The initial meeting between buyer and seller is where many buyers either win or lose the opportunity to purchase a practice.  To a large degree, the success of this meeting will depend on the ability of the buyer to connect on a personal level with the seller.

Many factors influence the way the buyer is perceived and will affect the degree of rapport established with the seller.  The seller has invested both financially and emotionally in the practice and wants to insure that it is sold to an individual who will care about the practice and the clients.  We will explore several issues in this series of blogs.

The first, and perhaps most important thing to remember is this:  The meeting with the seller is a confidential meeting.  Do not discuss the purpose of your meeting with anyone who may be remotely connected with the sellers practice.

Selling an accounting practice involves many, many people.  Including the seller, it also includes:

•    The seller’s family
•    The seller’s staff
•    The seller’s clients

It is the seller’s responsibility/privilege to tell the story he or she needs to tell about selling the practice.  In addition, and of perhaps greater interest to the buy, if news of the potential sell leaks prematurely, it can cause the practice to lose value.

If word leaks that a Seller is contemplating a sale of the practice, it could raise anxiety among the staff.  It might cause clients to use the transition to find an alternative service provider.  It may even cause hardship in the Seller’s family if they are not fully aware of his or her intentions.  

It is always best that the Buyer respect the confidentiality of the Seller.

The main question I receive from potential sellers revolves around how shocking the FSBO numbers are:

Why, when people sell on their own, do they settle for such high risk transactions — Like no money down, percentage of collection deals?

The answer primarily lies in the emotion tied to selling a practice to an unknown person.  One of the biggest questions looming for any practice owner is “who can run my practice?” or perhaps more accurately “who can I trust to turn my practice over to?”  In our experience, this question can have incredible importance to a degree that the answer carries higher priority than price or terms.

Often, this is where the FSBO seller starts.  Who do they know?  Who do they trust?  Who is just like them and will get along with the clients?  It might be the practitioner down the hall, the one they have spoken with for years at the chapter meetings or a friend of a colleague they have heard great things from.

Starting with this base of known practitioners immediately limits the market the FSBO will explore.  Then the FSBO, having identified their buyer, has the job of convincing the buyer to buy.  Fair Market Value of a business is defined as the value of a transaction in which “neither party is operating under compulsion”.  In transactions we develop, we see value being defined by a seller and a buyer both operating under compulsion.  In the FSBO transaction we have just outlined, the seller is typically under more compulsion than the buyer.  In many cases, the buyer may have no compulsion and in fact may believe they are doing the seller a favor.

The disparity in the statistical comparison is due to the fact that we, like most business intermediaries and unlike FSBO sellers, do not pursue a single buyer.  We work to create a market of buyers around the sale of a specific firm and let the market determine the price and terms.

For a basis of our analysis, let’s say we are looking at two practices each grossing $500,000 annually.  Under the one times gross rule of thumb, they are each worth the same amount, $500,000 or one times gross.

But wait, we delve into the practice information and find one of these practices is netting $250,000 and the other is netting $150,000.  Are they still worth the same amount?  In our webcasts, our attendees almost unanimously agree that the $250,000 net is worth more.

Now, let’s say the owner of the $250,000 net firm is personally billing 2,000 hours per year and the owner of the $150,000 net firm is personally billing only 500 hours per year.  Now which one is more valuable?  This is where it gets tricky.  Is 1,500 billable hours worth only $100,000 in additional net?  What is the line between quality of life and money made?  A very personal determination, but all our webcast attendees unanimously flipped their perception of value with this additional layer of information.  Not a single one across all of the webcasts we have held believed the $250,000 gross was more valuable if it required the owner to personally bill 1,500 additional hours.

You can draw your own conclusions, but we have just barely scratched the surface of these two example practices and already the one times gross rule of thumb is looking pretty flawed.  Our experience is that not all practices are worth one times gross.  How could they be?  A practice is far more complicated than just a gross and differences like staff, billing rates, location, length of service, types of clients and owner’s billable hours among dozens of others are critical components that need to be factored to determine value.

Year in and year out, we see practices selling for 1.0 times to 1.35 times annual gross, with very strong practices selling above 1.35 and struggling practices selling for less than 1.0.  In the end, if a practice sale is well executed, the market will determine the price and it will be based on far more than just the gross.

We speak with practice owners and partners about sales, mergers and succession planning issues on a daily basis.  Many firm owners have a general idea of what they want their exit strategy to be, but have not formalized it into an executable plan.  They have an idealized vision of their exit. 

For most firms the responsibility for creating and executing the succession plan falls on the managing partner.  Managing partners tend to be very busy with clients and day-to-day operations of their firms.  As a result, it is all too easy for succession to be put on the back burner. 

Sometimes casual conversation among partners passes for succession planning.  But it is not tied into the overall strategic planning of the firm.  Nor are the real needs, motivations, and values of the individual partners addressed. 

In order for us to increase the probability of success in multiple partner firms, ProHorizons uses three distinct phases in our succession planning process: Discovery, Design and Execution. 

The Discovery Phase involves identifying the individual values and goals of each partner, and defining value alignment and shared goals among the partners.   Conducting a thorough discovery increases the probability of a proper succession or merger at the time of execution.  The goal of the discovery phase is to help the firm owners understand their individual and mutual interests and motivations in the succession of the firm. 

The Design Phase involves taking what was discovered in the first phase and linking it to strategic needs of the firm.  During this phase, partners address issues identified in the Discovery Phase.  They anticipate challenges that will affect succession.  This also allows them to manage the expectations of clients and staff.   The plan will include objectives, target dates and necessary resources to assure a successful exit.

The Execution Phase is where the outcomes of the earlier phases get tested and implemented.  This phase begins as soon as the Design Phase is complete.  It includes a regular review of the plan. Changes in the firm will lead to adjustments in the plan.  The final portion of the execution may be a merger, an internal succession arrangement (selling to insiders), a sale to outsiders, or some other solution. 

Succession planning sustains the viability of a lifetime’s work.  In smaller firms, it means peace of mind and ensuring your hard work is rewarded in the long run.  In larger firms, it ensures stability in the leadership and management of a firm.  It assures the needs of clients are not neglected in times of transition and the goals of the partners are acknowledged and met.

In our experience, an LOI is a critical component in structuring a win-win transaction.  We use them on virtually every deal. Here are the main benefits we see:

• More efficient use of time

• Proceeding with a clear understanding and agreement in principle

• Trigger point for taking the next steps

More efficient use of time:   Some people feel an LOI puts the cart before the horse. We find exactly the opposite to be true.  If you were to go to an unknown area, would you want a map of the area? Well that is exactly what the LOI is: a map of the major deal points. In today’s busy world it is important to be sure two parties are going down the same road and in the same direction before spending too much time working out all the details of a transaction.

Proceeding with a clear understanding and agreement in principle:  The key elements of the LOI should be negotiated beforehand and can be used as a guideline to prepare the purchase agreement. It should state that, if all information during due diligence confirms what was represented, that the buyer intends to complete the purchase under certain conditions. The key elements should include:

• All parties to the transaction
• Type of deal structure
• Price
• Payment structure
• Non-compete
• Transition plan
• Closing date
• Contingencies (i.e. due diligence, financing, etc.)
• And identify other items to be negotiated.

Trigger point for taking next steps: In addition to setting the key elements of the deal, the LOI is also a trigger point for critical milestones during process. Those trigger points are:

• For the seller to remove the practice from the market and focus on the single buyer.
• For the buyer and seller to begin conducting their due diligence.  With agreement in principle on the main terms the seller will have more comfort in opening the books and sharing client information and the buyer will have more comfort in providing financial information.
• For the buyer to pursue financing.  The financing process takes times and banks require either an LOI or purchase agreement as part of the loan package.  So an accepted LOI is a critical component to securing financing.

We have a saying in our firm that smooth transactions make successful transitions. Basically, if two parties cannot agree on the elements of the LOI, they will probably have a hard time negotiating while dealing with the minutiae of the purchase agreement. Normally, once the key points of the deal are negotiated up front, the rest of the transaction tends to work much more smoothly.

“Firms must be able to make strategic decisions and then execute quickly and efficiently,” Erickson writes. “Unfortunately . . . many partners spend a significant amount of their time at retreats talking about the past and issues that cannot be changed.”

Erickson goes on to describe the unproductive use of time many partners experience on retreat and how many partners find it difficult to engage in authentic dialogue on the topics that matter most.   

This may be because partners lack training in group process.  They rise based on their technical ability or their business development skills rather than their ability to manage human capital. 

We also find many firms are partnerships in name only.  They consist of four or five independent silos.  Each partner works alone supported by common staff members.  Partners share an office, a coffee pot and a Christmas party.  But, sometimes that is about all.

Attempts to create economies of scale, synergy between specialties and shared goals – all of which increase profitability – have been frustrated by an inability to engage with one another in authentic dialogue. 

So they meet for a partner’s retreat.  They adopt many elements of a plan recommended by Erickson:

• Focus on the future
• Prepare in advance
• Have an agenda
• Adopt and enforce ground rules
• Remember their conversations define their relationship.

The first three of the five recommendations are easy enough.  It is the last two that frustrate real progress. 

They may adopt ground rules but enforcement is problematic.  And although they try to remember that their conversations defined their relationships, when they get into the meat of a critical issue, relational habits kick in. 

Despite everyone’s best intentions, a cycle of domination and avoidance results that undermines their agenda. Dialogue breaks down.   

It starts simply enough.  An item has been placed on the agenda.  It could be anything -- partner’s compensation, marketing strategy, staff roles. At some point in the discussion, someone becomes anxious. 

It may be that the issue is particularly sensitive.  It may simply be that someone feels frustrated at the pace of the discussion.  Whatever the reason, a partner begins to push.  In reaction to the push, one of two things can happen depending upon the relational styles in the room.  

1)      Someone pushes back.  The energy of the dialog escalates.  It reaches a point of risk.  Both partners withdraw rather than jeopardize the relationship.  2)      No one pushes back.  The energy of the dialogue fades.  The result is the same in both cases.  Real issues are not addressed. 

Partners will experience this cycle only a few times before determining that there is no value in a partner’s retreat.  But the deeper truth is this:  truth is, there is no value in a partner’s retreat that lacks process discipline. 

Just as a CPA would never dream of attempting a complex audit without having first planned an appropriate strategy or process for the audit, neither should partners gather for an important meeting without first defining their process. 

If the partners lack the skills, the experience, or the training to do it right, it is time to look for a process facilitator.  A business sometimes needs to hire an accountant to keep its books straight.  An accounting firm sometimes needs to hire a facilitator to keep their partnership straight.    

What is your experience with partner retreats?

Leave us a comment, or contact Kevin.

He was very organized.  He had planned well and executed a growth strategy that included acquiring small firms as well as developing a disciplined approach to new business development. He treated clients of the acquired firms just as he did prospective clients he was courting.

In fifteen years of working with tax and accounting professionals we have encountered firms with various levels of success.  We have seen some of the worst performing firms turned around by buyers who was intentional about creating and developing loyal clients.

Successful firms use a systematic business development process.  In a recent survey of 1,000 practitioners we found: 

• 40% responded their practice has a business development culture
• 42% of respondents agreed or strongly agreed that their team or staff were responsible for business development
• However, only 25% indicated their team or staff received any training on how to develop business

While many practitioners were optimistic about the upcoming year, they really had no plan or process in place that would help them create new clients and increase their revenue. Having business development process would help quantify those projections.

Developing (or learning) a simple process to support your efforts to acquire new clients will assure you understand a prospect’s business challenge and are able to offer the right solution at the right price. 

Your process should include: 

• Taking time to prepare (emotionally and technically) for a business development meeting or call.
• Developing a style of interaction that builds trust. 
• Establishing a basis for mutuality in the relationship. 
• Asking appropriate questions that help you discover a prospects felt need, that is, the emotional motivation that is leading the prospect to seek accounting or tax services. Exploring the financial burden represented by this need. 
• Identifying the  how the prospect will make a final decision and who else is involved in the decision making process.
• Establishing a clear future so the prospect feels a growing sense of confidence in your ability to satisfy the need

Following these simple steps will provide you a systematic approach to increasing your client base.  It will provide the business development found that will allow you to make continual improvement in your practice and keep building a successful firm.

Contact me with any questions.  If you would like to learn more, join us for upcoming web presentations or consider our 2 day workshop Becoming a Rainmaker: Winning the Practice Development Game.

Put into practice these simple steps and begin your turn around today. 

Some time ago, we had a call from a CPA interested in selling his practice. He mentioned that he was ill and would not be able to work much longer. He wanted our help selling his practice.  However, he kept pushing aside our paperwork and focused on taking care of other issues in his life. He mentioned to his wife that he had contacted us about selling, but did not involve her in any planning. When he passed away a few months after our initial conversation, he had never finished the paperwork we required to market his practice for sale.  He also did not leave any instructions for his wife.

Months later his widow contacted us to get the practice listed for sale.  Unfortunately, it was too late.  Most of the clients, who knew of the CPA’s illness and death, had already found other suitable accountants.  As a result, his wife and family received zero proceeds from the practice.

If you die without developing some form of practice continuation plan, your family is at risk of receiving nothing for your business.  Having a plan should enable your family to insure the continuation of practice through an internal buyout with an employee or partner or an external sale.  Whether you draft a plan or not, your family or estate will need to move very quickly.  Word travels fast and within a matter of weeks the value of your practice can decrease dramatically.

To help your family address the issues surrounding the transfer of your practice in your absence, we recommend you write a letter to be opened upon your untimely death.  The unexpected loss of you and your earnings will be hardship enough and handling the details of your business will likely be overwhelming to your family.  Help them profit from your years of hard work by documenting your plan and providing instructions for them to follow.

We are available anytime to discuss this or any concerns you may have.  It may be too early to begin a transaction, but it is never too early to begin planning.

First, I think it is very important to learn information about the practice and the owner before we talk about price and terms.  This frustrates some practice owners because they usually ask about price and terms early in our conversation.

Ultimately, it is not fair to a potential seller for me to tell them the price they want to hear just so I can get the firm listed for sale.  My reluctance to inflate a price means sometimes I lose a practice listing to another broker because they “quote” a higher price.  That is OK with me.

Next, even if I think I know who the buyer might be, I still want to market the firm to many prospective buyers as if I do not know who the buyer might be.  That may cost my company a little more in advertising and marketing the firm for sale, but it is important that we identify the “right” buyer for a practice and not sell to the buyer we just happen to have in our back pocket.  It is important to me that I do not get calls from buyers and sellers a year later saying they made a bad deal or the firm was a poor fit.  Frankly, I like to sleep at night.  

I look at it this way, either I will get the listing down the line when they figure out the other broker’s tricks or maybe the other broker did have a desperate buyer that was willing to pay an unrealistic price.  In both cases my goal is met, a happy seller and buyer.

Before we address the ethical guidelines, let’s define what we are talking about.  We need to understand that in selling a practice (a listing) a broker is establishing an agency relationship based on a contract. This is a relationship that involves one party (the broker) acting for the benefit of another (the seller).  For this reason, when entering into a contract it is important for an agent, in this case the broker, to disclose all facts which could be considered material even if not expressly asked about.

A false statement of fact made by one party to another party, which has the effect of inducing that party into a contract, is known as a misrepresentation.  There are several bodies that have statutes, canons or codes of ethics that address misrepresentations:

• First, there is the Uniform Deceptive Trade Practices Act.  This is federal legislation and addressed in statutes in every state in the nation.  Direct reference in this Act is given to “Using deceptive representations in connection with goods and services” as constituting a deceptive trade practice.  The FTC and many states also prohibit unfair practices that include taking advantage of bargaining power of vulnerable groups.
• A handful of states regulate business brokerage through their Department of Real Estate. Most enforce the National Association of Realtors code of ethics.  Article 12 states, “Realtors shall be careful at all times to present a true picture in their advertising and representations to the public.”
• In addition, there are many state and national associations for business brokers. The International Business Brokers Association has a code of ethics and business broker standards for its members. Article 1 of their code of ethics states, “Business Brokers should avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to properties and business transactions.”

So the ethical guidelines for business brokers are out there, published and readily available for all brokers to follow.  Be aware of the tricks and deceptions some use and avoid being induced into an agency relationship based on a misrepresentation.

So an easy way to get practice owners to sign up, or list, is to inflate the price you tell the seller they can expect, assure the seller it is easy to get all cash and tell them you have a “special” buyer ready to pounce.  Great, where do I sign up?

I have to admit; early in my career I may have inflated a price or two just to get the listing. I think this comes from fear and inexperience. Fear that if I did not tell the client what they wanted to hear they would not hire me. Inexperience because an experienced broker knows their worth is not in the number of practice they list but in the number they actually sell.

Timing is a funny thing because as I wrote this a friend of mine received an email message that stated, “A buyer contacted us specifically about buying your practice in his city (I will keep it confidential). If you’d consider selling this year we will provide more details regarding this particular buyer.”  My friend sent it to me because he found it funny since he does not own a practice and he never has.  I found it disturbing because it is such an obvious trick to get an owner to call the broker.

We work hard in our role and in maintaining our ethics.  We see ourselves as valued advisors, but struggle with the market perception that “brokers” are not trustworthy.  After all, how trustworthy is a relationship based on a lie?

Steven Covey, in his best selling book, The Seven Habits of Highly Effective People, advises people to begin with the end in mind.  So the wise accountant, even with no plan to sell their firm for several years, develops their firm keeping their exit in mind.

The reason this is typically not done and the plan is shelved until just before retirement is usually a flawed perspective of succession planning.  When asked what succession planning is most will reply that it is a plan focused on a single succession event.  We think succession planning is a development process that leads to an event.  The focus is spread across a series of development stages and growth steps with the natural outcome being the sale or merger of the firm to an outside firm or the continuation of the firm under new internal leadership. 

The succession plan begins with understanding your firm and your long term goals.  Only then can you begin developing, documenting and executing a succession plan.  The plan should be an all inclusive roadmap of your development stages and key milestones including client acquisition, staff development, pathways to partnership, expansion of services.  The succession plan should be developed today if not yesterday and implemented long before the seller or partners approach retirement age.

The result of a well-designed, implemented succession plan will be a larger, more profitable and easier to manage firm that can be transferred with greater ease to the successor.  The reward for the exiting owner is in greater value and consideration at the time of succession and a stronger legacy for years to come.

It’s no wonder his practice is doing well.  He developed a marketing plan and executes his plan.  This may seem like a no-brainer for many, but the fact is many accountants do not plan when it comes to marketing.  We surveyed more than 1,000 accounting and tax professionals last year and 48% responded that they seldom or never follow a strategic marketing plan.  Only 21% of respondents often or always follow a plan.

Can you imagine investing in a company that admits to not creating or following a marketing plan?   A company that is going to rely solely on referrals and repeat business clients from last year to help them achieve this year’s goals. 

Now, I am not saying that every firm needs a marketing plan or that every plan needs to be extensive.  Some accounting practice owners are happy with the status quo.  But 54% of respondents to our survey expect their practices to grow this year, both in revenues and in number of clients.  Many are going to hit that number by accident.  Others will do it by keeping busy and working hard.  A majority or going to need to work hard, be smart and following a strategic plan if they hope to achieve this goal.

My advice is to spend some time after tax season looking back at what worked for you and what didn’t work. Then, lay out a simple plan on how to leverage those successes throughout the remainder of the year.  Then, implement and follow the plan.  You will likely need to make adjustments during the year, but having a roadmap is an important starting point and will help you document lessons learned so you can tune and improve the plan year to year.

We will have discussions and posts related to this topic throughout the year.  Keep an eye open for them let us know what you think.

We can apply this same principle to buying and selling accounting practices.  Buyers buy for emotional reasons and for a successful acquisition it is important for them and those they are in dialog with to understand their emotional motivation.

We all function alike.  Human behavior involves three parts – motivation, intention and action.  

• Motivation is the driving force.  It is the need, want, or desire that inspires movement.
• Intention is what we aim for.  It is what we hope to accomplish.  
• Action is what we do.

It is also the case that sellers sell for an emotional reason.  The decision to sell a practice is an emotional decision.  When a practice owner offers her practice for sale, she is offering many years of work to the world.  

• Risking investment in property, furnishing, fixtures, equipment and training.
• Slowly developing the value of the business one precious client at a time.
• Long days and nights during tax season.
• Building trust in the business community providing one careful audit after another.
• Advising clients to make strategic business decisions.

When it is time to sell a practice the seller is filled with many complex emotions, some of them will be conflicting emotions.  

• I am burned out, but I do enjoy many aspects of the job.
• I am aging and just can’t keep up with the work-load any more, but I love what I do.
• I am going through a divorce and need to sell my practice in order to divide the assets with my ex.
• My spouse is ill and needs me at home.

We have encountered all of these scenarios over the years.  When a seller meets two prospective qualified buyers, he or she will sell the practice to the one that feels right.  The wise buyer will be sensitive to the feelings and emotions of the seller and the wise seller will be sensitive to the feelings and emotions of the buyer.

See as a coach, like a business manager, you are striving to get the best from all your players all the time.  What a lot of us do is focus on the technical stuff, in soccer this is touch and control, vision, moving the ball, moving off the ball, passing and finishing among dozens of other skills and techniques.  In an accounting firm, this might be answering the phone, greeting visitors, running client meetings, processing returns, balancing ledgers, filing, reviewing, auditing and dozens of other critical functions.

Last season my boys were in the championship game of a tournament.  They had dominated their bracket winning all three games and outscoring the opponents 15-0.  They were playing in top form when we went into the final game.  In this final game they came out flat, were out of sync, were not moving well, were not passing well and were not creating chances.  They gave up two great chances to the opponent, one resulting in an opposition goal.  It was 97 degrees on a Sunday afternoon in September when they came off the field at halftime down 0-1.

As a coach, like a business manager, you have all sorts of choices of how to respond and give direction when your team is not performing the way you desire.  My boys know how to play the game, they know each position, its role and how to execute their jobs in those roles.  They did not need me telling them how to do this again.  I needed to tell them they could do this and put them in a good frame of thought to go get it done.

At halftime we discussed three corrections to make in the play of the game and then… I told the boys two jokes.  After the second joke, they were all laughing and commenting on the jokes to each other.  We huddled up then and, in this new frame of mind, focused on the second half.  The boys went out and scored 5 goals and won the championship game 5-1.

Right now in your office it is likely 97% stress on a Tuesday morning.  Your team is in the final stretch of tax season and they might need you to help them reframe their thinking.  Check in with them regularly, let them all know you are in it together and then have a good laugh.  I suspect the end of the season might go more smoothly, be more enjoyable and everyone will perform a bit better.

I wrote about caring in my earlier blog Building Rapport is a Key to Creating Client Loyalty. That posting covered using tax appointments to communicate how much you care. Here are some guidelines to use for meetings with potential business clients.

1. Prior to the meeting, do your homework. Find out what you can about the prospect and the company. There are many sources of intelligence regarding businesses and individuals.

2. Prior to the meeting, get mentally prepared for the meeting. Work on emotional detachment, as well as making others okay. You are here to serve their needs not your own, so be sure to put your agenda aside and focus on how you are going to learn as much as you can about the prospect and their business.

3. As a first step in your meeting, use your approach to bond and establish rapport with the prospect.  This is a chance to begin breaking down barriers and establishing some trust.

4. As a second step in your meeting, qualify the opportunity.  Take some time to discover the prospect’s needs, emotional motivation for doing business, the economics of that motivation and the decision making process.

5. Now that you have gathered a fair bit of information about the prospect, you are prepared to discuss how you can provide solutions that address the needs mentioned.  These may be services you have, consulting, value billing or other solutions you have developed. 

6. Finally, end every meeting with clarity about whether there are next steps or not, what they are and who is responsible for them. 

How much you care about the prospect and their business will be apparent if you are thorough in your preparation, your meeting and your follow-up.  Following these guidelines will turn prospects into clients and you into their trusted advisor.

Many years ago I went to meet a prospective seller of a CPA practice.  His entire office was a disorganized mess.  From dust and cobwebs to piles and piles of files and other paperwork.  I recommended that he really ought to clean and organize the office before we have a buyer come to meet with him .  After several weeks of preparation he told me he was ready.  So I set up a meeting with a prospective buyer.  After the meeting the buyer said, "John, I would need to spend $50,000 just to get that place organized."

Whether we are working with a firm who is looking to grow or a client who is looking to sell his or her firm one of our main concerns is the office condition.  Remember, there is only one chance to make a first impression to any prospective client or buyer of the firm. 

Here are a few quick tips you might be able to use.

• Use some type of a contact management system.
• Establish a routine for incoming mail.
• Keep your desktop and workspaces available for actual work. One former client had a one file out at a time policy that each person in the office followed.
• Consider a file system utilizing less paper (or better yet paperless).  You can start by scanning your current year files.
• Schedule a few minutes each day for planning, clean up and organizing.

For more ideas take a look a Rita’s blog.

Both new clients found him while they were searching the Internet for someone to solve their complex problems.  Based on their search results, they contacted him to discuss their problems. We looked at his website and it did a good job of expressing his competency and personality.  Obviously, it was successful in engaging these prospects and differentiating him from his competition.

So, how well do you differentiate yourself and your practice from your competition?  Addressing the following questions about your site will get you started on generating leads that will be a good fit for your practice:

1. Who are your ideal clients?  What niches do you serve?  Be sure your site identifies and welcomes these individuals and industries through text and use of imagery.
2. What are your specialties and areas of expertise?  Can you present them in terms of clients needs (benefits) rather than just services (features)?
3. Can you present yourself and your staff through the site?  Think of this as the “online dating” portion of lead generation.  Pictures, stories, backgrounds, articles, a blog—all provide the prospect an opportunity to get to know you early in their decision making process.  Work hard to get your personality engrained in the site.
4. What value adds can you build into your site?  Obviously, you can post one of the syndicated newsletters on the latest tax code changes or something similar, but so can your competitor.  So again, think blog or a specific area of knowledge you can share.  There is a level of transparency where you can provide enough to inform prospects without giving away your advantage to your competitors.

Your web site provides you with a great opportunity to make a strong first impression and you cannot beat the price when it comes to direct marketing.  So, take some time to think about what a prospective client will experience when they go to your site.  Most importantly identify your key differentiators and be sure to present them in terms that will resonate with your prospects and your clients.

The flip side of the coin is nothing builds client loyalty better than letting them know you care. Therefore, it is important you continually demonstrate to your clients that you care about them and their needs. This time of year provides a great opportunity to use your tax appointments to communicate how much you care. Here are some simple guidelines to get you started:

1) Make sure you have ample time between your appointments. Although this may seem to be poor utilization of your time, stacking your meetings can be a critical mistake on two levels: it does not account for a meeting running over; and it does not allow you time to prepare for your next meeting.

2) Give yourself ample time to prepare for a meeting. Reframe your thoughts from an earlier meeting, clear your desk, review and prepare for the meeting with the next client.  Nothing says “I don’t care” or at least “I don’t know you” more than flipping through a file to find a piece of personal information about a client during a meeting.

3) Respect your clients’ time by being punctual. We wait in lines and traffic throughout the day, make sure you are an exception to this experience.

4) Have a simple agenda for the meeting. Something that outlines the key phases of the meeting is all that is needed. Perhaps as simple as (1) agenda review (2) catch up (3) review financials and tax return (4) discuss business development - referrals and (5) next steps.

5) Be sure you focus on building rapport in all of your client interactions. This may not be a natural process for you, but it is critical in the “catch up” phase that you ask open ended questions to provide your clients an opportunity to tell you about their lives. Asking appropriate follow up questions will affirm that you are listening and care about what they are sharing.

These steps are simple, straightforward and will pay huge dividends over the years. If you are not already using them, I recommend you test one or two by implementing them this season with half of your appointments. After the season, survey your clients about their satisfaction and see how the results vary based on the two types of appointments.

I wrote back to say that I was happy the season was going well for her. I asked her to what did she contribute her success and was pleasantly surprised with her response.  She mentioned streamlining work processes and great support from home, by ensuring the following:

1. Having a routine and sticking to it
2. Limiting herself to a 12 hour work day, no matter how much energy she may have.
3. Taking a late lunch and exercising daily
4. No matter what, taking Sundays off.

Some who read this may shake their heads and disagree. What they will not realize is that this CPA has figured out that the time to recharge her batteries is not when they are totally run down. She realized that it is better to work harder and smarter. Stress is a big part of most people’s lives these days, and a busy tax season will just pile on the stress.  Taking time to recharge and “de-stress” will make your time at work more productive.

I can not wait to speak with her later this spring.  I imagine that, when I do, the same smile will be there.  At the same time, many others will have that tired, worn-out look and will need a while to de-compress before they truly enjoy the fruits of their labors.

I say find some time to recharge your batteries this season and enjoy the journey. What are your thoughts?

Several years ago we spoke with someone wanting to sell a tax practice in Arizona.  This owner had not increased fees in five years for fear that clients would leave and go to the H&R Block office nearby.  He wanted to receive a premium price for a premium practice, but what he had was a discount tax service.  Potential buyers were willing to purchase the practice at the same type of discount.

The value you receive as price when you sell your practice is going to be determined by the market.  To create a higher price for your practice, you need to create more value within the practice, typically by creating more value around each individual client.  This is done by providing more value to each client.

There are three core values a practice can provide to a client:  high service, high quality and  low price.  The catch is that a practice can only survive and stay in business when it provides two of the three.  A practice cannot afford the cost and overhead of providing high service and high quality while also providing low price.  So to provide low price, either the standard of service or the standard of quality has to be lowered.  Guess which of these a buyer will find of least value?  Low price equals low revenue per client or at best a huge volume of work to generate revenue per client and buyers care about revenue margin and profitability to insure debt service and future income.

Buyers are looking for valuable practices. Spend the quality time and effort building that practice and it should pay off handsomely, both along the way and when it comes time to sell.

What are your thoughts?

According to the Bureau of Labor Statistics, in October of 2007, the unemployment rate in Portland, OR was at 4.5%.  By October of 2009 the unemployment rate had jumped to 10.7%.  (It is now hovering around 12%.)

Between the end of 2007 and 2009 while the unemployment rate more than doubled, this accounting practice had grown 40%.

What is the owner’s secret?  He told us he does not know, he just gets lots of referrals.  Although he does not know what he is doing to acquire new clients, he does know what he is doing to serve them.  He values his clients highly, provides exceptional service and stays in regular communication with them through a monthly newsletter.

“We stay in touch with our clients and manage the relationship.  Even if we have a problem client, we do our best to treat them right.  Even if we have to let them go, we try doing it in a way that leaves them with a positive experience.”

Following his intuition about the value of customer service, this practitioner has inadvertently developed a client referral program that works.

A Referral Ready Accounting Firm

No client will refer friends and neighbors to a service they do not believe in.  Some clients may refer people to a service they find helpful.  Most clients will refer a service that they experience as exceptional and unique. 

What can you do to create a referral ready accounting firm? 

1. Manage the relationships with the clients you he already have. Make sure they are well-served.  Anticipate their needs.  Respond to their concerns in a timely fashion.  Work to maintain a relationship of value with each and every one.
2. Stay in contact with your clients.  Distribute a monthly newsletter.  Survey your clients to check your quality.  Ask how you may better meet their needs. 
3. Educate your clients on how you firm can serve them. Use a monthly newsletter to make it easy for them to talk to their friends and neighbors about how you can help them solve their problems.  Tell how you have saved a particular client money, or resolved a tax issue, or provided sound advice.
4. Give your clients something to talk about. By being intentional about how your clients experience your service.  Find small ways to make it special, unique:  One practioner we know has M&M figures throughout his office...many given to him by clients over the years.  When you visit his office, you tell people about it.  People do not tell stories about a work product.  They tell stories about what they experience.

What are your thoughts on developing referrals?  We would love to hear them.

SWOT Analysis—short for strengths, weaknesses, opportunities, and threats—is a strategic planning technique that offers insight into your practice and those of your competitors.  This process will help breakdown your practice and identify ways to maximize your strengths while minimizing your weaknesses. By examining the opportunities and threats you can identify new service opportunities to pursue, identify highly competitive new services you may want to avoid and recognize steps you can take to avoid losing clients to your competition. Taking that information, formulating a plan and executing on that plan will help you grow your business by design by matching your services to your current clients and new prospects.

The benefits to your practice include:

• determining practice growth potential,
• evaluating the competitive marketplace,
• concentrating your marketing and business development activities in the most beneficial areas,
• identifying possible threats and ways to minimize them.

An old baseball maxim says that, to be successful, you have to “hit ‘em where they ain’t.” That can also apply to your practice. By analyzing and planning, you will know what areas to “hit” and what areas not to “hit” while you are executing the strategy developed during the process.

Taking time every quarter to measure your performance and adjust accordingly will help you build a much stronger and much more valuable practice. The SWOT Analysis can be an effective tool during that process.

In our fifteen years of evaluating practices, we have seen varying extremes in revenues per client. Our experience has shown that the more profitable practices are paying attention to client development during the busy season. If these competitors are in the market when you are not, they will get the new clients you are seeking, and perhaps will get your clients over time.

This tax season will be demanding, but it does not have to be chaotic. Spending time planning, educating the staff and developing a business development strategy will increase:

• Profitability
• Sales per client
• Potential referrals

This is the time of the year where your clients, the public, and the business world are all paying attention to accounting. There is a tremendous opportunity to grow your practice.

Firms need to look at the busy season as a stepping stone for 2010, while your clients are focused on taxes/accounting more than any other time. Benefits from maintaining a business development strategy are numerous and include:

• Accounting draws attention: The tax season is the time where you get the opportunity to meet your clients in person. Accounting is an important issue that, generally, captures an audience.
• Competitive advantage: Firms that make an effort at marketing during the busy season gain a competitive advantage over other firms who are not in the marketplace.
• Strengthened relationships: It is an opportunity to further strengthen relationships with existing clients.
• Increased referrals: Strengthened relationships will improve both quality and quantity of referrals.
• Accelerated growth: It offers opportunities to increase business and should not be wasted.

How does an accounting or tax firm develop business during tax season? It certainly is a challenge.  If it were easy, everyone would be doing it. There are a numerous ways, but none of them will be successful without the proper foundation; planning and preparation.

We will address other business development issues that your firm can employ to go from busy season to always busy and enhance your firm’s value in greater detail in our blog during the weeks to come.