The famous quote from Peter Drucker, “You cannot manage what you do not measure”, certainly rings true and is the reason why so much emphasis has been placed on providing business advisory services to clients in the form of management reports and dashboards. Every business, accounting firms included, need to measure the metrics that matter.
I’ve spent the last 3.5 years speaking with accountants and advisors around how they are structuring advisory services and building reporting workflows. During this time, I quickly began to realise a gap between what accountants were implementing for their clients, and their own internal processes.
I began to ask questions like, “How are you measuring your growth?”; “What is your MRR?”; “What are your most profitable services?”, and “Why do your clients continue to pay you?”.
Often, I was met with blank stares or vague answers. So, I’d like to pose these questions to you.
When was the last time you sat down and created a 12 month forecast for your firm? When was the last time you set goals with your business partner to achieve ?% YOY growth?
Accountants work tirelessly to improve the lives of their small business clients by researching and implementing systems, providing valuable advice and ensuring clients achieve their goals. However, is the same attention being given to their own business?
I like to use the analogy of a plumbers’ taps – his customers’ taps are water tight, but his taps at home are leaky!
Now, I am not saying that you have a leaky firm, but the focus is often on the of tools available to accountants for client reporting, including Spotlight, Fathom and Futrli.
However, these solutions are not designed to provide insights on firm-specific data pulled from services, client engagements and payments. The majority of practice management systems include some reporting functionality using client or tax return information – but none provide real time insights on firm growth from live data.
So, why measure?
If you are looking to grow and scale your firm, it is imperative that you identify the KPIs that are most relevant to your business, who your most profitable clients are, and your most profitable services. Identifying these key metrics will allow you to focus your efforts on the most profitable services, and target your chosen niche.
You may be asking yourself – so where do I start? Which KPIs should I begin to look at?
There are many suggested KPIs for professional service firms, the majority of which are transferable across industries. SaaS (or Software as a Service) companies experience fast-paced growth as a result of large funding rounds or rapid expansion. These companies hyper-focus on several key performance indicators to stay lean and scale.
Have you ever sat down to identify the relevant metrics for your firm that you should be monitoring on a monthly basis? I have outlined a few examples below that are applicable across industries to help get you started.
Payback: the time taken to pay back the CAC (cost of acquiring a customer). Payback is important as it gives you the basis to spend more money on marketing and bring in new business.
CAC/LTV: short for lifetime value and can be measured by taking the sum of all revenues paid by your clients, per client. It’s calculated by taking your average recurring revenue ($MRR) divided by your churn (% clients lost this month over last months # of recurring clients).
For accounting practices, MRR/Churn% should be high as they do not lose clients frequently.
Expansion Revenue: when your average per client revenue increases. This should be standard practice for accountants. Expansion revenue can drive phenomenal growth and increased revenue through cross-selling with other divisions.
At Practice Ignition, one of the most requested pieces of reporting is around how your services are being taken up by your clients – questions like:
- How many clients are using a particular service?
- How much am I charging for a particular service?
- What is the most frequent way I am charging for a service?
In the past, collating the data needed to answer these queries was burdensome – with multiple payments workflows, spreadsheets and word documents. A modern practice should rely on modern technology to do the heavy lifting.
In today’s fast-paced business environment, we require some level of predictability to plan and thrive. The Practice Ignition dashboard is designed to help accountants and advisors answer these questions, to ultimately make better decisions based on the data at hand.
The dashboard automatically calculates these metrics based off live data from your clients, services, engagements and payments. There is no need to run reports – you can simply get oversight of the key metrics for your business with a single click to understand where your business was in the past, where it stands now, and where it’s headed.
When your clients sign your contracts, your dashboard is updated immediately. No more spreadsheets, just decisions based on accurate numbers. You can easily track how many new proposals have been sent, how many have been accepted and how much new revenue was added.
“Ever since introducing the Practice Ignition dashboard, it has become a major component of strategy and target setting for many of our practices – and we want to expand on how you can use the data captured here by Practice Ignition even further!” Steph Hinds, Growthwise