New case study reveals how to achieve a 28% growth rate
29/03/2010 13:49:58

Case study of how an established firm with a previously stagnant fee base achieved 28% and 21% fee growth in the last two years

Steve Pipe – 4 March 2010

Nick Hume runs the Ashford office of Kent based Calcutt Matthews. Started in 1999, the office now has a team of 6 people and c 250 clients. Excluding the first couple of years when high percentage growth rates were almost inevitable, the annual growth rate had never been more than 7%. But two years ago it jumped to 21%, and last year rose further to 28% despite the economy being in the jaws of the worst recession for 60 years. So on 4 March 2010 I interviewed Nick to find out how he had achieved it.

Nick started off by saying:

“While the number of clients has increased, it is the improvement in the quality of the client base that has been most pleasing. For example, in the last 6 weeks alone we have picked up four new clients all in the £7-8,000 annual recurring fee range, and they aren’t even included in our 28% growth for last year. So compared to the past we are massively overachieving, and I personally have never been happier.”

The six keys to 28% annual growth

Digging deeper, six of the most important factors behind his success are clearly:

1. He has complete clarity over his goal

2. He uses his bonus system very carefully to align his team to that goal

3. He turns some clients away

4. He uses Train To Gain funding in a very innovative way

5. He has set up a number of really innovative strategic alliances

6. And he gives banks a really strong reason to refer work to the practice

Note: The full five page case study contains step by step detail on each of these six keys. However, it is not comfortable to read five pages on screen. So what appears here is a shortened version covering only the first three of the six keys. See the end of this summary version for how to get a copy of a separate Word file you can read in a more comfortable setting containing full details of all six keys.

It all starts with a clear goal

Nick’s goal is to build a practice with 100 proper business clients (at the moment he has just over 60, with the rest of his 250 clients being made up of the usual selection of tax return only, not for profit, and lifestyle businesses etc).

Those 100 clients will pay average fees of £10,000 each for an extended range of services that will include traditional accounting, advanced tax planning and business advice. Some will pay more than £10,000, others less, but in total they will generate £1m in recurring fees

And those 100 clients will be served by a team of five “client managers” - ie senior professionals who each manage a portfolio of 20 clients generating fees of £200,000. With only 20 clients to serve each client manager will be able to develop genuine expertise in their industries and businesses, and deep relationships with each client. This will ensure that the service is of the highest personal and professional standard.

Nick’s role will be to overview the work of the client managers, ensuring that the service level really is excellent, and getting involved in the small proportion of issues that really do warrant input from the top man.

Clearly this goal is not something that will happen by itself. So Nick is developing a very clear action plan to make it a reality – and every decision he takes is made in the context of “what do we need to do here to ensure that we achieve our goal?”

A bonus system that actually works

The overall goal of becoming a £1m practice allows Nick to set annual target fee levels. And this in turn allows him to set monthly target fee levels. His bonus scheme then pays out the following amounts:

• Every month where the actual fees raised exceed the target level for the month, 10% of the surplus is paid over to the team as a bonus (that way the team are rewarded quickly for hitting targets, and this instant gratification element makes them all the more determined to achieve the same feat the next month)
• Each December the actual fees for the year are compared to the target, and an extra payment is made to bring the total bonus the team receive up to 30% of the surplus.

To some practitioners paying a 30% bonus may sound like heresy. But actually it makes perfect commercial sense. Remember, the target level Nick sets already reflects the need to pay all his overheads, and pay him his target level of profits and keep the firm on track towards its ultimate goal. So because the bonus only starts to pay out once that target is reached, he is already getting everything he had hoped for, and paying the bonus is something he is actually very keen to do since it means that the business is doing even better than he had hoped, so everybody wins and everybody is happy.

Turning some clients away

Nick has realised that his time is a scarce and precious resource – and that he cannot afford to fritter it away on any Tom, Dick or Harry that comes through the door. So he now turns prospective clients away if they won’t help him achieve his ultimate goal.

Braver still, he is also more selective with his existing clients. His preference is always to nurture existing clients so that they grow, and the range of services they buy grows also. But sometimes he has to, very politely, ask clients to leave because there is too much of a gap. And where that is necessary, he doesn’t hesitate. Even then, however, things sometimes take a surprising turn. For example, one client he asked to leave about a year ago has recently asked to be readmitted, with an increased fee in the region of £8,000 which means that they do indeed now fit with Nick’s goals for the practice!

The other three keys to Nick’s success

The other things that have driven Nick’s 21% and 28% growth rates in the last two years are:

• He uses Train To Gain funding in a very innovative way that is earning him £70,000 in up-front fees
• He has set up a number of really innovative strategic alliances which are earning him as much as £10,000 extra per client
• And he gives banks a really strong reason to refer work to the practice – and as a result the practice has won eight high quality clients from bank referrals in the last few months alone

 

How to get the full case study covering all six of the keys to Nick’s success

If you are an AVN member… you can instantly download the full version of the case study here (you’ll need to log in to the website first). You will then also be able to use AVN tools such as the OnTrack software as shortcuts to make it easier for you to replicate Nick’s success.

If you are not an AVN member… please contact me on stevepipefca@avn.co.uk, quoting “Calcutt Matthews case study”, and I will email you a free copy of the full case study so that you can also replicate Nick’s success.

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