Accountants: How to lock in your clients for life

Client retention is the life blood of sustainable growth for an accountancy practice. Without a good retention rate, the practice is resigned to working harder and more often on its marketing activities and handover processes – leaving less time (and money) for revenue generating activities. There can be little doubt that a high lifetime value client is preferable to a low lifetime value.

This article explores the main drivers of client retention and allows you to consider how you and your accountancy practice can lock in your clients for the lifetime of their business and beyond.

Accountancy firms: A tale of two extremes

In my experience, accountancy practices in the UK, and worldwide, can differ greatly in the level of service that they provide to clients.

Retrospective and transactional

On one end of the scale there are low-cost data processing firms that generally have a high level of client churn. Such firms provide a bare bones compliance service which achieves one objective – meeting the client’s immediate need in preparing and submitting their annual accounts and tax returns. Their clients, generally, do not see their accountant as anything other than a means to an end – it is often a very transactional, retrospective-focused relationship. Let’s call these “retrospective accountants”.

Holistic and person focused

At the other end of the scale, there are accountancy firms that see the client relationship as much more than an annual transaction. They are in touch with their clients often and are aware of the pressing issues facing the client – often before the clients themselves. Yes, such firms do help with the annual preparation of year end accounts and tax returns – but this does not define the relationship. The accountant is able to clearly communicate the additional value that they can provide to their clients.

You might call these accountants “advisory-based” accountants, “business advisers”, “business consultants” or “growth specialists”. The name is irrelevant. The point I am trying to make is that these advisers strive to provide a lot more value to their clients than their opposite number and their clients are warm to receiving this additional advice. For the purposes of this article, let’s call these “holistic accountants” that focus their efforts on the needs of the person within the business – not just the mechanics of the business itself.

The large middle ground

Of course, life isn’t normally this black and white. There are many accountants (I would suggest most accountants) that fall into the middle ground between these polar opposite descriptions of an accountant. Accountants often anchor their service offering on the compliance needs of the client – probably because it is an easy and stable form of recurring income for the firm. Any additional value they provide to the client in the form of business and tax planning advice is given at, or around the year end sign-off meeting. Often, it is the client themselves that initiate the conversation where they highlight, in passing, specific areas where they need additional support.

Ad hoc advice and business support is given, for which the client is grateful – however, the accountant may struggle to adequately monetise this passing of knowledge, if charging at all. There is no solid system in place which communicates and formalises this high-value additional offering.

Client retention

The retention of high value clients is generally seen as the easiest way to grow an accountancy firm.

A “retrospective” compliance focused accountant will still gain client referrals, of course. If they provide a competitively priced service and fast turnaround then their clients will let others know about them – from time to time. However, the narrative that the clients are using to their friends, family, colleagues will be based around the fact that they provide a strong compliance service at a low price. Inevitably, this will attract more clients who expect similarly low fees.

Furthermore, there is often very little in the way of client loyalty to the retrospective accountant. The client will happily shop around for other similar accountants where they can save £100 on their year end fee. The market for low cost accountancy services is large in the UK – especially since the advent of web-based accountants. The accountant’s main option to try and retain clients is to match (or “beat”) the incoming accountant on price – hoping that the hassle to the client of moving firm will be enough of a deterrent for them to make the move. Profit margins are quickly eroded in this “race to the bottom”. Taking care of incoming and outgoing handover procedures becomes a core activity for the firm.

An accountant situated in the “middle ground” will often refer to themselves as being “proactive”. This may be partially true in that they may identify areas where they can provide unexpected value to their client base – often at a practice-wide level (for example – where improvements in technology, or changes in legislation result in tax-saving or time-saving opportunities that can be blanket-applied across the firm’s portfolio).

However, as this persona of an accountant operates, largely on a retrospective basis still – their client retention rate suffers due to the things that they don’t do for the client. After all, the client was originally won over by their impressive use of the term “proactive”.

The client retention profile for a “holistic” accountant can be much more favourable.

Assuming a great service is provided (and this is often a big assumption), then the accountant gives their clients little reason to think about moving to another adviser – regardless of the cost savings they can make in doing so. There is a much smaller market for accountants who consistently give relevant advice which makes a positive impact on the client and their business – accountants who rarely hear the client feedback “Why didn’t you tell me about…”.

If a truly proactive service is provided, brought about through regular contact with the client, then a much deeper understanding of the individual client and their business is achieved. If the accountant is able to systemise the processes that they use to collect relevant information to enable better advice as effectively as they systemise their compliance offering, then the term “trusted adviser” has been rightfully earned.

How can I provide a proactive holistic service and retain more clients?

I have asked myself this question many times over the years. I found myself stuck in the middle ground for many years. My small practice has always provided more value than just the preparation of accounts and tax returns to clients and we have grown organically because of this. However, I have always wanted to tailor a highly systemised approach to the value-added services that I provide to our clients. The main driver of this being to further develop my relationship with clients which would enable me to provide better advice in areas that I may have previously overlooked.

The route that I took was to develop a system which focuses on the individual business owner and allows us to map out that individual’s past, current and future personal financial position, including the setting of personal and business goals – both financial and non-financial. At our regular review meetings which we carry out quarterly for most clients, we update the client’s financial position details, review any deviations from expected values and develop action plan items with the aim of steering their projected long-term forecasts towards their targets/goals.

This centralised and holistic approach to collecting relevant data about the individual, their family and the business allows us, as accountants, to build an ever-changing picture about the client. It allows us to highly tailor our advisory approach to each client with little effort, intrinsically linking our advice to their short and long-term goals. Our clients value and look forward to these review meetings as they know that they will come away with new ideas or opportunities. We now achieve a much higher fee per client with little to no price resistance. We are able to clearly associate our additional fees with the cost-savings and benefits that we provide to the client. Shortly after each meeting, the client is sent a report (which is automatically generated) which explains, in a language they understand, how they are doing and whether they are on track to meet their long-term goals.

Our work is now a lot more enjoyable and we are proud that we are able to actually help clients by providing them with a service that they actually want, not just take care of the things that the Government, Companies House and HMRC dictate that they need.

If you would like myself or one of my team to take you on a personal walk-through to explain how you can implement the same system in your firm, please do get in touch or request a free 21 day trial.