Accounting and bookkeeping firms today have more to think about than the accounts or the books. Mostly their time is spent doing the technical work. When there are forces at work that are disruptive, business value is decimated. A bookkeeping business will, in the future, be worth only the amount of revenue that is recurring. This requires building a business (firm) which has created subscription revenue streams. This augers well for the firms that are mirroring SAAS businesses (such as cloud accounting software firms) who have been steadily building their subscription-based business.
A survey conducted in April this year suggested that less than 10 percent of bookkeeping business owners had any kind of succession or business sale plan. This compares to accounting firms where recent studies suggested that more than 50 percent either had or were planning a succession or sale plan. This may suggest – yet again – the lack of value bookkeeping business owners place on their services and hence the firm. It also suggests poor pricing structures are in place.
Building value on best practices
Yet another finding from the Benchmark Insights Report was that firms that deliver best practice are the most profitable. This would resonate intuitively yet only a minuscule number of firms adopted benchmarking that compared their performance against best practice.
What gets measured to define best practice? The usual metrics matter such as the ratio of clients to bookkeepers as well as the cost basis per bookkeeper (a key measure of profitability of the firm). But other metrics matter in this new, post-disruptive era.
The most successful firms track:
- The average price increase per client per year
- The percentage of revenue invested in marketing and business development
- The growth in the percentage of value-based revenue work per client per year. It is an inconvenient truth that up to 40 percent of a bookkeeper’s time is spent doing non-billable work. This presents as an opportunity for the bookkeeping business owner seeking to build the value of her business to slash unproductive time. And the rewards will be great.