I started my accounting firm way back in May 1996. I started from scratch and built up my business as a sole practitioner.
I made so many mistakes!
I often get asked advice from people who are starting up their businesses, so I thought I would share with you the first 3 things I would have done differently if I were to start it all again…
1 - Hire The Right People
I went from 0 clients to 200 in 3 years and had a team of 13 people. I was growing crazily fast.
But I wasn’t growing profitably.
One of the biggest mistakes I made was hiring the wrong people.
I didn’t have a huge amount of money, so I tried to cut every possible corner I could, hiring college students and school leavers, rather than qualified accountants, to avoid the fees of recruitment agencies.
The problem with employing people who aren’t the best is the work is not as good, and you have to micro-manage them. I spent so much of my time in my early years micro-managing junior trainees, that it stopped me doing what I was good at.
If I were to start again, I would aim to grow more cautiously. I would spend more money on the right people who are capable of doing the work and dealing with the clients.
It may cost more at first, but in the long run having good staff would save me a lot of time and money.
The only problem is, when I first started, I didn’t have a lot of money. Which is where point 2 comes in…
2 - Having a Pricing Strategy
I did not understand pricing back in 1996.
I was more focused on growing my business as fast as I could, so I was far too cheap.
When I met with potential clients, during the meeting I would add loads of value by spotting tax planning opportunities. I would do this by asking to look at the prospect’s last set of accounts.
When they gave them over I would look through for some tax planning opportunities and would always be able to find one or two things. They would be really impressed.
But what I was really doing was looking for the Audit and Accountancy fees, so that I could make a mental note of what they were previously paying.
The client would be impressed and ask what the price would be. Here I would panic and tell them I would go away and think about it and send them a proposal.
I would then make my price 5-10% less than their previous accountant.
This was a stupid mistake.
I should never have based my price on what their previous accountant was charging. They were clearly not happy with that arrangement which is why they were looking for more.
People know that if they want a better service, they will be paying a higher price.
I thought I was being clever because my business was growing fast, but I wasn’t making any profit.
The second thing I would change, would be to think long and hard about my pricing strategy to make sure I wasn’t cheap.
When you have the right pricing strategy, you will make more money.
3 - Ideal Client Profile
I wanted to grow my business fast, so I took on every single client that came to me.
I never stopped to think about who would actually be good for my business.
Most of the clients I ended up with were terrible clients that only wanted something cheap. They gave me a lot of trouble complaining about fees, paying late or not paying at all.
I wasted a lot of time, energy and resources dealing with the wrong clients.
I learnt much later, you can make much greater profits with fewer people if those people are the right people and you are charging the right price.
Those are the first 3 things I would change. In my next blog I will carry on with the next 4 things I would change so keep your eyes out for that.
If you would like any more help with subject or would like to learn more about value pricing, I run a free live online training session every month. You can attend and ask me any questions you have. Click here to register and I will send you an invitation to the next session.
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Wishing you every success on your pricing journey.
Chartered Accountant, Public Speaker and Amazon No.1 Best Selling Author Of “Effective Pricing for Accountants”
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