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Project Management

How to Measure Firm Success

When it comes to measuring the success of an accounting firm, many partners find that traditional small business metrics aren’t enough.


Accounting firms are in the business of helping their clients be more productive and effective at running their businesses, and most are familiar with a variety of business benchmarks and metrics that can gauge the health of their client’s entities. But when it comes to measuring the success of an accounting firm, many partners find that traditional small business metrics aren’t enough.

Accounting firms are service-based, which means they are client-focused. As a result, most factors that firm managers need to measure and improve upon are related to clients and service functions.


1. Client Retention

Maintaining a healthy client base with a consistent revenue flow is one of the core factors in assessing the performance of an accounting firm. While clients will come and go, it’s essential to not only know the norms on attrition, average life, and acquisition, but you must periodically measure the vitality of those relationships.

According to the 2018 AICPA/TSCPA MAP study, client attrition at accounting firms averages around 10 percent. Firms can increase client retention by cross-selling and regularly reviewing client services, specialties, and industries served. The study also showed that it can cost about 10 times as much to attract one new client than it costs to keep one from leaving. Therefore, if the client is worth keeping, pay a little more attention when the relationship is being stressed.


2. New Client Acquisition

Whether you track client wins by specific RFPs or have a method that is less formal, your business development efforts must be tracked so that you can measure the success of those efforts. Standing out from your competition is an obvious key to attracting the clients you want, and there are simple ways to do so. Having a firm specialty, such as representing franchisees, restaurants, or medical practices can be a good way to focus your firm’s productivity. You should also determine if you’re offering the services that your clients and prospective clients truly value. For instance, strategic business planning may be more valued than basic tax preparation services, and therefore might be more profitable to your firm.


3. Proactive Client Interaction

If your clients don’t interact with you, how will they understand the value of the services you provide them? Whether your clients are the face-to-face type, prefer quick calls, a text or a video call, they want to know that your firm is actively engaged and looking for ways to help their business. Firms should track client contacts, and partners should reach out to top-level clients on a regular basis. The regularity of contact instills a greater sense of the client-firm relationship and can result in higher client retention, more client satisfaction, and additional opportunities for up-selling of services.


4. Satisfaction

An excellent proactive tool for predicting client retention is assessing client satisfaction with the firm. 

An article from Firm of the Future showed that nearly 60 percent of small businesses were “highly satisfied” with their accounting firm, while 20 percent were dissatisfied. Developing a system to track client feedback is essential. Start by reaching out to your clients through personal relationships. If you don’t have the personal relationships, to begin with, it is possible your clients’ satisfaction levels will be lower than ideal. Anonymous technology tools can also offer more candid insight. 


5. Engagements/Services Per Client

Providing an array of services to clients is essential to strengthening the client relationship. The more services offered (tax preparation, tax planning, bookkeeping, payroll, business consulting, etc), the more frequent the interaction between the firm and the client, and the less appealing it becomes for a client to consider changing firms.  It is also important for firms to continue to evolve their own service offerings. As new technologies gain acceptance in the market, clients expect not only changes in the way they are served (such as secure cloud access to files), but new services made possible by the new technologies as well. These include virtual CFO and consulting services.


6. Client and Firm Turnaround

It’s good to be proficient in both, depending on the situation. When a client asks for a service, how quickly can you provide it? Is it something that could have been foreseen and prepared in advance or recommended in advance? Many businesses expect swift action to their requests, and while this is the goal of many firms, the results certainly vary by firm,  client and even service offering. This includes daily administrative assistance functions, as well as more detailed client engagements. Firms that can accomplish more timely results for a client will enjoy increased client satisfaction and decreased client attrition, and may be able to charge a premium on services over that of their peers.

Conversely, if you measure the time it takes for clients to respond to action items from firm staff, you can achieve greater insight into the profitability of each client. For example: 

‘Client X, please send your tax documents so that we can move forward with your return.’

With some clients, it may seem as though you’re running a dental practice-requesting a simple client document can be like pulling teeth. This is not ideal, particularly if your firm is seeking to optimize its own efficiency. Clients who are routinely slow in providing essential work products, especially those who are regularly delinquent on submitting payment, may need to be culled.


7. Future Earnings From Clients

Consider future earnings a measure of potential value, as you may be under-serving your existing clients. Or quite the opposite, their future growth may be worth planning for. If you look at the annualized revenue realized per client per service and have tools to track the effectiveness of moving clients to more profitable services, the firm can better forecast its revenue generation potential across the entire client base.


8. Staff Utilization

Measuring staff utilization can be as simple as looking at the billable percentage of staff members’ time. More advanced productivity tools, like those in BQE CORE, can give even greater insight. Although you shouldn’t be billing clients based on time anymore, it is valuable to track time spent on various client services and administrative tasks, as this data can identify the most productive staff and most profitable projects, giving you a better idea of overall firm productivity

According to the AICPA, partners often have the lowest utilization rate because they are more likely to spend time on firm management, new client activities, networking and other basic functions. Likewise, senior staff will have less billable time than lower staff, as management duties necessarily occupy some of their time.


9. Firm Revenue Growth

Firm revenue growth is the bottom line, of course, and accounting firm partners should be quite familiar with measuring revenue and firm profits. When performing reviews of projected and actual revenue growth for the firm, partners should also look at revenue by employee teams, type of client, and service provided. Doing so will let you pinpoint the greatest opportunities for growth, as well as those that may be underperforming. 


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