Here are some key factors that can influence the earnings of an accountancy business:
Know your client base
Running your own business is about making money. It is not just about the amount of revenue you generate and the type of customers you serve will impact your profitability.
You may decide to concentrate on high-net-worth individuals and businesses with complex financial needs. Clients with complex transactions may be willing to pay more for specialised services. However, they will also expect you to dedicate more time and resources.
If you focus on smaller business clients and charge them lower fees, you will have a more stable income. This is because if some clients leave, it won't have a big impact on your business.
What services you offer
The services you provide to clients impacts your potential earnings, profit, and the assets you are building for the future.
Some accountancy firms offer more than just accounting and tax services. They also provide advisory services, payroll, tax consulting, financial planning, mortgage, and insurance services. These services can be offered in-house or through a third-party, creating multiple sources of income.
Offering additional services can both attract and retain clients and will help to build the client/accountant trusted advisor relationship. Financial Services are heavily regulated, so partnering with a firm or joining a franchise that already offers this will give you a commercial advantage.
The location of your practice
The visibility and accessibility of your practice will have a significant impact on your earnings potential. When working from home or a back office, it will be necessary to make more effort to attract clients, because you may not be well-known or trusted.
Operating from a shop or visible office will attract client walk-ins and give you a presence within the business community. This will help to integrate marketing activities and reinforce your brand. It helps you stand out and provides a workspace for staff and a meeting place for clients.
Your brand name
Your level of experience in the field can influence the fees you can charge as can your brand reputation.
Businesses that have a strong brand, positive reviews, and a talented team are able to command higher prices. They achieve this by offering a wide range of services and placing a high importance on customer satisfaction.
Marketing and developing your business
To keep clients and grow your business, you must have a good marketing and communications plan.
A strong online presence, with a regularly updated and SEO optimised website, social media campaigns, newsletters, guides and promotional material, plus networking, client walk-ins and word-of-mouth referrals/online reviews can all contribute to your success.
To grow your business and make more money, think about how much time it will take to do these things. Instead of doing them yourself, it might be better to hire an agency or support service to help you.
The support structure you have behind your business
The biggest barrier to growth for many accountants is not lack of demand, but lack of capacity. Many accountants work alone and become the bottleneck in their practice. They focus too much on their work instead of growing their business.
To scale and grow a practice, requires a support structure, systems, and software. These tools allow you to delegate tasks and refer work to others. By doing so, you can concentrate on building relationships with clients and growing the business.
You may decide to employ staff and/or work alongside outsourced solutions. There will be practical and financial benefits to both options.
By forming a team, working with third-parties, or joining a franchise, you can take a comprehensive approach to building a business. If you are ambitious, this may include opening multiple locations or buying fee banks that are available for purchase.
Accountancy fee pricing
When setting fees, consider both fixed rates and time-based models, but always prioritise making a profit.
You may decide to charge up front, or retrospectively, or encourage your clients to pay by direct debit.
It’s advisable to analyse what your competitors do, so you know what the going rate for work is in your local area.
Always evaluate the workload and notify the client if it exceeds the agreed amount stated in the initial letter. Additionally, inform them that there will be an increase in fees if this occurs.
Anyone can be a ‘busy fool’. It is better to have fewer clients that are profitable than lots of clients from who you make no money servicing.
How much your accountancy practice is worth
Running a successful accountancy practice means you should be taking a good ongoing income from your business, while simultaneously building a valuable fee bank asset to sell when the time is right.
Typically, a new business is expected to incur losses in its initial years. However, this will vary depending on the amount of money borrowed to replace the previous salary and working capital requirements. It also depends on your level of ambition and how hard you are prepared to work, to push forward with the activities required to grow a practice to its full potential.
Accountancy practices for sale are in demand, and those that are well run, will achieve an additional premium. The current industry average for accountancy practices is 0.8 – 1.0 times gross recurring fees.
Are franchised accountancy practices worth it?
Franchises are a quick way to be your own boss, with higher success rates compared to other start-ups.
People who want to have their own accounting practice but also want support and guidance and not to be alone, choose franchising.
They get peer support, receive client leads, training and have marketing and business development support. They have access to software, technical support and systems.
Research different tax and accountancy franchises to find the best fit for your goals and ambition.
TaxAssist Accountants franchisees are able to build up their turnover and profits consistently, aiming for 400+ clients with a turnover of £300,000 + after 5 years. Some franchisees are satisfied with their current income and minimal involvement in the business. Others, however, choose to work full-time and aim to surpass a turnover of £500,000.
A third of turnover is expected to cover the costs of running the franchise, with a third payable for staff, leaving the franchisee with a third of turnover as net profit.
Franchisees embracing efficiencies can increase profitability to 40%.
To find out more about how to join the TaxAssist Accountants network call 0800 018 8297 or submit an enquiry here.
