and the firm.
2. Be efficient and save costs while using technology
Today there are fewer reasons for your business process not to include the outsourcing of non-core functions, plus the active use of technology for internal efficiency and as an enabler for a more value added and engaging client relationship.
Ultimately, the considerations here are around scalability, repeatability, engagement and cost compression so that the firm’s most valuable resource – its people – are spending more time consulting and advising clients on their needs.
3. Adapt to industry change
When asked to complete a third party independent valuation, it’s important for an investor to look at the challenges facing the industry. When looking to buy equity, an investor would look at how a firm deals with future challenges from the medium to longer term.
Are they picking up on those trends and challenges?
How proactive are they being?
Do they have a clear vision of the future and where they fit?
By diversifying services and extending beyond simply the traditional scope of services an accounting firm would offer, the firm is giving their clients, and their people, more reason to engage on a more frequent basis.
These additional services provide the ability to build additional revenue streams and an additional asset base for future value.
Regardless of whether you build in wealth management services, finance or other complimentary services, the focus on services that build recurring engagement and therefore recurring revenue are ultimately more valuable.
Always ensure that you have an equity interest in the success of these additional services rather than simply a referral agreement.
You cannot build value if you do not own part of the asset.
4. Reduce key person risk and plan for succession
Future value is about allowing for the continuation of the accounting firm and not building a principal dependent business reliant on key people. Clients should ideally primarily gravitate to your firm because of its unique values, proposition, services and people, not just a person.
Transition or succession of partners and primary client contacts should be planned well in advance of any succession event based on the businesses goals and objectives, this all comes back to continuity for clients and a team approach.
5. Get a thorough and regular valuation
How an accounting firm is tracking in driving future value, can be checked by having a third party conduct a thorough valuation on a regular basis. It is also a periodic measure of the success of your business strategy and benchmark against the businesses goals and objectives.
Some of the more poignant considerations as part of any valuation of a firm and what someone else may be willing to pay when buying equity includes:
- The likelihood value will be maintained
- The prospect of it improving
- How the income is generated
- Any improvements that can be made to the operations
- Additional services that could be provided to existing clients
- Scale or consolidation benefits
- The number of new clients generated and how
- The age of the existing client base
- The underlying technology of the firm and its sustainability
- Key person risk
- Whether it is a business with a real and enduring value proposition, or
- Simply a collection of sole practitioners under the one roof
Ultimately, if an investor (internal or external) can see that a firm has an open culture of growth and evolution with client value firmly placed at the centre of its proposition then there will be opportunities to position that firm for growth.
We would really like to have a conversation about how Prime Financial Group can add value and help you achieve your goals and your objectives. Please contact Simon Madder, Managing Director & CEO:
To LEARN MORE about Why Accounting Firms choose to Partner with Prime Financial Group: