Accounting practices, like all businesses, need to continually grow total fees each year to grow profits, increase the business sale value, and ensure the business’ viability.
Practice growth rates provide direct feedback to accounting practice principals on how well they are servicing their client base and managing their practice. Just as an empty restaurant tells the owner about the quality of their food, décor, and customer offering, so too does the annual fees growth send messages to the accountant.
The five standards of annual fees growth are:
- Tin – Negative growth
- Copper – 0% to less than 10% annual growth
- Bronze – 10% annual growth
- Silver – More than 10% but less than 20% annual growth
- Gold – 20% or more annual growth
‘Tin’ practices are destroying value and slowly going out of business. Changes are urgently required.
‘Copper’ practices are performing below industry average and going no-where.
‘Bronze’ practices are achieving the industry average growth performance and marginally adding value. This group accounts for 50% of all practices in the industry.
‘Silver’ practice are growing above average and creating wealth and value for their principals.
‘Gold’ practices are growing well above average and are the stars of the industry. They will reap the largest profits and grow to the largest practices over time. These practices are providing the best service to clients.
Many accounting principals believe they are doing a wonderful job, but often the practice growth rates tell another story. All accounting principals need to benchmark themselves against the 5 standards and take action if they are not in the silver or gold categories.
Accounting practice principals need to ask themselves what their annual growth rates say about their customer service levels and practice management. Most importantly, what action plan is required to fix growth issues?