Accounting firms looking to grow and add value to their business, in many cases don’t need to look beyond their existing clients. Those accounting firms that are yet to provide a broader range of financial services to their clients – over and above traditional accounting services – have significant growth opportunities by simply expanding the range of services that they can offer their existing client base.
As any good business person knows, it is significantly easier to engage with existing clients than it is to find new ones. In fact, most of the accounting firms which approach Count do so only after their clients have asked them for assistance with financial advice. Importantly, their clients know and trust them and often don’t want to have to go elsewhere to get financial advice.
Providing additional services to meet their financial needs is a great way to add value to both your clients and your business. In addition to creating a supplementary source of revenue for the business, it helps with client engagement and deepens existing relationships.
Diversification into higher value add services such as financial advice is also a good way of mitigating fee pressure on more commoditised accounting services. Accounting firms are experiencing increasing competition for traditional services such as SMSF administration and auditing. In addition, services such as income tax returns are likely to become less complex with the greater use of technology and more pre-filling of tax return information.
Providing a broader range of financial services within an accounting firm has the added benefit of enhancing the overall value of the business. Traditionally, accounting firms sell at about 0.8x revenue. However, revenues from financial advice services sell for 2.5x revenues. By way of a simple example (and using the assumptions above), if an accounting firm has $1 million of revenue, it would sell for about $800k. If it diversified into financial advice and over time added, say, $500k revenues from this service, the value of the business would increase to about $2 million ($800k from the accounting revenues and $1.2m from the financial advice revenues). A significant uplift by any measure!
For those accounting firms who are looking to protect, diversify and grow their businesses, an expansion into financial advice services is the logical next step.
As the CEO of Count Financial, David is responsible for the strategic growth and financial performance of Count. He is a Member of the Board and Director of Count subsidiaries.
