Twelve Metrics Firms Should Track

Mar 1st 2013
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By Alexandra DeFelice

Dozens of metrics exist for firms to track, number crunch, and strategize around. No two firms will track the same exact metrics in the same way for the same exact reasons. However, focusing on a "defining dozen" can propel firms to the next level – or at least prevent them from losing clients.

Regardless of whether firms incorporate any or all of these ideas into their strategic plans, the key is to focus on the clients, people, and practice. The triangular view will help firms gain insights and agility to respond to this ever-changing marketplace.

The defining dozen ideas were presented during a webinar presented by Lauren Prosser, director of ProfitCents Professional Services. ProfitCents is a team of specialized consultants providing partner coaching, small-group coaching, and firm-strategy construction services to accounting professionals throughout North America. 

"Processes [involving your clients] should lead to areas to further explore", Prosser said. "The answers you get to the questions raised by the metrics today will highlight strengths and areas of weakness."

The Defining Dozen

1. Lifetime value of a client. If you know how much your clients are worth over a lifetime, it makes a difference how much you should and will spend on future clients like them. Look also at the client's length of service. Monitor how successful new service offerings have been. Grouping similar clients together will help with prospecting and messaging. Look at the relationship as an asset and determine the optimum level of investment.

2. Cost of client acquisition. The AICPA estimates it costs eleven times more to bring in a new client than to keep an existing one. Think of the physical materials, marketing, staff, and partner time invested in research, drafting RFPs, etc.

3. Client retention rate. The annual average attrition rate (depending on firm size and location) is about 10 percent across the board. Maximize retention rate by having a client service plan to identify opportunities and serve needs. According to one ProfitCents survey, only 37 percent of firms had a formal plan in place. Study what offerings and types of clients (size, industry) you have the greatest success/retention with. Improve client retention through better relations. Always find new ways to engage clients to avoid them jumping ship for another firm that may be knocking at the back door.

4. Average number of services per client. Address the spectrum of needs to get more business out of existing clients. More services translate into increased stickiness and longevity.

5. Average number of top-client touches per month. They value face time. One ProfitCents survey found 70 to 80 percent of value clients perceive comes from sitting down talking about needs. Contact A-level clients multiple times per month. Send them information about a trend in their industry, and then talk about how your firm can replicate successes, such as introducing cost-cutting measures into their business. Involve staff/firm members. ProfitCents asked staff/senior firm members what was the most important skill set to help them grow to become a partner, and increased client face time/interaction topped the list. 

6. Average client response time. Cultivate a culture of getting back to clients quickly. The average client response time should be consistently understood and executed throughout the firm. Responsiveness needs to be a priority.

7. Number of cross-selling opportunities identified vs. won. Cross-selling or cross-serving, as Prosser referred to it, entails the foresight to identify opportunities, pair opportunities with internal resources/expertise, drive value, and be tangible. Focus on relationships, not just deliverables. Do this at least monthly. What are you doing to empower younger staff in the trenches to identify opportunities? Look at the partner group or industry practice group. Who is talented at cross serving? What are they doing? How can they teach others, or can you place them on specific strategic client service teams? What are your least/most profitable current service offerings and why? Do they align with core competencies within your firm and support your vision?

8. Win percentage by RFP, other proposals, and pipeline. What makes you indispensable to top clients? Who is your target audience and why? What are their needs, and what does your firm have that tie into those needs? Always lead with WHY before HOW. Most firms on average have a 40 percent or lower close rate, according to Prosser's research. What obstacles exist to increase close rate beyond price, and what do you have in place to achieve targeted growth goals?

9. Average number of professional development hours per firm member. When determining the number of hours to cultivate soft skills of senior managers, do so at an individual level. Let managers vocalize where they see their role in the firm. Where do you see their role? How will you train them to get to the next level? Communication is the most important soft skill for those in the accounting profession, according to an August 2012 iShade Accounting Pulse poll. 

10. Utilization/realization rates. These are quantitative and fairly standard. The AICPA's PCPS/TSCP 2012 National MAP Survey results showed utilization unchanged from 2010 at about 68 percent for all firms. Partners were at about 59 percent utilization, while senior associates had the highest utilization at 73 percent. Realization remained at 86 percent, which Prosser said is a good target.

11. Staff/partner ratio. In firms with revenue of $20 million and up, the ratio is between 7.5 and 10 to 1, staff to partner. Smaller firms are around 2.5 to 1. Be delegators, not doers. Focus on training. Leadership is more imperative than management for having a firm of the future.

12. Revenue growth per year. Look at revenue growth by service line, partner, and industry. Benchmark your firm against itself, not just outside comparisons. How realistic are your growth goals? What research are you conducting on existing markets to see if you can address their growth?

About the author:

Alexandra DeFelice is senior manager of communication and program development for Moore Stephens North America, and a regional member of Moore Stephens International Limited, a network of more than 360 accounting and consulting firms with nearly 650 offices in 100 countries. Alexandra can be reached at [email protected].


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By Drew West
Jun 25th 2015 20:11 EDT

Nice article, and oustanding advice from Lauran Prosser. (I heard her speak live on this topic during a recent "Ask the Expert" webcast via iShade.) These are telling measurements, and I imagine any firm tracking even the majority of these would have decent insight into what it does well, and what it needs to improve.

Of course, an obvious need behind these 12 measurements is easy access to current, trusted information. Many firms find this difficult because the systems managing their firm are typically a jumble of disconnected, stand-alone system.

Imagine trying to evaluate Lifetime Value of a Client- if certain client details are in a CRM system, services rendered in an engagement-management tool, and financial results stored in the financial system. "Connecting the dots" across all this information is complicated and time-consuming, and the final calculation may wind up highly debatable across the firm.

Connecting the practice on a single management system makes it much easier to calculate, evaluate, and publish performance measurements. Data is current, connected, and easily accessible- making performance measurement not only easier, but also more consistent and more likely to be embraced across the firm.

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