Shane Lukas looks at in issue affecting a lot of accountancy firms.
I listened to the recording of the webinar we ran with Adfin the other day and something really struck me.
Tom Pope mentioned those legacy clients – the ones who are stuck in their ways and using old, clunky systems. Maybe they’ve been going for decades and have never thought they needed to update. They have the mentality of, ‘everyone knows how things work, so why change?’
They may well have been your client for decades too and over the years they’ve brought you referrals to other similar businesses.
Which is all well and good but….
You can’t rely on those kinds of clients any more.
Why legacy clients are bad for your accounting firm
Did you know that almost one in four UK companies (24.8%) have an average director age of over 60 – that’s more than 850,000 companies. And for 6.3% – over 200,000 companies – the average age is over 70.
That’s a lot of directors who are heading towards retirement.
What’s more, out of 3.4 million active UK companies, 61.9% have just one director. There’s no succession infrastructure in place, no one ready to take it forward, not even a family member (stats from ExitRadar research).
When those directors retire, what happens?
Small businesses are notoriously difficult to sell, particularly so if they’re reliant on one key person; around 80% don’t find a buyer.
And if they can’t be sold, they’ll simply close down.
So as these baby boomer directors exit, where does that leave their accountants? Where does that leave you?
Moving from legacy clients to younger entrepreneurs
If your business is built on this kind of client, I have to tell you that the future doesn’t look great.
There could be several more good years ahead, of course. But the demographics don’t lie; this is coming.
The good news is that if you take action now, the problem goes away.
And what I mean by taking action is making sure you appeal to the upcoming generation of business owners.
Younger entrepreneurs aren’t stuck in the status quo. They’ve grown up with technology and expect the same speed and digital communication they’re used to elsewhere. They want relevant information that shows them where they’re going, not just accounts that show them where they’ve been.
And crucially for you, they’re less entrenched in the idea that accountants are just there for compliance. So the more value you can help add to their business, the more attractive you are to them.
There are so many opportunities for accountants who understand this and position their firms to attract that kind of client.
If you’re doing this already, that’s fantastic.
If not, I highly recommend you start now.
Find out how vulnerable you are to this shift:
Action point 1: review your client list. What’s the average age of your business owners? How many are actively growing rather than just ticking along?
Action point 2: look at the clients you’ve acquired over the last year. What kind of businesses are they? Are you attracting forward-thinking, growing businesses or more legacy-type clients?
Action point 3: take an objective look at how your firm is positioned. What do you focus on in your marketing? Are you explicit about the kind of clients you want to work with and how you help them? Do you come across as a modern firm that’s up to speed with the real needs of business owners? Or is your image a bit stale and old fashioned?
Action point 4: review your systems and tech. Are you a legacy business yourself? Are you taking advantage of tech and AI to save time and improve the client experience?
The future looks bleak for accountants who don’t adapt to this change. But those who do will thrive.
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