Growth is on the horizon! The global accounting services market is expected to grow at a compound annual growth rate (CAGR) of 12.7% this year. Is that your target? Or is it closer to 20%?
Now, how many clients does your accounting firm need to succeed and be a part of this industry growth? You might be tempted to simply say, “as many as we can possibly get.”
The fact is, most firm leaders don’t have a clear, strategic answer. This article will explain the data points you need to intentionally consider the question, cultivate the right mix of new clients, and create growth within your existing clients as part of a strategic prospecting approach.
First let’s define strategic prospecting. This is the combination of your firm’s inbound and outbound relationship-building efforts to pique the interest of decision makers and influencers, resulting in quality conversations with an ideal prospective client. Strategic prospecting should take place at the beginning of the relationship building process.
Next, we will consider growth objectives. Your firm growth will typically come from these three categories:
Continued business with current client (run rate)
New business with existing clients
New business with new clients
Another important aspect to consider here is whether or not you have the right clients. If you need to transition some accounts away, that will leave a gap to fill.
By The Numbers: Using Your Data
When it comes down to it, how many clients does your firm need to be successful?
As a partner of Bill.com, this is where your access to firm business development data will come in handy. The four data points you will need to evaluate are:
Number of current clients
Average engagement size
Last year’s top line revenue
Current year top line revenue % growth goal
After you have that data, you can put it to work. I’ll walk you through an example firm snapshot.
This example firm has:
50 current clients
$20,000 average engagement
Top line revenues $1M
Growth goal of 20% ($1.2M)
To reach their goals, the firm can take two business development approaches.
In the first path, they can increase the average engagement size of their client base. In this case, it would increase from $20,000 to a $24,000 average.
In the second path, they can assume their current engagement size will remain the same and attract 10 new clients at the $20,000 level.
For reference, in their 2020 CSO Priorities Pulse Survey, Gartner shared that 70% of revenue expectations would come from existing clients, and 30% would come from net-new clients.
Some additional data points to know for this exercise are:
Forecasted run rates of current client engagements: Do you have a clear picture of your average engagement size? How much do they vary?
Client churn: How many clients have left your firm in the last year, intentionally or unintentionally?
Win/loss ratio: This will tell you how many clients you need at the top of your relationship-building funnel. For example, if you have a 40% win rate, then you would need to submit between 20 and 30 proposals to attract 10 clients.
Analyze your client base in quartile: Look at your top tier and bottom 25% of clients. When you do this, you will uncover emerging trends and determine ideal clients and verticals for strategic prospecting efforts. What are the trends that make your bottom 25% different from those you categorize at the top? It’s likely these accounts will have very different qualities.
While it may not be an exact science, this prospecting strategy will provide you with a smart framework for firm growth. By having the data around the number of clients you need, you’ll be ready to exceed your growth goals!
This article is a follow-up to our webinar, Use Strategic Prospecting to Connect with New Clients in the Digital Age. Follow our Driving Digital Transformation Webinar Series to hear from today’s thought leaders who have been there, done that, and are sharing what they’ve learned along the way.