4 Myths Firms Have About Millennial Business Owners
As millennials launch companies or ascend the hierarchy in other businesses, they now often hold the decision-making reins when choosing – or shedding – accounting firms.
The 2017 Millennial Business Owner-Accounting Firm Survey polled more than 1,000 business owners to determine what millennials require from their accounting firms. Each of these respondents is responsible for the accounting firm relationship, so they are uniquely qualified to share what makes or breaks that relationship.
With the data from this survey, I want to debunk some common myths that accounting firms may have about millennial business owners and demonstrate how this can help their bottom line as well:
Myth #1: Millennials are too young and don’t generate enough business revenue to be accounting clients.
Researchers generally date the millennial generation from the mid-1980s to the mid-2000s. However, some researchers place the birth year of millennials as early as 1977. This means the oldest millennials can be anywhere between their early 30s and 40 years old. Clearly, business professionals at this age can – and do – serve as substantive business leaders.
Regarding size, almost one-third of the millennial business owners polled lead companies with $1.1 million to more than $25 million in revenue each year (compared to 38 percent of respondents of all ages). Sixteen percent lead companies that make between $501,000 to $1 million a year. Fourteen percent of the millennials have companies with more than 51 employees, and an additional 12 percent have 21 to 50 employees.
These numbers represent two advantages for accounting firms. First, there are millennial-led businesses that need and can afford accounting services. Second, the figures illustrate the potential for long-term impacts via partnerships, referrals, and future ventures.
Takeaway: Future-proof your accounting firm by targeting this new and powerful generation of business owners.
Myth #2: There’s no need to diversify beyond tax services.
While millennials select taxes as the No. 1 service they use from accounting firms, the survey results show that millennials opt for a different mix of services than previous generations:
Millennial business owners consume a higher percentage of bookkeeping services at 54 percent. Compare this to 34 percent for those ages 40 to 55 and 30 percent for those 56 and older. Some other findings show:
- 24 percent include accounting technology recommendations and training in their services. This type of service is lower for previous generations (8 percent for those 56 and older and 16 percent for those ages 40 to 55).
- 20 percent of millennials indicate that they need invoicing from accounting firms, compared to 4 percent for 56 and older and 8 percent for 40 to 55.
- 22 percent of the millennial business owners polled use bill payment, a service that lands at 14 percent for those 40 to 55 and 8 percent for those 56 and older.
Millennial business owners cite their top accounting frustrations as forecasting, managing cash flow, and reporting, signaling a need for strategic input that extends beyond basic reports and technical terminology. In fact, 52 percent of millennial business owners say they want strategic insight and guidance, 31 percent currently retain CFO/consulting services from accounting firms, and 42 percent want complex financial concepts translated into terminology and reporting they can understand.
Takeaway: It’s time to move beyond tax services. Create a competitive edge by strategically diversifying your services to accommodate millennial business owners.
Myth #3: Clients want hourly billing.
If you want to attract millennial-led businesses, you should reconsider hourly billing. For a generation accustomed to subscription-model services for both consumer and business purposes, nonhourly arrangements are familiar and easy to control from an expense perspective.
When polled, millennials show a preference for fee arrangements such as value-based pricing for services. They rate monthly flat rates (44 percent) and fixed fees per project (35 percent) over hourly billing (21 percent). The anti-hourly preference appears more extreme for the subset of respondents 30 and younger. More than half support monthly flat rates, and only 14 percent opted for hourly billing.
Takeaway: Move beyond hourly billing. A model that offers, for example, a monthly flat-rate option transitions the client/firm relationship from one defined by numbers to one defined by the value of the firm’s contribution.
Myth #4: Technology is a “nice to have,” not a “need to have.”
For a millennial business owner, having the right accounting technology makes a difference when selecting an accounting firm. The survey shows that millennials want accounting services in the cloud and on the go.
Recent findings show 82 percent require paperless accounting services, which 56 percent want firms that work with cloud-based accounting technologies and 33 percent opt for digital payments. Finally, 25 percent of millennial business owners use mobile devices for accounting.
Accounting firms that regularly utilize these technologies will have an edge on winning and retaining millennial businesses. These preferences and the fact that 64 percent of millennials chose email as their primary communications tool for accountants show a strong acceptance for working with virtual accounting firms.
Takeaway: The next generation of business owners wants cloud-based and mobile access to accounting information, digital payments, and online invoicing. To maximize the value of the cloud, use integrations between accounting solutions to create real-time results and optimize efficiency.
Accommodating millennial business owners and decision-makers can future-proof your firm. After all, the demand for these preferences will only increase as more millennials enter the workforce. By anticipating and creating practices that suit their preferences, an accounting firm can create the ideal set of services and benefits to generate a competitive edge and long-term, profitable results.