Do you want to grow your accountancy practice or scale it?
For many people, the two concepts might be indistinguishable. However, they are in fact very different in terms of the benefits that they deliver to you and your team.
In this article, we’ll reveal the differences between growing and scaling, and share some advice to help you focus on the latter.
Here’s what we cover:
- What’s the difference between growing and scaling?
- Challenges involved in scaling your practice
- How to scale your accountancy practice
- Final thoughts on scaling your practice
What’s the difference between growing and scaling?
Growing your practice
If you’re just growing your accountancy practice, then you’re adding new resources such as people, offices and equipment, the result of which should be that the business gets bigger and your revenues increase.
The problem, though, is that these new resources are also adding to your costs and squeezing your margins.
You might take on two or three more clients and so your revenues will increase.
This sounds great, except that your costs will also probably grow, as you find yourself having to employ more staff to service these new clients.
As a result, your revenues might be going up, but your profits will be staying the same – or even falling.
Scaling your practice
Scaling your accountancy business means you’re growing your revenues but you’re also improving your margins and driving up your profits.
Many practices start by simply growing but the really successful ones are those that scale up after the initial stage of development.
So remember, growth alone doesn’t necessarily mean greater profits, greater job satisfaction and a more robust business. Ensuring your practice – whatever its size – is strong and profitable is particularly important during these difficult economic times.
According to government figures, as of 1 January 2022, there were 5.5 million private sector businesses in the UK.
And that’s 1.5% fewer than in 2021.
The drop between 2020 and 2021 was 6.5%, the largest fall in the business population since the surveys began in 2000.
Effective scaling involves constantly rethinking your business strategy and tactics, so your practice, your revenue – and your profitability – are all growing, and you’re well placed to handle economic headwinds.
Challenges involved in scaling your practice
There might be numerous challenges when it comes to scaling your practice, especially if the prospect was never previously on your radar.
However, a key challenge when scaling up is a lack of information.
If you don’t know which of your services is most profitable and which clients are responsible for the best margins, as well as who pays on time and where your most significant profit and cost centres are, you won’t know where to focus your efforts to scale.
Using technology to gain timely and accurate insights into your costs and your profitability in all areas of the business is essential.
Other issues include:
- Scaling faster than you’re prepared for
- Focusing on short-term goals rather than long-term ones
- Failing to optimise your systems so your practice can scale
And one more challenge is around your focus on growing your practice. You may not have considered the prospect of scaling, so your mindset is unlikely to be geared up for that.
So what you need to do? Develop a scaling mindset instead.
We cover that below.
How to scale your accountancy practice
Once you and your people have understood what the difference between growth and scaling up means for your practice, you can start putting into practice some tools and techniques to scale up.
Here are some things to consider and do.
Decide on your scaling goals
What do you want your practice to scale to and what are your timelines?
This will make an impact on how quickly you want to scale and what that looks like for your practice.
Think about where your emphasis on scaling is going to be.
Are you, for example:
- Looking to take on more clients and make greater use of new technologies rather than employing lots more staff to service them, thereby improving your margins?
- Planning to expand the range of services that you offer your clients, so you’re gaining a greater share of wallet?
- Thinking about opening new locations, so you can offer your services to a wider audience of clients?
Your scaling goals might be based on becoming a human firm and giving staff more autonomy and freedom to scale the business on your behalf based on their own ideas of what clients are looking for and how profits can be increased – almost as if you were operating a mini-franchise.
It’s useful to update your business plan to include an indication of scaling timelines.
Creating a graphic to show how you intend client billing and your practice’s income to increase over the coming months and years compared to outgoings and therefore how you intend to become more profitable can help you to plan and visualize your scaling goals.
Develop a scaling mindset
What got your practice to its current stage of development probably won’t get it to the next level.
To a large extent, the difference between growth and scale involves a change of mindset.
Hitherto your strategy might have centred on acquiring more clients and recruiting more people – and this makes sense in the early stages of a business or if your practice is still relatively small.
However, to scale up, you need to think beyond this.
Focusing solely on growth might mean that you pour resources into looking after a large client, perhaps one with an impressive brand image or one that you’ve worked with for a long time.
But you need to ask, are they really giving you a good return on that investment of time and effort?
A scaling mindset involves analysing the figures to identify how profitable this account is and working out whether you can do something to increase your margins when dealing with this client.
Reduce costs and boost profits
You and your team should think about how you can reduce costs (by automating processes, for example; more below on this) and increase margins (such as providing bundled offerings to clients), as well as taking on new clients and growing your range of services – without substantially increasing what it costs to service those new clients and deliver those services.
Your focus should be less on driving up revenues and more on driving up profits, and expanding the areas of the business that are the most profitable.
This doesn’t simply mean trying to service new clients by making your existing staff work longer hours or devoting less time to each client.
Instead, it’s about helping them to work smarter, supported by lean, agile business administration and processes.
As well as delivering a great service, everyone on your team needs to start thinking about how they can offer new services to existing clients or take on board more clients without significantly adding to costs.
Offer new services
It’s well known that retaining customers is cheaper to do than acquiring new ones, while improving retention by just 5% can drive profits up over 25%.
So in addition to providing your existing services to customers, you should think about offering new ones.
An accountancy practice that provides business advice, financial planning, tax strategy, business payroll and other management consultancy offerings will not only have an edge over the competition, but it can charge an existing client more.
Many companies welcome a one-stop shop for both tax and accounting, for instance. Offering clients these integrated services is another great way to scale up.
Providing a broader range of services can help you to retain clients and increase revenue from each one, while ultimately boosting your profits.
As well as your own staff, using freelancers and partnering with other businesses that are in complementary but not competitive fields such as HR or employee benefits and wellbeing can help here.
Once you’ve developed and refined a new service for one client, you can then roll it out to others with minimal impact of costs, time and effort.
Develop your team
Retaining and developing your own in-house people rather than spending money on recruiting new talent will reduce costs, enabling you to scale up your business.
Investing in training for your employees so they can do more for the companies they work with can also allow you to increase your billing without substantially increasing costs (but don’t afraid of raising your prices).
Word of mouth is the best marketing tool – and it’s very often the cheapest.
Developing a referral programme where existing clients receive a gift or incentive for introducing you to their own contacts who, in turn, sign up, is a cost-effective way of recruiting new clients.
Vouchers, discounts and gifts can all be used to incentivise the companies you work with to recommend you to others.
Delegate more and review your reporting lines
Simply growing their business can see entrepreneurs working harder than ever as their tasks and responsibilities increase.
However, as part of your scaling up mindset, you and your senior team will have to be ready to delegate more and to allow your employees the freedom to take more decisions themselves.
The structures and reporting lines that you had when you started employing people will have to be reviewed.
Allowing your staff more autonomy and enabling them to use their initiative to manage clients will almost certainly mean an acceptance that they’ll make more mistakes.
You’ll therefore have to think about how to avoid a blame culture. In other words, how will you allow people to fail without too much fallout and how can you ensure that they learn from their own and other people’s mistakes?
Create standard operating processes
As you might know from experience, it’s all hands on deck with a business in its early stages. Everyone in the company ends up doing everything and this kind of team spirit is admirable.
But as you scale up, it’s important to document processes and standardise procedures.
This might involve onboarding clients, dealing with their enquiries, billing and invoicing, taking notes from meetings, submitting expenses and managing annual leave.
Ensuring that everyone knows the right way to handle these tasks is important for improving collaboration, and ultimately scaling smoothly.
As well as onboarding new clients (and staff) more quickly and easily, this standardization provides consistency across the various sections of your company so you can measure income and expenditure more accurately and make comparisons between departments.
You’ll also be able to see where systems can be simplified and made more efficient, speeding up procedures and reducing costs.
Use external expertise when you need to
It’s a good idea to think about bringing in specialists to offer additional support to your clients.
Using freelancers and outsourced expertise means you can expand your portfolio of services and your billing, as well as creating a competitive edge beyond standard accountancy without significantly increasing your costs.
Consider approaching experts in disciplines such as tax planning, technology, forecasting, business consultancy, sustainability and environmental, social and governance (ESG) issues plus market research to see how you can collaborate.
Professional networks such as LinkedIn and local business groups are a good place to start.
And if you’re looking to scale but are unsure on what you need to do to stay on the correct path, using the services of a business coach could be a good move.
Use tech and automate your processes
Technology can reduce many of the costs involved in the day-to-day running of your business. There are lots of software solutions available to your practice, which you can use to make your processes more efficient and effective.
By automating some key processes, you and your teams can spend more time servicing customers and doing things that add to the value of your business and increase profits.
Tasks you can look at automating include:
- Staff leave management
- Onboarding new employees
- Creating proposals
- Managing projects
- Generating engagement letters
- Scheduling appointments.
Stay on top of the numbers
Accounting software can help you to keep on top of key performance indicators (KPIs) and essential metrics such as cash flow, expenses management, staff productivity and profitability, client profitability and client payment terms.
Gaining a better understanding of the financial position of your practice with detailed, accurate, and timely data can help you to ensure that you’re really scaling up rather than just getting bigger.
If this software is cloud based, then it can scale up as quickly and as cost effectively as your practice.
As mentioned above, delegation and decentralization are essential for scaling up most businesses.
However, it’s still essential in every case for the management to be able to take an overall view of the practice’s financial position on a regular basis and to have essential information at their fingertips.
This, again, is where the latest software can help as you delegate authority without losing control.
Final thoughts on scaling your practice
“Our experience with dozens of companies launching businesses is that more than 60% of scaling efforts can succeed,” says consulting firm McKinsey.
“Based on an analysis of US venture capital (VC) data, two-thirds of value is created when a company scales up to penetrate a significant portion of the target market.”
Want to follow suit with that for your practice?
Remember that successful scaling up requires a change of mindset as well as a thorough, cool-headed review of your entire practice.
Technology is essential here too.
Looking to scale rather than simply grow can be challenging but it can also benefit you, your staff and your clients as your accountancy practice evolves and takes this exciting step forward.
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