This document discusses the challenges of practice growth for accounting firms. It addresses trends like demographics, regulation, and technology that are influencing the industry. It provides strategies for firms to analyze their business, clients, and markets to develop a strategic growth plan. This includes understanding strengths and weaknesses, identifying growth opportunities, setting objectives and targets, and optimizing operations to improve profitability through increased efficiency and higher fees. The goal is to help firms assess their current position and develop the right strategies to successfully manage growth and changes in the business environment.

1. THE CHALLENGES OF
PRACTICE GROWTH
Andrew Jenner FCA FCCA
Director, KATO Consultancy
www.kato.uk.com
us@katoconsult.demon.co.uk
Mobile 07831 100528

2. A BRIEF RESUMÉ
 Time for a change
 Strategy for success
 Supercharge your firm
 Getting into shape
 Growth momentum

3. 5 YEARS OF CHANGE
 Pre-recession
 Recession
 Post recession
 An improving economy
 What are the issues now?

4. TRENDS AND INFLUENCES
 Demographics
 Regulation
 Squeeze on fees and profits
 Finding the right people
 IT developments
 M&A or organic growth or both

5. TIME FOR A CHANGE
Do you have plans in place for:
Services that clients will require in
future?
Providing clients with what they regard
as value for money?
Driving out inefficiencies and
introducing economies of scale?

6. UNDERSTANDING YOUR
BUSINESS
 Fee income split
 Gross margin
 Fee recovery levels
 Lock up
 PII and risk
 Marketing spend

7. STRATEGY FOR SUCCESS
 Who should we act for
 Which sectors should we concentrate
on
 What services do these clients and
sectors require
 What levels of performance do the
clients and sectors expect
 Can we perform to meet these
challenges

8. PARTNER ROLES
A change of emphasis?
Managing the business, less hands on
working
Effectively using IT and people
Developing clients and relationships
Developing new business

9. KEY CONCERNS
 Survival
 Client services
 Improved operational structure
 Stronger staff relationships
 Improving profitability

10. EXTERNAL INFLUENCES
 Attracting and retaining good people
 Clients who require more/better VFM
 Regulatory environment
 IT systems and communications
 Efficiency and turnaround

11. MARKETING OPTIONS
 Increase market share
 Expand existing markets
 New markets/existing services
 New services/new markets
 Increase profitability

12. PRACTICE DEVELOPMENT PLANS
Preparation
Analyse strengths and weaknesses
Assess opportunities and threats
Objectives
Attract the right new clients
Develop existing clients
Retain existing clients
Dispose of misfit clients
Improve profitability

13. SWOT ANALYSIS (1)
Looking outward at opportunities and
threats
Nature of the local market
Size of the local market
Nature and scale of services required by
the local market
Direct and indirect competition

14. SWOT ANALYSIS (2)
Looking inwards at strengths and
weaknesses
Client mix compared with the market mix
Range of services compared to market
needs
Fees compared to other firms
Do we provide existing clients with the
services they need and we offer
Are we prospecting potential clients and
intermediaries

15. CLIENT RETENTION STRATEGIES
Who do you retain?
A. Excellent client, good fees, good
growth prospects, key referral source
B. Good client for the firm but little
prospect of significant future growth
C. Poor prospects, little or no chance of
developing the business
D. Clients the firm should dump

16. SUPERCHARGE YOUR FIRM
“If you break everything down that goes
into riding a bike, and then improve it all
by 1%, you will get a significant
increase when you put it all together”
Dave Brailsford, British Cycling

17. WHAT DO YOU KNOW
 Is all your work profitable?
 If not, how can you make it profitable?
 If not, why do you do it?
 Can you measure profitability?
 Are all your clients profitable?
 Which are the most profitable?
 How do you measure client
profitability?

18. WHAT DO CLIENTS WANT?
Assurance ideas Compliance Services
Performance improvement ideas Consultancy
Retention of profit ideas Tax Planning
Protection of wealth ideas Financial Advisory

19. LEVERAGE THE GRF
 The 80% annuity
 Manage compliance and regulated
work
 Invest in IT, reduce production costs
 Invest in IT, increase efficiency
 Improve recruitment and retention


20. GETTING INTO SHAPE
Where does your profit come from?
£000
Value of work done 1450
Fees from compliance services 1100
Salaries and overheads 880
Core business profit
220*
Tax consultancy 150
Total Profit 370**
3 partner firm - PPP *£73k or **£123k

21. CREATING PARTNER TARGETS
 Fees
 Profit per partner
 Chargeable hours
 Practice development
 WIP and Debtors
 Write offs and risk exposure

22. THE TRIPLE WHAMMY
 Discounting fees when quoting
 Discounting by failing to fully record
chargeable time
 Discounting by writing of time when
billing

23. A SIMPLE TEST
By how much would fees increase and
profits grow if:
All charge rates increased by £10 per
hour
The rate increase was recovered on
billing
Each fee earner recorded an extra 30
minutes per day
Billing write offs were reduced by 50%

24. FEES
 Time based v fixed fees v performance
based
 What is the trend
 What does the client want
 How do you gauge any change

25. STRUCTURE AND MANAGEMENT
 Corporate or non-corporate
 Roles and people
 Planning and scheduling
 Managing partner

26. THE COMPLIANCE FACTORY
 Department structure
 Responsibilities
 Accountabilities
 Technology
 Turnaround targets

27. PUT IT ALL TOGETHER
Profit per equity partner £150k
= gearing x hours x rate x recovery x
margin
= 5 x 1000 x £150 x 80% x 25%

28. KEEPING SANE
 Terms of business
 Frequency of invoicing
 Advance payment methods
 Credit control
 Access to finance
 Forecast

29. CASE STUDY
A successful firm’s 5 year plan

30. BUILDING VALUE IN THE FIRM
 What other areas will your client base
support?
 What are the areas where clients need
support?
 What services could you sell to other
accountants?
 What shape are you really in?

31. A strategic approach is essential
for any successful firm!
www.kato.uk.com
us@katoconsult.demon.co.uk
Mobile 07831 100528