Wednesday, January 20, 2010

More about Alan

In the previous blog posting I attempted to make the point that if the basic model is followed the probability of you securing an engagement from your prospect is excellent even if you are going up against a competitor (“Alan”) with a strong history of business development success.

In the example I wrote about it turned out that Alan did NOT in fact possess an effective technique beyond his determined and widespread networking skills. In essence, he positioned himself in the front of the collective mind of the local business people and became, for many of them, the default accountant, i.e. the first one they thought of. Not a bad way to go about finding clients, but much, much more effective when combined with good technique.

Subsequently, I received some great feedback from readers, and it illuminates how varied the challenge can be when a prospect is up for grabs.

John in Salt Lake City described a remarkably similar situation as last week where it turned out “Alan” wasn’t even a “competent” (John’s word, not mine) accountant. Instead, he maintained client contact while others did the work. His time was spent attending seemingly every meeting in town and smoozing desirable prospects with golf, dinner, drinks, etc. John easily won the particular engagement he sought by focusing in upon the prospect’s needs and demonstrating his expertise and experience in those areas.

Anita, from Wisconsin, found herself in competition with the biggest business development player in her market area and augmented her effort with a unique psychological approach. She followed the model, especially as it related to isolating the prospect’s priorities and issues, and then took a bit of a risk to gain an advantage. During the meeting she found an opportunity to comment about her competitors.

I wasn’t there, so these aren’t the real words, but as Anita described it to me, her approach went something like this: “I really appreciate being given the opportunity to compete for your accounting business. And, I’m flattered that you have considered me to be in the same league with (name #1, her main competitor) and (name #2). As you know, #1 serves many of the biggest clients in town, such as (names), and I’m glad to see they are now seeking business from other prospects. And #2 is renown throughout the mid-state area as the go-to firm for green and not for profit entities.”

Needless to say, the prospect was neither very big nor connected to the green movement.

Anita talked about the advantages of personal service, how the prospect would – if Anita was engaged – be one of several key clients she served, and her specific expertise with the prospect’s issues. In the end, they chose Anita because they wanted to be with a firm which considered their business to be important and, because they were neither, they didn’t really relate to the other firm’s emphasis upon green and NFP clients.

So, in effect, she poisoned the well. Hey, as the saying goes, “all’s fair in love and war and winning the business from desirable prospects.” Well, maybe it doesn’t go exactly like that, but you get the idea.

Bill, from Seattle, was on the other end of some game playing. He was one of four competitors for an account and was third on the interview list. With a few minutes to go he completed his agenda and began a gentle close by asking what the next step was in the selection process.

To his surprise, one of the two interviewers (the owner and his CFO) asked if he was going to stay in the Seattle area after he retired. Bill, who is in his mid-50s, recovered from his surprise and asked what prompted the question. He was told someone from one of the prior two firms mentioned he would be retiring shortly. Bill said he responded emotionally by blurting, “Wow, he must really need your business. I’m not retiring for at least another ten years!” The prospects, who now understood they’d been gamed, started laughing and when the moment passed Bill realized he’d not only sunk the competitor’s ship, he had also experienced a solid bonding moment with the prospects.

Bill didn’t get the account because of his relative inexperience with the specific industry, but the owner told him he wanted Bill to take over accounting services for a development start up where the owner was the general partner. This was right up Bill’s alley, and a perfect outcome.

So, again, follow the model. You can’t go wrong in that regard. If you need more prospects, find ways to talk to more people. Maybe not to the extent Alan does, but nevertheless more. Finally, as Anita and Bill’s stories demonstrate, games will be played every now and then. Whether you are on the giving or receiving end, a five figure addition to the revenue column can be plenty of motivation to generate some bumping between competitors in the race to the checkered flag.

Don’t be afraid of Alan

Brad, a long time reader of this blog who has his practice in the outskirts of Chicago, made the decision to take the steps necessary to upgrade his book of business to include a greater percentage of larger, more profitable clients.

As a result of some low key, one-in-one marketing, he subsequently met a business owner who was just beginning the process of finding a new accounting services provider. Along with two other candidate firms, he asked Brad to make a presentation to him and his executive team.

When he heard who his competitors would be, Brad had a deer-in-the-headlights moment because he realized he’d be going up against Alan, a locally notable business development ace for another local firm. Alan is gregarious, has a big personality, seems to be involved in every local organization and knows almost everyone who is anybody by their first name. He has a busy and apparently lucrative practice and has been responsible for signing up many of his firm’s most desirable clients.

Brad emailed me and then we talked on the phone. I reminded him that he doesn’t have any evidence that Alan is, in fact, an above-average business developer. I asked him how much time the so-called “average” accountant spends networking like Alan; being involved in the business community and positioning themselves for higher visibility? He agreed that Alan was much more proactive than probably anyone else he was aware of. OK, if that’s the case, I argued, how do you know that it isn’t just a matter of numbers – that Alan is simply throwing out a much larger net than his competitors – and he isn’t actually that good when it comes right down to it?

It is axiomatic in the sales profession that (assuming you are at least reasonably competent) if you talk to more people you close more sales. So, yes, ultimately it IS a numbers game. Alan may be a great business developer, but on the other hand he may simply talk to more people which in turn results in more conversations occurring that reveal new business opportunities for Alan and his firm.

Don’t be intimidated by Alan, I counseled Brad. Instead, do those things that have been shown again and again to enhance the probability that your conversation with a prospect will ripen into an engagement. Make Alan leap over the bar YOU have set if he is going to win the business.

Brad began his campaign by first calling the prospect and asked which days had been set for the three interviews. Told it was Thursday and Friday the following week, Brad said he would be out of town/unavailable both days but could be back mid to late afternoon on Friday. Yes, it was a fib, but there is strong experiential evidence that being first or – even better – last enhances your chances of being selected. It’s basic human nature: making the last impression, freshest memory, etc. (Another application of this truism we’ve all experienced is that in marketing-savvy restaurants the dessert or special entrĂ©e your waiter wants you to select will never be mentioned in the middle. It will almost always be the last or, less frequently, the first he suggests.)

After settling the day and time of his appointment, Brad asked if he could see applicable financial data. The prospect wasn’t prepared to give him carte blanche, but did send over the most relevant bits of the 2008 corporate return.

He then spent a good hour finding out everything he could about the prospect’s company. He checked the internet (local news sources, Yahoo/Google, et al), found a Dun & Bradstreet listing, and made a few calls to local contacts who might have had some dealings or other helpful knowledge.

Sure enough, just like we preach in this blog an in the CPA Practice Builder sales manual, he found gold. The prospect had recently hired a new VP Sales and Marketing and also replaced their advertising/PR agency. Obviously, this meant he wasn’t sitting on the status quo or rounding the wagons to try and hold on to what he had. Instead, he was being proactive and planning to attack his markets.

Brad then made some preparatory assumptions: he anticipated the executive team would be interested in accounting-related expertise that would help facilitate the prospect’s aggressive plan. To that end, he prepared to discuss bank lines, cash production and retention techniques, asset acquisition options, financial & tax implications of joint venture and partnership relationships, and other strategies relevant to companies with an expansionist mind set.

On the day of the meeting he arrived on time, dressed and groomed impeccably, and went through the recommended steps to quickly build rapport with the executive team.

Brad petty much went by the numbers in terms of structuring the discussion, and he was very pleased to discover his instinct was correct: the company was in fact adopting an aggressive two year plan to begin in 2010. Accordingly, he specifically emphasized how his services could help facilitate their plans and offered a number of suggestions they hadn’t considered.

At the meeting’s conclusion, he gently inquired how they wished to proceed? The owner asked him to give them a few minutes of privacy and when recalled, Brad was told they had selected him.

This occurred in October. Two weeks ago Brad was told by the controller that his was by far the superior presentation; that Alan had essentially spent the hour talking about people the owner knew who were already being served by Alan’s firm, and the third candidate talked about their experience with similar-sized businesses, their long time presence in the community and how up-to-date their software and technology was. Fatally, neither presentation addressed the prospect’s specific issues/challenges.

The lesson: Don’t be intimidated by a competitor’s business development reputation. If you follow the model, they should be worrying about you.

Client Loyalty

When I am talking with a brand new client, I always ask about the client turnover in their own practice. I do this because turnover is a good overall indicator of how well their practice fulfills its client’s expectations. If the client turnover appears excessive, or if my client wants to reduce their turnover rate, then our analysis turns to individual factors that can affect client loyalty.

An obvious driver can be pricing. Most of my clients adjust their pricing at the beginning of a new calendar year. Not surprisingly, one or more of their clients may find the increase excessive and seek a lower cost provider. Most readers know that client size isn’t necessarily a factor when it comes to price sensitivity. Large clients can be just as price conscious as smaller, and it isn’t unheard of for the CFO of a major contributor to your practice’s revenue to call up and put the pressure on for some fee relief or an invoice adjustment.

It can be argued, of course, that any client whose primary concern is cost is never going to be motivated to stay with you except by a very competitive price structure. I’ve always assumed a given percentage of any practice’s clients are price sensitive and may be lost when fees are adjusted upward. It is almost a cost of business issue; some clients are just bound to leave. Nevertheless, no accountant wants a good client to leave, and so the challenge is to enhance the sense of loyalty they feel to you.

You do have some control over what percentage of your clients are primarily driven by price. If your practice has been built upon impersonal, price driven marketing, which I describe as advertisements delivered via any medium that say, in effect, “Your 1040 taxes prepared for as little as $149,” your client base will be highly price sensitive.

If you lose some of these people when fees are adjusted upward, you will in all likelihood be able to amp up your ad campaign and replace them. I am familiar with some 1040-based practices, and have learned they anticipate having not-insignificant client turnover each year and if it occurs, they adjust their marketing effort accordingly and deal with it. Their practices earn them a good living and in some ways are less draining and stressful because their relative lack of client involvement means they aren’t fighting and dying as their clients careen between various ups and downs.

If instead, you market your practice based upon a promise of service coupled with a close working relationship with your clients, the opportunity for greater loyalty and reduced turnover is greater. By its very nature, this approach means your clients will be relatively larger and fewer, because each will take more marketing effort. It is the process of successfully signing up these prospects that is the basis for this blog.

Client service levels are a more subtle, yet the most impactful factor in client loyalty. Assuming your fees are consistent with other local accountants, the key differentiating factor in client loyalty is how they perceive the treatment they are receiving from you and your support staff. Do they feel respected, important, valued, etc.? And, to state the obvious, accuracy and meeting filing deadlines are crucial.

As advocated ad nauseum in prior posts, I believe experience has demonstrated repeatedly that you should have at least three, and preferably four “touches” with clients during the calendar year. They need to “feel the love” as current phraseology would put it. All your clients? Probably not. If you have 200+ client you are too busy for that. However, I think the top 20 – 30% of your revenue producers are worthy candidates. More, if you have an exclusively high end practice.

Every client I have ever worked with who has wished to increase client loyalty/reduce turnover has been successful when they initiated a plan to ensure these “touches” occur on a consistent basis. Lunches, birthday and various life event greetings, planning meetings, shared social events, etc. all offer potential occasions to make contact.

It’s just like a recipe: then add a marketing plan that doesn’t emphasize price. Stir in accurate and timely client services and your client loyalty will be off the chart with virtually no turnover.

Are they REALLY an ideal prospect? – PART 2

I used to work with a good number of clients in the San Francisco Bay Area, and many of them were located within, or operationally connected to, Silicon Valley. The unique nature of the environment meant that there was a strong possibility that a new business venture would either expand rapidly or expire quickly with hardly a whimper; the employees immediately dispersing and reattaching themselves to the Next Big Thing.

Many national law and accounting firms recognized the upside potential and invested millions locating satellite offices in the area. Out of the many start ups arose Apple, Oracle and hundreds of other highly successful technology businesses. In the years following hundreds of millions of revenue dollars flowed to those firms that had placed their bets on the valley’s entrepreneurs.

How does this relate to you? Here’s a story to illustrate one possibility: Frank worked for one of the big accounting firms in Silicon Valley and experienced the explosive growth in his firm’s office. In 1999 he and his wife felt the whole California scene was becoming a bit much and moved back to Texas to be closer to family. He set up a one-person practice and began doing exactly what thousands of other accountants do – 1040s, small business compliance and tax, some transactional services and providing advice and counsel to his client base.

Frank didn’t forget what he’d seen in Silicon Valley and he began networking with start up and new business forums. He didn’t invest much of his time, maybe 5%, in this effort, but he’d seen enough successful entrepreneurs to be confident he’d know one when he saw one, and he felt he had been around enough business plans to have a good idea when a winner appeared. So, he was patient and kept his eyes open.

His patience was rewarded when he ran across a small company with some unique approaches to robotic miniaturization. Frank approached the engineer who was the force behind the effort and offered his services at a greatly reduced price in exchange for assurances of a continuing relationship if success was forthcoming (“we’ll bet on the future together”). A deal was struck and to fast forward to today, the little business became a big business and Frank’s firm’s annual billings for that one account are now approaching $200,000. Plus, out of that relationship have come several lucrative referrals. Ten years later, Frank’s one person firm is now a very profitable medium size firm.

The bottom line is that a really great prospect may not just be the one that offers immediate substantial billings, but may additionally be one offering a significant future upside.

How might you expose yourself to the entrepreneurs in your area? If you are in or near a large urban area there are seminars, incubators, on-line groups, etc. Could you provide a free or low cost presentation to help them create an accounting structure suitable for businesses with the potential of rapid growth? Perhaps a seminar discussing basic approaches to wealth retention for the suddenly successful? How about strategies for extending the life of first stage(s) investment cash? Venture capital ins and outs? Bank line strategies for rapidly growing businesses?

It goes without saying that for every so-called can’t miss venture twenty will fail and one might make it. But, if you invest just a small fraction of your business development time – like Frank did – in future winners, the payoff can be huge.

If you never hit one, well, you’ll have met some interesting people. Perhaps REALLY interesting. I mean, how boring can someone be who claims to have invented an implantable recorder so the implantee can actually re-live their alien abduction in stereo and HDTV once they get back to earth? (yes, someone actually invented that device)

A clever strategy employed by an accountant in Sacramento, CA is to approach patent attorneys with the goal of creating a relationship that can lead to growth opportunities with the attorney’s clients. I am told this tactic has worked very well for him. A nice collateral benefit of this methodology is that the attorney in all likelihood has a pretty good idea of not just the client’s financial condition but also an opinion of their intangible qualities, such as focus, dedication, maturity, energy, drive, reasonableness and other factors that can impact the probability of future success.

A more difficult challenge (because larger accounting firms have worked this ground for many years) is establishing relationships with venture capital firms and/or individuals. Obviously, these firms (as well as angel investors, later round financing entities, etc.) work very hard to separate the wheat from the chaff because their livelihood depends upon it. Many of them prefer to have “their” CFO installed to watch the investment, and there is no doubt they can greatly influence which accounting firm is hired by the company being financed. If you can nurture one or more of these relationships the upside can be dramatic.

However you identify your future growth prospect, at least charge enough to absorb your overhead and don’t commit to more than you are truly willing to do. Finally, get the agreement in writing. Create a suitable engagement letter detailing what you are going to do for the client and what you’ll receive in return.

Yes, they are long shots, but the payoff can be huge. The secret is to be selective and only devote a small percentage of your time chasing them down.

Are they REALLY an ideal prospect?

I’ve received several comments from readers who have had bad experiences while prospecting for new clients. A recurring theme is that they hadn’t previously experienced these problems, suggesting that the present state of the economy may be introducing some new wrinkles into the finding-new-clients challenge.

Marsha in Florida attended a local networking get together and met a couple who own several home/internet based businesses. She wasn’t familiar with the business model, so Marsha began asking some questions about how they made it all work. One thing led to another and she was told they were not happy with their present accounting services and would prefer to work with an accountant who understood their economic model and could provide advice and financial projections for new ideas as well as competent compliance and tax work.

Marsha rose to the moment and described how she might be of assistance; talking about her practice areas, how she interfaced with clients, and the like. A meeting at the couple’s house was scheduled.

The house looked very impressive as Marsha drove up and when she saw the computers, boxes of products ready to ship, a dedicated shipping area and a couple of employees scurrying about, she felt comfortable she was viewing a going concern.

A deal was struck and Marsha drove away with a box of records and data. She worked up a needed refiling, did some timely compliance work, cleaned up a couple of other areas and completed everything by the agreed upon due date.

She submitted a bill for $2800. In the meantime, some more compliance work was due, so she prepared that also. The bill was now $4100. To make a long story short, the bill still hasn’t been paid after over 180 days. Marsha had another client run a credit check and found the couple was in arrears to practically everyone, including the lease payments on the big house. She eventually found out the prior accountant hadn’t been paid either, which explained the couple’s presence at the networking meeting.

Marsha had previously operated on trust and her instinct. She’s changed her approach when evaluating prospective clients in light of this experience, and will be considerably more careful in the future.

Gino in New York has a lot of clients who invest in real estate. The essence of his practice is working with high wealth individuals and providing accounting services for their (primarily) commercial real estate investments. Most of it is old money, and his practice has been in mild decline for several years as clients passed away, sold assets to free up cash and generally tightened their belts in a declining market.

Sarah, a client and heiress, recommended he talk with a gentleman – we’ll call him Stephen - she had done some business with who she felt would be a “wonderful” contact for Gino. A meeting was set and Gino was introduced to a man in his 50s, quite elegant, and apparently heavily involved in commercial real estate.

Stephen told Gino he had heard “great things” about him from Sarah and other clients they shared and that Stephen was always on the lookout for an accountant who understood the nuances surrounding real estate investments of this magnitude. Suitably flattered, Gino made his case that he was indeed the right guy for any of Stephen or any of his clients who might need accounting services.

At a subsequent lunch, Stephen again talked about how Gino’s revenues could really take a jump if he began doing work for his clients, and Stephen promised to “see what he could do” to make this happen.

When Gino did Sarah’s 2008 taxes he noticed some irregularities in the data for one of the properties. As it turned out, it was the property Stephen had brought Sarah in on. He was struck by a series of events and transactions completed just before the end of the reporting period that had a disproportionately positive effect upon operational results.

When he called Stephen, his questions were downplayed and deflected, and Stephen again emphasized how Gino’s skills could be particularly valuable to some of Stephen’s large clients.

With the hair rising on his neck and sensing a scam, Gino carefully began to probe around. Sure enough, Stephen was being investigated. Several complaints had been filed and at least one other accountant had blown the whistle on him.

In retrospect, Gino believes Stephen’s vision of more revenue was a subtle bribe to either keep quiet or perhaps it was a first step in recruiting him to become part of the scam. In the following months Gino has been drawn further into the investigation and spent untold hours dealing with frightened clients.

It’s tough out there. A lot of people are in trouble. Why is your prospect looking for a new accountant? Are you sure it isn’t because they couldn’t pay the last one? None of us can afford to expend hours on activities that don’t produce collectible revenue, let alone spending billable time participating in a fraud investigation.

Be careful. When in doubt, run a credit check. Another strategy is to use retainers, so you are – even if it is only partially – working with the client’s money. When in doubt, check ‘em out!

Blogger’s Note:
You may have noticed I’m not posting as often as I have in the past and this is because I began Proton treatment for prostate cancer a month ago. My prognosis is excellent and the treatments will last through mid-January. In my case, the side effects are tiredness. Coupling that with the several hours each day dedicated to going and coming, standing by, dressing/undressing, getting zapped, etc. and my current production is less than stellar.

By the way, if any of you of the male persuasion are or in the future become similarly afflicted, I can not speak more highly of the Loma Linda Proton Center in Loma Linda, CA. Incredible technology, facility and people. Check it out. I’m very glad I did the research and made what I strongly believe to be the correct treatment choice. Oh, and a final note, they treat over 40 different types of cancer and are just now embarking upon a breast cancer study and looking for volunteers.

Even Good Business Developers Can Strike Out

A CPA – we’ll call him Tom – had a great prospect handed to him by Ray, a consultant who has been a reliable referral source for many years. The prospect was a good size commercial interior design firm with historic accounting billings in the $20,000 range.

Even better, Ray was going to be at the meeting where Tom’s firm would be evaluated as a prospective provider of accounting services. Further, Tom’s competition was a local accountant who Tom knew did not have nearly his familiarity with design firm tax and accounting issues.

The topping on the business development cake was that Tom knew Ray had given Tom’s firm an excellent recommendation because Tom already served several of Ray’s design and architectural clients, all of whom were satisfied with his firm’s services.

The meeting attendees would consist of Tom, Ray and Joyce, one of the prospect’s owners.

Tom was unable to see the prospect’s financials and tax returns until the beginning of the meeting. This was not a problem – in fact it was probably an advantage – because of Tom’s nuanced knowledge in this area. He scanned the documents and quickly confirmed the prior accountants had not taken advantages of several strategies to reduce the prospect’s tax exposure.

Knowing it was highly unlikely his competition would know about these solutions, he exploited this knowledge gap by explaining to Joyce how her firm could improve her bottom line.

Ray, while not an accountant, has a sophisticated lay understanding of the subject, and with Ray’s occasional input Tom was able to illustrate in concrete terms why Tom’s firm was the desired choice for Joyce’s design firm.

The meeting adjourned cordially and on time. Tom was told a decision would be made in a day or two. Tom has a strong record as a successful business developer and walked away with a very positive feeling.

Two days later Tom was told by Ray his firm didn’t get the engagement.

How could a “can’t miss” prospect, a potential contributor of $20,000+/- to the firm’s revenue, get away? What went wrong?

If you have been reading all of the approximately 60 prior postings of this blog, you already have a good idea of why Tom’s competitor got the work.

Let’s begin with a truism you MUST be aware of: unless your prospect is exceptionally knowledgeable, or the engagement has a highly unique nature to it (I have an investment … it’s a fractional share in an offshore oil rig owned by Royal Dutch Shell … do you know anything about that?), they think all CPAs are capable of doing a decent job.

As it turned out, Joyce had taken some notes as Tom made suggestions to her and when she met with his competitor, Charles, she asked Charles if he was aware of the various approaches. Ray reported that Charles simply nodded and smiled, muttering an occasional, “Yes, that’s standard treatment,” and “I can see he (Tom) is up to speed.” Ray knew he probably didn’t have a clue, but it wasn’t his place to say something. And Joyce never considered that Charles and Tom might have a significant knowledge gap between them. After all, both their cards say CPA; both have accounting degrees and both practice accounting in the area. Tom’s demonstration of knowledge accomplished nothing.

The second factor is that there was a reason why Joyce’s firm fired the prior accountant. Why was that? What behavior do they need assurances will not be repeated by the new firm? Tom never asked.

Charles asked Joyce what happened with the fired firm and was told they wouldn’t return calls, had missed a couple of deadlines, quoted a five figure fee for a project and then came in 50% higher with no advance warning, and never really demonstrated any particular interest her firm’s business. Charles ticked off the reasons why that would, of course, NEVER happen with his firm and made a real point of emphasizing that Joyce could call him anytime, no matter the problem, etc., etc.

You MUST discover the prospect’s needs, desires, fears and motivations. Those factors are what they feel are the most important considerations. Put simply, they have an itch and they’ll hire the outfit they think will do the best job to scratch it.

Tom knows all this. He’s an excellent business developer and has a large and profitable book of business. But, this so-called “can’t miss” turned his head, got him away from the basics, and reminded him how you can never ignore the basics.