There are different types of accountants, some are unqualified working from a bedroom while others are based in expensive offices. Consequently prices vary, but so does the value.
Before thinking about the cost of accounting fees, think about the value which broadly comes in three elements.
First there is making sure you are legally compliant so you don’t suffer fines, penalties and hassle from the taxman. This can include extras like what we do at Scakmans of dealing with tax investigations.
Secondly, there are tax savings. Again, at Sackmans unless we are working with a start-up or low profit business, our fees are pretty much always covered by the tax savings we create and maintain from our tax planning advice.
The third element of value accountants bring is sound business advice. This can just be a new perspective or more specific advice which can be based on working with other clients. Once again, at Sackmans we have a free online advice library that all clients can use plus we have the On-Track service for business owners who want to work a bit closer with us.
Sound business advice can include ways to save time on red tape. A recent survey of small businesses by the FSB found that half spend between two and eight hours each month trying to understand and calculate their taxes and complete their returns.
The survey of 2,198 business owners found that a further 11 per cent spend between two and six days per month working on their taxes. I assume their accountant has not told them about systems like Xero which can save anything up to 60% of the time with features like recurring invoices and bank feeds.
The survey also found 77 per cent spend up to £5,000 on professional fees and software to meet their obligations. I would assume this includes bookkeeping service and/or business advice because the annual fee for personal 1-2-1 support from a qualified accountant during the year plus dealing with limited company year-end accounts/tax should really not exceed £2,000.
The theory (or thinking behind your business) is the most important thing in your business; it drives everything and it’s what we should be focussed on and measuring.
Our theory at Sackmans that if we bring you interesting, thought provoking and useful business insights then you will use and recommend us. So, at one level…if this post bores you then the chances are it and we will not be a success. But, if it fundamentally changes your entire view of using numbers to manage your business then I think we have more chance of being successful.
This is why I am interested to get feedback from people about our blog. The higher the scores for the blog the more chance we have at being successful by winning and retaining the best clients.
So, here is a four step formula for developing your business theory and finding your business drivers:
Step 1 – observe
To construct a theory you just need to start by observing the world and asking “what is important to your customers?” And you need to challenge yourself with questions like:
- How do you know what your customers want?
- How do you know what will bring a customer back?
- How do you know what will get a customer to refer your business?
Now, this is observation of the real world. This is not an ivory tower theory process. It requires you to go out in the real world and observe human behaviour and talk to people.
Step 2 – categorise
Next, you and have to categorise and rank what is important.
Some things are much more important than other things so you need to rank the criteria. And, you need to simplify it. What are the top three things that matter to your customer?
Step 3 explain
You need to be able to predict or explain the theory. This is the “so what” part.
If someone says to you “so what does this mean” you need to be able to say something like “if we do these three things customers will be happy and 95% will return”. When you can say this you know that your theory and the measurements or judgements has predictive power.
Step 4 prove
Finally, you confirm or disprove the theory and if it doesn’t work you develop another theory.
It could be that you need to go through the process a couple of times because what you think customers care about may not be what they care about most. And, you will also need to go through this on an ongoing basis because customer behaviour changes. Humans are not static, we change and evolve.
Our expectations are evolving every day. Our customers’ expectations are being shaped by other organisations that are not even your competitors. You may not run an amusement park but if your customers go to Disney World then they are going to experience a level of customer service that is going to make them less tolerant of bad service of every other organisation they deal with.
The chances are your customer and potential customers are using brands like Apple, FedEx and buying things from Amazon and in doing so they are receiving great customer service.
So, you may need to up your game!
Think about a hotel which changes your towels and bed sheets every day. You are probably only going to care if they you don’t do it! Or, do it wrong with dirt on the towels or sheets.
Fresh bed sheets and new towels is not going to make you go back or tell your friends because that is something that is a basic expectation. So, this is a never ending process. What should we measure and what is important to our customers.
Now, this may seem like all this is hard work but I prefer to think of it as smart work. It is basically developing a business strategy, designing and innovation which is where you get maximum leverage.
A good idea can come to you in a second and literally be worth millions. It can be the difference between you working hard for the rest of your life or having financial independence.
It is also a fantastic opportunity because if you can develop a better theory than your competitor and use measurements and judgement more effectively, then you will discover, develop and retain competitive advantage.
Now, it’s your turn…you need to stop reading and start thinking. This is how you are going to beat the competition, you need to out-smart them because there are always bigger and stronger competition who have more money than you.
If you’d like some help then book an On-Track Review.
A key question for people setting up in business is how much capital you need to start.
Well, like most answers to business questions, it depends. In this case it depends on things like:
- Are you leaving a job and taking clients with you?
- How good are you at sales and marketing?
- What price point are you going to market with?
- What is your personal network like?
- How good is your idea?
- How strong is your personal brand?
- What are the set-up costs?
All of these questions determine how much money you will need but so does your goals.
For example, at one extreme you maybe a highly regarded market research consultant who has many years experience and lots of business contacts. A simple Website, some business cards and some LinkedIn messages maybe enough to get you to the position where you are making the same as what your salary.
But, if you want to create a leading edge Market Research Agency then the funding required will probably be very different. This is because you will need to consider winning business outside personal network which will require a significant commitment and investment in marketing.
As well as the marketing you will need to fund employing people to do the service delivery (because you can’t do it all), premises, equipment and administration costs.
As a rule of thumb I think £25,000 is required. This may not be all on day one, and you can test the market before you leave any job, but at some point you will need to go full time. And, at that time you will probably not have enough money to cover all the business costs and your wages.
If you are thinking of setting up in business and want to work out how much you’ll need then our Get Set service will help you.
As we approach the end of the year I thought I’d post a summary of Giving at Sackmans and take this opportunity to thank those people that helped.
We signed up as a member of B1G1 in April 2013 and so far this year Sackmans has given.
- 6 goats to rural families to have sustainable income for a year
- 10 people in need required medication
- 357 days of access to life-saving clean water to people around the world
- 110 days of education support to disadvantaged children
- 10 children a school uniforms
- 100 great learning tools to children who need them the most
One way you can help us give more now (and in the future) is by recommending us to friends, family and business associates. Remember, Sackmans are Chartered Accountants and Chartered Tax Advisors so you all tax planning opportunities will be explored.
Perhaps the best way to recommend someone is in person but there are some electronic ways to make referrals. Here are some things you can do to recommend us include:
- Include us in your email newsletter
- Use your email and cut and paste a message to people you feel may benefit from a review of their accounting and tax position
- Post a status update once a week on LinkedIn
- Use LinkedIn to email all your contacts
- Post a message on relevant LinkedIn Groups
- Tweet a link to this page
- Post an update with a link on Facebook
