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BENCHMARK REPORT 2017

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Introduction How good are bookkeeping business owners?

If you want to be good at something, look at those who are the best at it and do what they do. What is ‘best practice’ for a bookkeeping business and who is doing it?

While the industry has some benchmark information on sole practitioner-based firms there has not – until now – been an industry-wide study to enable a best practice ‘benchmark’ for the bookkeeping business owner to compare themselves against and gain insights from. For sure, some franchise systems have the franchise sector to draw on, yet many bookkeeping business owners have only their business targets and milestones to guide them.

In July 2017 we talked to a number of bookkeeping firms in Australia and New Zealand. We asked a set of questions as well as seeking open-ended comments about the performance of their businesses in both qualitative and quantititive terms.

We analysed these results, not just in chart (numerical) terms but also the comments and the wider implications, and are excited to bring the findings in this report, to you.

Our mission is to offer insights and actionable advice.

There are suggestions in the text but, given the gravitas of the results, we now are investing time to bring features and more analysis in our blog www.bookkeepershub.com. au/boc as well as in guides on our resurces page (www.bookkeepershub.com.au/free-reports/)

To your success, Morris Kaplan, MBA Co-Founder, Business Owners Collective

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Insights

Typically, a bookkeeping business: Employed a mix of 5 part and full-time professionals Had a gross revenue of $475,000 p.a.

Serviced 32 businesses Billing: fixed, monthly (averaging $100/hr per professional)

BENCHMARK REPORT 2O17 “– A report developed from a survey of bookkeeping business owners, some being inaugral members of Business Owners Collective, others being subscriber-members of the Bookkeepers Hub” www.bookkeepershub.com.au

This report arises from the second survey of its kind in Australia (our first was April, 2016), highlighting the role of bookkeeping business owners, distinguishing them from the broader mix of bookkeeping professionals who may be sole practitioners, independent contractors or individuals who are employeebookkeepers.

The survey and this report provide fascinating insights into the profession at large: the trends, the successes and the failings. In brief, following are some bullet points; then an analysis and commentary.

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“The insights in this report illustrate some key findings that will be of special interest not just for business owners but for individuals, firms and industry vendors who will doubtless identify with the leverage potential of this sector.”

Biggest challenges (3) Winning new business/clients Recruiting the right people Lack of willingness amongst professional staff to promote, present and pitch for new business/more business Lack of skills sets in ‘soft’ skills (communications, sales, etc)

Key constraints to delivering business advisory services Need to better understand what services an advisory client will value (and pay for) and a red flag on what services cannot meet client expectations in (in value terms) Lack of depth in staff capability Uncertain about client willingess to pay (more) for these services

Other challenges Most want more value-add advisory work but recognise a skill gap: A need to better understand the skills required to deliver advisory services A lack of understanding of how to scale advisory services Although very few specialised in one industry (in revenue contribution terms), a majority recognise the value of establishing expertise and capability in specific industry niches such as legal services Uncertainty about the impact of AI (Artificial Intelligence)

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WHAT DID WE ASK? WHAT DOES THIS TELL US? (Extract) What are your biggest challenges in 2017?

What non-compliance services do you offer?

How many clients do you service?

Main source of new business: client/ accountant referrals, website, directories, advertising, SEO? What are your goals for 2016/17?

Describe your fee and billing methods Your technology platform: MYOB, Xero, Intuit, Reckon, mix, other?

What business and professional development programs do you have in place?

Which of the following apply to you: growth by acquisition, merger, JV, offshoring.

Analysis The value chain Climbing the value chain with existing clients and building a lead generation ‘machine’ for new clients are high on the agenda for most accounting and bookkeeping firms.

In respect of the ‘value chain’, a key insight gained from the data is, while more than 85% of bookkeeping business owners report that they recognise their businesses needing to generate more from higher value advisory than from compliance, only 12% generate a majority of their revenue from this part of the value chain.

It does appear that the larger the (bookkeeping) business, the higher the percentage of revenue generated by non-compliance services. One interpretation is that there is a lack of execution.

It must be said however, when compared to the wider population of sole practitioners, bookkeeping business owners generated a far higher percentage of their revenue from higher value services than from traditional compliance work.

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Winning new business

While a majority of business owners report that client referral is a major source of new business, there remains a disconnect between the stated goal of increasing lead flow of potential clients, and the level of investment in marketing activities. Irrespective of where new client leads come from, it is a near certainty that your prospective client researches you online. Increasingly prospects are finding solution providers online. Whichever source prospects come from your buyers go to your website – before picking up the phone.

Traditional marketing involving directory listings, ads in local newspapers and letter

Revenue split between compliance and business advisory

Firms with turnover of less than $250k, generate more than 75% of revenue from compliance For firms over $1mil. in revenue, compliance and business advisory ranges between a 60/40 and 50/50 split.

How do we explain this paradox? Although there appears to be a resistance to leaping across the divide towards more business advisory, there is an obvious transitioning period to be reckoned on. We predict a different set of outcomes in 2017 but that does not change the fact that automation may encroach on bookkeeping business profitability. And in terms of transitioning to business advisory, as we noted above; size matters!

box drops appear to be on the wane. Direct digital marketing, social media are on the ascendency. Investing in the website may not be a high priority for business owners but remains core to any successful marketing campaign. That would need a best-practice approach which, in turn, needs to address many of the issues raised in this study, including: A clear description of service offering Pricing options A compelling and differentiated mission statement

Which advisory service are you currently or planning to deliver?

Cash flow forecasting and accounts receivable management were the two that scored highest rating. Others mentioned were: Dashboard (KPI) reporting and analysis Benchmarking services’ Training.

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ABOUT BUSINESS OWNERS COLLECTIVE The Business Owners Collective (‘BOC’) is Australia and New Zealand’s first alliance of bookkeepers who are also business owners with at least one employee. We believe business owners have unique needs that the profession does not cater for. Our mission is to support the business development of bookkeeping business owners through unique array of resources, programs and processes. Our mission is to help you develop the skill sets and practices to grow your business, grow your profits and the value of your business. Our methodology and resources are specifically designed to overcome the key challenges that bookkeeping businesses face.

CONTACT BUSINESS OWNERS COLLECTIVE Web: bookkeepershub.com.au/boc Phone: (Aus. only) 1300 659 604 Email: member@bookeepershub.com.au

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DISCLAIMER Information in this report and the toolkits, eBooks, guides and articles linked or referenced is for educational purposes only.

Calculations are all estimates based on information provided by our alliance partners or by other third parties. The suggestions here are neither appropriate for the purposes of making a decision to carry out a transaction or trade nor do they provide any form of personal and business financial advice (commercial credit, investment, tax or legal), or make any recommendations regarding particular financial or commercial credit instruments, investments or products. The publisher Australian Bookkeepers Hub Pty Ltd or its employees are not financial advisers, planners, brokers or tax advisers. All information in this resource is intended only to assist you in your business organisation. Users of this resource are advised to seek the advice of a licensed advisor before embarking on any financial investment mentioned or referred to in this document. While every effort has been made to ensure that the information contained within this report was obtained from reliable sources, the information is presented for general purposes only. In no event will the publisher or authors of the BENCHMARK REPORT accept any liability to you or anyone else, for any errors or omissions, or for the results obtained from the use of the information. The Business Owners Collective is a wholly owned subsidiary of Australian Bookkeepers Hub Pty Ltd. Participants contributing information to the survey requested confidentiality of identity.

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