Reprinted with permission from Accounting Today.
“The secret of getting ahead is getting started,” Mark Twain sagely advised. But where to start, and how, when your goal is driving revenue? I tweak this Twainism by advising firms to start with an understanding of which clients are contributing the most revenue, then developing a program focused squarely on the needs of those clients.
As their approach to growth becomes more sophisticated and more data-driven, many firms are acknowledging that 80 percent of revenue is generated by 20 percent of clients. More than an interesting metric, this recognition (give or take a few percentage points on either end) can become a powerful tool for growth when strategically applied.
What comes next?
Armed with insight into your revenue stream, the next logical question becomes, “What are we doing for that all-important 20 percent to ensure that we are protecting and growing relationships and revenue?” If that doesn’t sound like typical “accounting think,” you’re right. It isn’t.
While the 80/20 thinking is relatively new to our industry, it is not new to the business world. I became intimately familiar with it back-in-the-day as a member of the Key Client business development team at IBM. It’s a strategy I’ve long recommended to growth-minded firms for decades. Now, 17 years into the new millennium, as a profession we’re finally noticing its power!
The idea is fairly simple. Rather than consider all clients deserving of similar types of attention, provide a special focus on those with the most potential to drive growth consistently over time. This requires a strong champion—a Key Client Program leader who oversees a process-driven initiative to insure optimal firm growth.
Relationships precede revenue
At IBM, we sold products year in and year out. Our team had no annuity revenue coming in. Our livelihood was solely dependent on identifying and offering new opportunities to our biggest and strategically significant clients. The charge, and the challenge, was to continue to identify ways to satisfy a finite number of key clients each year. So we got very good it this. Our tactics were built around a few big ideas:
- Relationships precede revenue.
- Strategic account plans.
- Deep knowledge of the client’s industry.
- A strategic solutions approach.
Key client success is predicated on deep, nurturing relationships. I’m not talking about an occasional outing to a ballgame. Rather, what’s required is a fundamental understanding of an organization’s power structure and political pressures. Grasping the deep and often hidden and personal motivations that drive decision-makers. Knowing their world view, their advocates, their adversaries and navigating the political dynamics which impact decisions.
Becoming the ultimate trusted advisor among an elite client base requires that you combine relationship strength with rock-solid industry expertise. At ongoing internal client-specific strategy sessions, the relationship partner leads the client account team, as well as relevant industry and service line leaders, in a facilitated strategy session.
Armed with data contributed by all participants, the group brainstorms opportunities and exposures that impact relationships and revenue, and identifies maneuvers to drive relationship strength and revenue growth, all in the context of strategic client-centered solutions. Discussion centers on relationship issues and solutions that may be standing in the way of growth, along with opportunities, solutions and execution plans to enhance objectives.
Sometimes the obstacle is in the way the firm’s leaders are thinking, which reveals itself as you are brainstorming. Case in point—a book-of-business partner in a mid-market accounting firm, who managed about 100 clients. Of those, 99 engaged the firm to prepare tax returns worth an average of about $1,500 each per year, while one client was responsible for $100,000 in business, with at least double that amount of potential already identified. I wondered why the partner hadn’t developed the additional potential. He responded, “I don’t have time to grow this client, because I have the other 99 to worry about.” Needless to say, the managing partner and I both dropped our jaws!
Share of wallet
An essential element in the review process is a percentage of how much each key client is spending on accounting services with the firm versus overall. This is called share of wallet. The other money the client is spending is with our competitors. This brings into focus how much potential is out there that we haven’t captured. Strategies to grow our share of wallet then focus on relationships, obstacles, solutions and realistic goals.
In the second installment of this article I’ll offer detail about other components of the Key Client Program.