I received a 3 paragraph letter recently from someone I didn’t meet at a recent networking event. This person had obtained an attendee list and sent out what is clearly a standard letter. I won’t embarrass the firm or the writer by identifying them. And here’s the key thing: Nothing in the letter will identify them either.

As you read it I would encourage you to think about how ineffective such an identikit letter is likely to be. It could be describing almost any of the top 50 firms of accountants.

“It was unfortunate that I was not able to meet with you at the [event]. I would have appreciate the chance to talk with you about your organisation and gain an insight into how we can work together in the future.

I would like to introduce our firm to you. [This top 30 firm] is a firm of chartered accountants providing a fully integrated business advisory service across several areas of expertise, designed specifically to save you time, provide you with peace of mind and achieve cost savings where possible. We pride ourselves on our ability to understand our clients’ issues, working closely with them to identify areas where we can provide solutions that add value to their business and shareholders. In short, we are here to help you.

Our clients include quoted public limited companies, owner managed and family owned businesses of all sizes, professional partnerships, regulatory bodies, public sector bodies and not-for-profit organisations. I will contact you in a couple of days to discuss your requirements and how our approach to service delivery could be of benefit to you and your organisation. Further information about our firm is available on our website [here].

Direct mail has a poor reputation – partly because so many direct mail letters are poorly written. This one is focused solely on the firm of accountants and says nothing of any value. Nothing that distinguishes the firm in question from any other firm. Nothing that would make a recipient think “Oh, now that sounds different from my current accountant”. Nothing that would make anyone want to check out the firm’s website. And nothing to identify whether the sender has relevant expertise, is a partner, a specialist or is in the marketing department or whatever.  And don’t get me started on the lengthy sentences (one has almost 40 words in it).

Sorry. But this letter fails on almost every measure. Of course this direct mail campaign will have limited impact.

It also reveals the opportunities available to smaller firms to distinguish themselves. Most of the the bigger firms are all the same – or at least they come across as all the same. This letter, like so much of the marketing materials emanating from bigger firms, tries to be all things to all people. So it will be largely ineffective, a waste of time and of effort. Which takes us back to my last post on this blog…

Any comments?

Last week I interviewed Daniel Priestley on a webinar during which we discussed ways in which accountants in practice can become more entrepreneurial.

One of the issues we touched on was the benefits of identifying a niche, or preferably a micro-niche.  Daniel made the point that this makes you more referable as it distinguishes you from all the other accountants. And this is a point with which I certainly agree. I’m always amused when I see a list of “areas in which we specialise” on accountants’ websites. In fact such lists are more often simply a list of all those areas in which the firm’s clients operate. As such they provide less evidence of specialist expertise than is ideal.

The same point arises when accountants try to describe all the things they can do when they announce themselves at a networking event. All this does is to make you sound just like every other accountant. And that means you’re BORING and not memorable. So the low rate of referrals and new work introductions that follows from such activities shouldn’t be a surprise.

Claiming a micro-niche involves focusing on something like: “Divorced women over the age of 50 who are worried about their finances.” That’s a clear memorable and distinct focus. It’s a micro-niche.  You probably are already finding yourself thinking of people who fit that demographic. If so you’re putting yourself in the position of someone who could refer work to an accountant who focuses on that micro-niche. And that’s why it can be so valuable to have such a focus. Clearly you should pick one that relates to your own experience. But PLEASE make it different to all the other accountants who (claim to) focus on SME businesses…. (yawn),

Daniel suggested that micro-niches might include reference to gender, age, level of wealth, location, income, beliefs, values or any other such distinguishing personal or business feature. Focusing on micro-niches also makes it easier for search engines to find you. This is relevant for when your target audience is looking for an accountant. Your micro niche makes you more referable, more memorable and more obviously a specialist from the media’s perspective too.

I had one further thought after the webinar had finished. And anyone who has ever worked for or met someone from a larger firm of accountants will be able to relate to this. Often their business cards will define the niche or area in which they work. They are not simply a partner or a manager. Often they are not simply a tax partner or audit manager. Their business cards typically identify an area such as ‘property’, ‘retail’ or ‘international’.  These are akin to niches. But I know dozens of property tax specialists in large firms and I have difficulty in distinguishing them in my memory.

The accountants (in any size of firm) who stand out are those who emphasise their own unique micro-niches.They make these clear on their websites, on their marketing material, when networking and seeking referrals and when obtaining media coverage.

During the webinar Daniel answered a couple of related questions:

a)  Can you have more than one micro-niche? Yes you can but it’s rarely necessary and will confuse people if you mention them both in the same conversation;

b) What about the work and opportunities you miss through focusing on a micro-niche? In real life you gain far more than you lose.

What do you think? Do you have micro-niche you’re prepared to share?

Chatting with a business contact this morning he told me why he feels compelled to go out to tender for new auditors. Bear in mind that he is a VERY experienced FD and has been in post at this multi-million pound business for 4 years. The auditors in question are a top ten firm and have been in post for 5 years.

I share below the points my friend made:

Our current auditors said they’d staff the audit with local [north London] staff; in fact the manager and staff are based in Birmingham.

We don’t know what they’re doing half the time. They ask for random invoices and have told me lies.

They do interim work during the final visit and disrupt us at our busiest time of year.

My finance team are close to resigning due to the attitude of the audit staff.

My number 2, who has been in post for 8 years, cannot understand why the auditors are so uncommunicative and disruptive in their approach.

We agreed timetables for respective actions to avoid being charged for cost overruns. When the auditors miss their deadlines and cause delays they then report US to the audit partner if our next stage is behind the original schedule.

We know they underbid for the work originally and have been constantly trying to push the fees up each year, which we have resisted as the group structure has been simplified.  We agreed a small excess for cost-overruns last year. There won’t be any this year.

I know the auditors have to be independent but ultimately we need to work together to ensure the financial accounts are right. This firm (other than the partner) takes a more ‘them and us’ approach than any firm I’ve ever worked with before.

We’ll go out to tender again and we’ll have to let them re-tender but there’s almost no prospect of them being reappointed.

If I didn’t know better I might think that the FD has something to hide and that the auditors are just doing their job properly and objectively. And maybe that’s how some audit partners excuse themselves when they lose a re-tender – as is bound to happen here.

I understand that over the years there have been NO major audit issues or disagreements re figures or presentational adjustments. The audit partner has been objective, professional and helpful. He’s been firm when he needed to be – but this has not caused any serious disagreements or issues.

Lessons?

A number of people have mentioned in conversation recently how much it costs to go to the dentist.  In each case their dentists are getting close to retirement and their longstanding patients are stating to look for someone new. The patients are shocked at how much more they have to pay their new dentist.

Their automatic assumption is that their old dentist was out of touch with what his contemporaries were charging. They feel that they’ve been fortunate to get away with paying very low fees for so long. Now their dentists are retiring they have no option but to pay commercial rates.  They specifically do not want to try to find another older out of touch dentist. They assume that a new dentist will be more uptodate, use newer procedures and be around for some time into the future.

None of the people who have shared these stories with me have considered telling their old dentist that he’s been undercharging them.

Is there a lesson here for accountants I wonder? Especially those who have kept their fees unreasonably low for many years? When you retire your clients will find that they cannot secure the same quality of service without paying more commercial fees.  In the mean time the only person to lose out is you.

There may be other lessons we can learn from the analogy. When you choose a new dentist what do you look for? Do you think about their professional qualifications? Do you make assumptions about their competence, experience and ability? Would it matter if they promise a personal service? (What other type is there?).   What REALLY matters to you when you are recommended or choose a new dentist? What REALLY matters to prospective clients when they are recommended or choose you as their accountant?

Reading about MP’s for hire and their differing daily rates brought to mind the question that many accountants are asked by prospective clients: “What’s your hourly rate?”

Last week we learned that Stephen Byers charges upto £5,000 a day (about £625 per hour). Patricia Hewitt and Geoff Hoon charge less, ‘Upto £3,000′ a day (about £375 ph). This week reports suggest that Andy Ingram and Richard Caborn charge upto £2,500 a day (about £312 ph). It’s interesting to speculate as to whether the journalists, who uncovered the MPs’ willingness to take money for lobbying after they stand down, had inside information. Did they know who to target? Did they just get lucky? Or were these 5 MP’s just unlucky to get chosen and therefore revealed? No doubt there are many more MPs who operate as ‘cabs for hire’ and who would make themselves available for a daily or hourly rate. But that’s not relevant to this blog.

If you wanted to engage an MP – how would you choose who to use? Are they all the same? Why not just go for the cheapest?

Actually the question should be “Are they all the same as regards their ability to help me achieve my business objectives?” And the answer is clearly ‘no’. They each have different contacts, different levels of influence with other MPs, ministers and civil servants. And this is why there is no standard daily/hourly rate for which they can be engaged. Rightly or wrongly some charge double the amounts that others charge.

Dare I suggest that, in this context, accountants are just the same as MPs?  Who decides what is a fair fee for an accountant’s services? If someone thinks that an accountant’s quoted hourly rate is too high, of course they can go to find another who charges less. In real life, including that populated by ex MPs lobbying for their paymasters, what matters most are the results that are achieved.  And, of course, the relative cost of securing that outcome, advice or solution.

Accountants who allow themselves to be challenged over their preferred hourly rate need to feel comfortable that it is reasonable. There is no ‘right’ or ‘wrong’ hourly rate.

When I worked in large firms of accountants each level of staff had a different hourly rate. Managers had a higher rate than juniors and Partners had a higher rate than managers. One of the reasons for such differences was the speed with which more senior people could solve problems, source answers and provide advice. That came with experience.  Amongst sole practitioners it is quite likely that more experienced accountants charge more than those who are younger and less experienced.

In so far as the client is comparing straightforward compliance services, the winners will be those accountants with the most efficient systems and who are able to provide a good service for a competitive fee. Hourly rates are less and less relevant in these days of clients wanting to know what it will cost to get their tax return done or their accounts prepared.

When it comes to hourly rates for advisory or special work however, it is the prospective outcome that should matter most. One accountant could charge half the hourly rate of another (as with the MPs quoted above). But if he takes 2 or 3 times as long to get to the same result, the client hasn’t saved anything. The challenge for accountants, as for MPs, is how to ensure that prospective clients value the service that will be provided. Rates can vary and if you allow the prospect to think that the quoted rate is all that matters you will find yours forced down and down regardless of your knowledge, experience and ability.

Can you relate to this? What’s your take on the issue?

I’m reminded of the old sex education message: Just say ‘no’!

As professional advisers we are all used to prospective clients seeking free advice. As I’m no longer in practice and as a frequent blogger I have very different perspective now. So here is some free advice from me.  When a stranger/prospect calls you need to set clear parameters. Why give any free advice?

I think the most common reason accountants give themselves is that it helps evidence their credibility, style, approach, knowledge and willingness to help clients.  In reality it is only the accountant themselves who doubts their ability and knowledge. The prospect generally takes all that for granted – after all our adverts or website makes clear we’re an accountant. All accountants know everything don’t they? We know this isn’t the case but prospects assume it is so.  Even more so if theye have been recommended or referred by a third party.

So accountants are generally proving nothing by giving free advice. They can evidence the other key qualities they want to exhibit without giving free technical advice.

I also tend to think that a side benefit of the Anti-Money Laundering (AML) legislation is that it gives accountants a statutory justification for any apparent reluctance to provide answers to technical questions before engaging a new client.  “I’m really sorry Mr Prospect but as a professional adviser I’m precluded by law from giving any advice before we’ve been through the anti-money laundering checks. I know it’s a pain but it’s the law.” The consequence of this will often be that you have engaged the client and secured their agreement to your preferred billing procedures before you give them any valuable advice. So the AML laws do have an upside after all!

Finally I would suggest you establish a process to qualify a prospect or to let them go elsewhere before you waste too much time on them. Initially you may want to qualify out time wasters on the phone. You will also want to determine what you need to cover in an initial meeting.

In many of my seminars I ask accountants if they offer a free initial meeting to prospective clients. Typically the answer is ‘yes’. “How long do you allow for such meetings?” Some put a cap on it. Others say ‘as long as it takes’. I ask the question – “As long as WHAT takes?” It’s not just about getting the prospect to want to appoint you. You need to find out quite early on if they can afford to pay the fees you would want to earn. You also need to determine if this is the sort of person you want to have a client.

Bottom line, I’d suggest you establish a process/checklist (that you will in time commit to memory) to use when you receive such calls in future and indeed when you have an initial meeting with a prospect.

The Telegraph Business club has produced a very professional film about a London based firm of accountants: Lubbock Fine.

As I watched this I initially felt sorry for the firm. Everyone on film was very positive but we could have changed the name of the firm to one of dozens of others and almost every single statement and sentiment being expressed would still have held true. Especially the so-called ‘ground breaking’ reorganisation  that resulted in a partner-led one to one service and joined up client services some years ago.

About 3 minutes into the film we learned about some of the firm’s genuinely unique (or at least less common) features – including their expansion into the old eastern block and the fact that over 50% of their clients are based overseas. Also their long term corporate sponsorship and their involvement with other worthy activities.

I was especially taken by Managing Partner Geoff Goodyear’s closing statements (6 minutes in). He talked about the obligations he sees for management to, effectively anticipate changes within the market and the need to “develop some skill sets that may not be available or required at the moment but you anticipate that they will be required in the future”.  I would like to think though that this too is the same as all other decent managing partners.

The example inspired by the film prompts me to highlight a number of points that I have mentioned previously on this blog:

1. Good professionals need to develop a variety of skills. Effective CPD is about more than simply keeping uptodate technically (see yesterday’s post: What does CPD really mean?)
2. Sometimes you don’t need to be different,  you just need to communicate what you do more effectively than your competition (and Lubbock Fine’s film is a great example of a firm doing just that);
3. Some of the things we think make us different are fallacies. Many firms of a similar size and age find it hard to identify REAL points of difference. In practice though this is  probably only an issue in competitive tender situations when comparable firms find it hard to distinguish themselves;
4. Lubbock Fine’s website highlights their specialisms in 6 key client areas.  Such an approach is bound to be more effective than trying to be all things to all types of clients.

I titled this piece – “How different do you need to be?”  What’s your view?  How different do you need to be?

One accountant I know advertises his services using what I think is a pretty good message.

He suggests to recipients of his ad that if they do their own tax return it probably costs them far more than they realise. More in terms of the opportunity cost of their time, the hassle, worry and the prospect of making mistakes.

In other words he’s advocating the reasons to use a professional. And he’s right of course.

On the other hand I noticed the same accountant plans to run his own telemarketing campaign. He may have a good reason for doing this but it seems like a big risk to me.   It seems he’s going to use untrained staff to make calls, using a script/approach that hasn’t been checked by anyone who understands what works and what doesn’t work when it comes to telemarketing.

Perhaps he has had a bad experience with previous attempts using so-called professional telemarketers. Perhaps they did not have the requiste experience, perhaps the offering was wrong, perhaps the follow up was inadequate, perhaps the pre-meeting confirmation with prospects was lacking, perhaps the accountant needs to develop better ‘closing’ skills. There could be all manner of things to tweak or test.

I suspect that the outcome of a DIY approach to telemarketing will probably cost the accountant far more than they realise. More in terms of the opportunity cost of their time, the hassle, worry and the prospect of making mistakes.

Imagine if someone who has had a bad experience with an accountant decided that all accountants were rubbish and decided to attempt to save money and to complete their own tax returns in future…..

I’m aware that many accountants provide bookkeeping services for their clients. In some smaller firms this is all part of the service. In others it’s done more as a necessity when a client’s recordkeeping is based on the practice of  ‘we throw all the papers into a bag or box and let the accountants sort it all out for us.”

I think it’s fair to say that many people are confused as they are unaware that anyone can call themselves an accountant (or indeed a bookkeeper). So small business owners do not know whether they need a bookkeeper as well as an accountant. And of course some accountants provide bookkeeping services as part and parcel of their accountancy service.  It can be helpful therefore to clarify with clients which approach to bookkeeping will best suit them (and you).

Some accountants are more than capable of writing up  a client’s annual accounts and preparing their tax return from a bag or box of what we used to call ‘incomplete records’ when I was training (many years ago!)  Other accountants get stuck doing bookkeeping for their clients simply because it’s one of the services offered when the practice began.  Is it the most effective solution for the clients? Is it satisfying for the qualified accountant whose expertise stretches way beyond that of a ’simple’ bookkeeper?  I mean no offence to bookkeepers here – I simply mean that their training, knowledge and expertise is, by definition less extensive than that of a qualified accountant.

So what are the options for small business owners when it comes to bookkeeping these days?  I think there are six alternatives.

• DIY – best only attempted after recieving guidance from an experienced accountant or bookkeeper;
• DIY using an online bookkeeping package such as kashflow;
• DIY using a bookkeeping package on their computer – eg: sage;
• Use a postal service – sending off their monthly invoices and receipts etc to a service provider who writes up their books  and then returns all the paperwork by post (eg: this service);
• Engage an independent vetted bookkeeper who knows what they are doing – such as someone provided by this service; or
• Let their accountant write up their books when they produce the annual accounts and tax returns.

Some accountants employ bookkeepers to do the work for clients. Again this probably makes more commercial sense than the accountant undertaking all the bookkeeping themselves – unless they have the time and inclination to do so.  Bookkeeping service provided by employed or sub contracted staff made available by the accountant may be the ideal solution – especially once the practice has grown such that the qualified accountant can focus on more rewarding activities themselves.

Historically it was quite common to ignore bookkeeping during the year and to simply produce annual accounts from the papers and records collated by the business owner.  This is no longer a sensible course of action – as I explained in a posting on the TaxBuzz blog last year: The end of the old paper bag jobs?

Continuing such an approach may deny the business owner the facility to claim they took ‘reasonable care’ in the event that HMRC identify any careless errors. The new penalties regime became law in 2007 but only really comes into effect as regards tax returns for periods ending on or after 31 March 2009. It’s now the case that where the taxpayer can show they took reasonable care to avoid errors HMRC are no longer allowed to charge penalties as regards consequential underpayments of tax.  So effective bookkeeping throughout the year now has another benefit to commend it. And so it makes sense to think through which approach you wish to advocate to your clients. Indeed this may be the perfect opportunity to encourage clients to adopt a more efficient solution than that which they or you may have adopted through default.

It seems there is a tricky balance to be made here. I’ve written previously about how networking, whether online or offline, can be an effective way to secure new clients of the type you want – just as long as those with whom you network know enough about you, like you, trust you and know the sort of referrals that can help you.

I’ve recently seen the results of some research from the respected Kellogg school of management in the USA.  The Price of a Billable Hour – Social networks affect transaction costs. The summary is dated July 2009 but the research itself seems to date back to 2004 and thus pretty much predates the rise of online ‘social’ networking.

Nevertheless, this research highlights what may be a key disadvantage of networking – especially online where we are encouraged to include social and personal material rather than to have a solely business focus. (Although I would always advise caution and remind you that anything posted online will be there for all time. It could come back to haunt you if it is too personal, unprofessional or otherwise indiscreet).

To paraphrase one key finding, the research suggests that you will charge lower fees to your friends than to clients with whom you share no social interactions. And put like that it’s almost obvious isn’t it?

In the UK, Barristers are often perceived to be more expensive than solicitors and, in general, they are perceived as less approachable. Is there a correlation?

One conclusion that could be drawn is that you will end up charging lower fees to clients ‘won’ as a result of relationships developed through ‘social’ networking. I wonder whether, for example, regular attenders at weekly BNI breakfast meetings charge their fellow group members the same fee levels as would be charged to new clients who are total strangers? Maybe any reduction in normal fees is justified if the client in question is a regular and reliable introducer of new clients.

I’m curious as to whether real life supports the conclusion drawn from the above research. And how you feel about it.

I’d appreciate your views as comments below or by email to the usual address.

* Relevant previous posts include:

• 10 top networking tips
• People do business with people they know, like and trust
• Why gaining advocates is important
• Networking for professionals
• Networking mistakes to avoid