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How To Differentiate Your Accountancy Practice

I’ve been interested in the big question of “how to differentiate an accountancy practice” since 1981.(This article was first posted on my Differentiate Your Business blog in July 2011 but I believe it is still very relevant.)

That was when I was in the last year at University studying Economics and Accounting and I started looking for a job as a Chartered Accountant trainee.

At that time the profession was dominated by the Big Eight and Price Waterhouse and Coopers & Lybrand were head-to-head competitors, KPMG were known as Peat Marwick Mitchell, Arthur Andersen were seen as the brash newcomers and Spicer & Pegler (a name I always liked) were just outside the big eight.

I must admit the big ones did seem to be pretty much the same although there were two common preferences amongst my classmates – Peats (because they were the biggest) and Price Waterhouse (because they were the poshest).

Being different, I turned down job offers from both and was one of four to join Neville Russell (now Mazars) in Birmingham in 1981, mainly because they seemed less stuffy because they had a young, female staff partner and because they offered plenty of small business accounts work which for me meant variety and contact with entrepreneurs while still offering the full training support.

I left Neville Russell and the accountancy profession in 1985 with ACA after my name and since then, I’ve been looking at the accounting market with interest as an outsider. At one stage in my consulting and coaching career (since 1995) I thought I’d take advantage of the qualification and branded myself as a chartered accountant, even though I didn’t do accounts and tax because it added credibility to my strategy and financial management services. All it did was cause a lot of confusion and I quickly changed.

“Accountancy Practices Can’t Differentiate Themselves – Accountancy Is A Commodity Service”

If that’s how you think, then you’re right.

You won’t be able to differentiate yourself as an accountant because you won’t make the decisions needed to create a clear position in the market.

There’s no argument that the tangible output of an accountancy assignment – in terms of the set of statutory annual accounts and the various tax returns – are going to look remarkably similar because the formats are prescribed and many of the details will be the same.

The numbers may be very different.

It’s like the old joke of an employer interviewing candidates for the job of company accountant.

To test their skills and professional opinions, he devised an exercise where each accountant had to go away and calculate the profit for the period.

The first went away and came back with the answer, “the profit is £567,387.” The entrepreneur looked at the very detailed calculations and the very conservative assumptions that supported the profit figure and made certain judgements about the candidate.

The second came back quickly and said “profit is around £600k” and presented the entrepreneur with a “back of the fag-packet” calculation with some broad assumptions. This time, the judgement of the entrepreneur was very different.

The third took the bit of paper with the exercise on it and before he stood up, he leant forward and asked “what profit do you want it to be?”

The Big Impact An Accountant Can Have On A Business

You and I know that the impact of one accountant compared to another on a business is much than some calculations,decisions on accounting policies, assumptions and judgements.

The underlying numbers can be affected even more by the advice given by the accountant to the business owner, either directly or indirectly through referrals.

The impact of a good accountant compared to a weaker accountant can be seen in the profit, cash flow and tax paid by the business and in the money that finds its way to the business owner’s personal bank account.

The Professional Accountancy Bodies Are A Commoditising Force On The Profession

It’s inevitable but the role of the professional bodies like the Institute of Chartered Accountants In England & Wales is to keep standards high and that narrows the opportunities for differentiation.

You have to do certain things in a certain way because it’s required. And accountants who don’t are disciplined, fined and even expelled from membership.

This is a grievance for me personally because I have a practising certificate from the ICAEW because I “give financial advice” even though I don’t provide any of the standard services Chartered Accountants do.

The Big Marketing Advantages Accountants Have Which Hinders Differentiation

Accountants have two big advantages which help them to attract clients which other professional service providers don’t have.

  1. The output of the accountancy service in terms of accounts and tax computations are required by law and they are too complicated and scary for the vast majority of business owners to do on their own.
  2. The work has to be done every month (PAYE returns), every quarter (VAT) or every year (accounts and tax assessments).

Effectively accountancy is a compulsory purchase and it’s one that business owners have to make each year.

Just like banks, accountants keep clients, even if they are not particularly happy, because of customer inertia. It’s seen as too much trouble to change.

So if all accountants appear to look virtually the same, and the professional bodies keep standards high, the business owner may as well pick one at random – often based on convenience – and if the fees seem reasonable based on the effort of talking to more accounting firms, decide to become a client.

Of course the client doesn’t look at the decision the right way because he or she doesn’t factor in the inertia issue.

The difference between the £1,000 free from accountant A or £1,300 fee from accountant B is only £300 but over ten years, it becomes a £3,000 difference assuming fees don’t change. A 10% increase in fees per year increases the difference significantly.

The Downside Of Client Inertia

If a client thinks that “all accountants are the same” or more negatively, “all accountants are as bad as each other” then there is little incentive to change.

Clients can even test the water by looking in Yellow Pages or taking a look at competing firms websites. Unfortunately what they are likely to see is a lot of the same phrases being used time after time – see Marketing Bingo For Accountants

It’s a case of “better the devil you know”.

And that makes it difficult for an accountant to attract clients which are already established businesses unless the client is extremely unhappy with the incumbent, has a new, special requirement which the existing accountant can’t handle or is being pushed hard by a third party to move to another (often better known) firm of accountants.

So many of the new clients an accountancy firm are start-up businesses who have very little money, are unsure what an accountant does, are unable to tell a good accountant from a bad one and are daunted by the big fees for uncertain value.

And the accountant is unsure of the business start-up. Even if the talk is big, will it succeed and grow into a substantial business which justifies an investment of time and attention?

Differentiating Your Accountancy Practice – Creating A Positive Reason For Choosing You As The Accountant

In contrast, if your accountancy practice is differentiated from competitors, you provide a positive reason for some clients to choose you rather than your competitors, both for start-ups and for established businesses.

Even better, the established businesses may be relatively happy with the service they get from their existing accountants but your differentiated offer of services is strong enough to motivate them to change and to pay a premium price to work with you.

Attracting Some Means Repelling Others – Nobody Buys OK

There are only four levels:

  • You can be worse than your competitors – and obviously you don’t want that.
  • You can be the same as your competitors – this is the big problem because many accountants are perceived as the same.
  • You can be better than your competitors – it’s an easy claim to make but much more difficult to prove. You can taste all the different types of tinned tomato soup and eventually decide that Heinz is best but you can’t do it with accountants. You can get testimonials to say something along the lines of “XYZ accountants are much better than our previous accountants and we wish we’d changed years ago” but it’s a very limited comparison.
  • You can be different from your competitors – and communicate those differences to your target market.

But being different is a bit like being a magnet. You attract some clients but repel others.

One of my popular sayings is that “nobody buys OK”. People don’t buy an average product if something better is available in some dimension of customer value.

Accountancy services may be the exception that proves the rule. Many small business owners do buy OK and put up with it year after year because they can’t see that anything better is around.

How To Differentiate Your Accountancy Practice

I use the seven big questions of business success as the basis for thinking about how to differentiate one business from it’s competitors.

These questions are who, what, where, when, how, why and how many and are designed to move attention away from the profit killing question “how much do you charge?”

Can Accountants Differentiate By Who?

The who dimension of differentiation can be applied to:

  • Who are your clients? Are they different or special in any way?
  • Who are your employees? Are they special in any way?
  • Who are your suppliers? Is a supplier unique to you in the local area?
  • Who are you and your fellow partners? Are you or can you be a celebrity in some way so that clients feel privileged to have you as their accountants?

It has always struck me that a very easy way for accountants to differentiate their practices is by type of client.

“We provide accounting and tax advice to small manufacturing businesses…” or

“We provide accounting and tax advice to subcontractors…” or

“We provide accounting and tax advice to privately owned retailers…”

I see this kind of differentiation by who regularly in the coaching market and it works very well.

People like dealing with specialists because it makes them feel special. It’s a hit directly in the marketing bullseye.

Of course specialising in one type of client means ignoring or at least discouraging other types of clients.

It significantly weakens your positioning if you cop out and say “we provide accounting and tax advice for independent retailers but if you’re a service business or manufacturer we’d be happy to have you as a client.”

Don’t laugh… it’s the type of think that I’ve seen and it becomes anti-marketing i.e. it actually puts off your target market.

While I think about differentiating by who, I should mention the accounting umbrella organisations (I don’t think I’m supposed to call them networks) like AVN and PROBIZ.

In my opinion they are both positive and negative forces for differentiation. Where membership has geographical restrictions, then being the PROBIZ representative can be helpful because you are the only one. I live close to the West Bromwich Albion football ground which is covered with PROBIZ Tax signs.

But across the membership it is another commoditising force. One PROBIZ accountancy practice offers same products and services as another.

How Accountants Can Differentiate By What

What is the answer to the basic question asked by clients of “what do you get for your money?”

The core services are accounts preparation, tax preparation and tax advice but many other services can be included.

Some accountancy practices have differentiated so much by what that they’ve stopped being general practice accountants and instead are tax specialists or insolvency practitioners which can then create their own sub-specialisms.

Others have taken focus from the differentiation by who and developed specialist services for their niche markets. If you concentrate on retail businesses, you can see how you can develop very focused services based on your unique insights into the problems and issues of the clients.

Claiming to be a specialist means that you’re very knowledgeable about the subject.

Not compared to your clients who know little but to your competitors.

This means that you can make a big mistake in claiming to be a specialist in too many things unless you have the scale of a PWC or KPMG and you really do have a narrow specialist (or department) in just about everything.

If you’re a small firm and have few resources, then the broader your coverage, the shallower will be the perception of your expertise. It’s the opposite of a recent PhD who knows all there is about a tiny field.

Differentiating Your Accountancy Practice by When

I’m not sure there is much scope in this dimension of differentiation for accountants since it refers to when the service is available (think all night chemists) or how fast the service can start or finish.

Having said that I’m shocked by accountancy practices who offer a management accounting service or part time FD service and think it’s OK to get the monthly accounts out by the end of the fourth week of the month. Experienced industry based accountants know that a lot has changed by then and the only value of old numbers is for trend purposes.

Differentiating Your Accountancy Firm By How

To be honest for basic compliance work, clients don’t care how you produce their statutory accounts and tax returns.

The effort that goes into providing the service is invisible to them and that is one of the reasons why they complain about high fees. While having the accountants in on site can be irritating, at least business owners get to see the hours being put in and even want a reasonable number of questions.

How can be more interesting with specialist services, even if the client doesn’t really understand the process.

Think tax schemes. The end result may be similar but one tax saving scheme may fit much better with the business owner than another.

Or a service like SystemBuilder from AVN members which is software which helps you to document and formalise systems following the E Myth idea. I haven’t seen SystemBuilder in practice and have no idea about the numbers but something that has been used more than 1,200 times would be much more appealing to me as a client than a proprietary system for one accountancy practice which has been used three times.

The other “how” which is important to accountancy practices and the clients is how you charge, since Ron Baker’s value pricing ideas have been so popular. For the client fixed fees gives certainty and for the accountancy practices who use it, fees often increase and cash flow improves since you can introduce monthly direct debits during the year rather than waiting for payment after the service is provided.

Differentiating By Where Is The Classic Way For Many Rural Accountants

Once you get out of the cities and big towns, the choice of accountants is often easy because there is only one in the local area.

Of course differentiation become an issue if another one moves into the territory – perhaps a breakaway by one or more partners of the existing firm.

One of the nice things about having competition is that it gives you something to be compared against and that can help you to look good.

The human brain finds decisions easiest to make if there is a choice – not too big a choice – but it’s much easier to decide if something is good or bad based on whether it is better or worse than something similar.

Differentiating By Why You Became An Accountant

The why differentiation dimension is an interesting one because people are attracted to people with passion or a cause.

My story about why I’m a small business advisor and passionate about helping small business owners make more money relates back to one of my first accounting assignments and a small transport company which didn’t make it through the early eighties recession. I really liked the owner and he was kind to me as a raw novice and i wish I knew a small fraction of what I know now because it could have made a big difference.

Perhaps you have an interesting story which shows that accountancy is not just a way to earn a living but something that you care passionately about.

Differentiating By How Many

Our focus here is to focus on the value element of the value for money to provide a reason for engaging your accounting firm instead of a competitors.

It’s the same idea as a bottomless cup of coffee or eat as much as you want at your favourite Chinese restaurant.

I’ve already mentioned fixed fee pricing as part of the “how” differentiation but the call our accounting, finance and tax helpline as many times as you want in the year as part of our service can provide important reassurance to some clients.

Small businesses are all to wary about the money clock running up a big bill when they talk to professional advisers and they may have been stung by a lawyer, consultant or previous accountant. That creates a problem. It stops many asking for advice they need and it stops you deepening your relationship with the client and referral opportunities.

There Are Many Different Ways To Differentiate An Accountancy Practice

I realise this is a long article but I have really just scratched the surface of what can be done with the 7 big questions approach. It’s also important to realise that what you can do to differentiate your business depends on what competitors do at the moment, what they might want in the future and what clients and potential clients want.

Some clients will just want a cheap and cheerful service. I’m like that with banks.

Others want and need much more and provided there is genuine value in what you do (i.e. the benefits to the client far exceed the fees), they will be willing to pay.

As you think about how you can differentiate your accounting firm, please realise that differentiation can be shallow or deep.

Shallow differentiation is jazzing up your marketing communications a bit to make your firm sound special or unique.

Deep differentiation is taking the differentiation concept and making sure that it is reflected in everything you and your staff do consistently and reliably.

Advice On Differentiating Your Accountancy Practice

If you’re based in the UK and you have a small accountancy practice or you’re planning to start one, I’d love to help you to differentiate your business. Give me a call on 0121 554 4057.

It can be difficult to recognise what makes your business special because you take so much for granted and you may miss the WOW factor.

What Makes An Accountancy Firm Special To You?

It would be great if you could share your thoughts on what differentiates one accountant from another by leaving a comment.

If you’ve already differentiated your accountancy firm by one or more of the dimensions I’ve gone through, I’m happy for you to do a bit of self promotion by sharing your niche, speciality, story etc. Just don’t try to keyword spam the comments because I won’t publish.

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