The Lifetime Value of An Accounting Client

The lifetime value of a client - or CLV - is an often overlooked metric, particularly in the accounting arena.

Why?

Principally because once on board, accounting clients tend to stay with their chosen advisor, don't they? After all, another accountant will provide the same service, so they're unlikely to move unless you really mess up…

And anyway, what practical use does the metric have anyway?

So goes the thinking in the traditional accountant's mind.

But at any one time, around 70% of your client base will be open to moving to another provider, if they perceive the switch will offer better value and a better service.?

It's a longer term metric, but monitoring the length of time clients stay with your firm can provide, amongst other things, an indication of how well your firm is meeting their expectations.

For example, if your accounts compliance service consists of requesting accounts info, preparing accounts and tax, and then having an annual meeting, you’re already well behind the curve.?

Compare that scenario with another firm that has open access to cloud accounting software it provides to clients for free.?

It prepares VAT returns after checking and resolving bookkeeping issues as they arise.?

It’s configured the accounting software to run real-time reports, so that the business owner can keep tabs on debtors, creditors and cash daily.

The firm has scheduled monthly zoom meetings with the business owner to review progress towards the owner’s goals and answer any questions.

Which of these two firms do you think has the higher client CLV?

The quality and perceived value of the service provided have a direct relationship to how long a client stays with a firm.?

The profit generated through those services, multiplied by the number of years the client stays with the firm is your client’s CLV.

Sure, the more efficient your processes, the more profit you’ll make.?

But will that translate to a higher CLV?

There’s a limit.

The limit is the perceived value of the services provided, based on how well they help the client achieve their goals.

Not something that compliance services are renowned for.

So monitoring client LTV over time is an indicator of either how lazy and indifferent your client base is, or more positively, how well your services are improving your clients’ businesses.

OK, so that’s why you should keep an eye on CLV, but what do you actually do with it?

Er… well… that depends on whether you’re engaging in marketing.

I know, anathema to accountants in general, but it's a necessary component of controlled growth.

As Peter Drucker wrote:

“the aim of marketing is to make selling superfluous”

So if the thought of selling makes you want to throw up in the corner, better get to grips with marketing if you want to grow your firm.

So CLV. Huh. What is it good for?

Well, I need to make some assumptions here.

Principally that you’re engaged in marketing your firm and actually spend spondoolies in doing so.

Someone reading this will now be smirking to themselves, thinking “Oh I don’t spend money on marketing, clients get referred to me all the time, so I don’t need to”.

To which I say, read this, and then come back to me when you’re ready to deal with the capacity constraint you’ll inevitably hit.

And as far as spending money on marketing goes, I also hope you’re factoring in the time you spend at networking events, posting on social media, meeting with unsuitable prospects and preparing proposals that get turned down or ghosted.

Anyway, moving swiftly on.

When you’re at the stage where you want more clients of the type that you want, rather than clients that people you barely know think you want, that’s when you decide to take marketing your firm seriously.

You’ll probably approach an agency to ‘do your marketing’ for you.?

At which point they’ll ask you what your budget is, you’ll tell them ‘we don’t have one’ and hope they can then come up with the goods.

Might happen. Might not.

Alternatively, you might have a go at Facebook ads and then drop them like a hot brick when you’re spending far too much for sod all return.

Then you’ll go back to networking, social media, asking clients for referrals and carrying on as you were.?

However, if you’ve recognised that your firm is best suited to handling a certain type and size of client with issues you know you can resolve, you’re on the right track.

You can position your firm to provide the range of services you know that they want, at a price you want to charge and that they’ll accept.

You’ll then be able to come up with a cunning plan.

After gaining experience with them, you’ll know what level of profit that target client can contribute on an annual basis.?

You’ll know from your CLV what profit you could reasonably expect that type of client to contribute over their time with your firm.

That’s where CLV comes into play.

Once you know how much it costs you to acquire a lead of your target client type (Cost Per Lead or CPL), you can come up with a marketing budget that you know will provide the annual ROI you want.

You can reduce your CPL by systemising your lead generation, giving you scope to increase your marketing budget, which in turn helps you get more clients.

You’ll be able to streamline your processes to handle your target clientele at volume, that you can control, and plan your capacity well in advance.

So are you ready to put your client acquisition efforts on steroids?

Drop me a DM to book a demo of the 100K Success Funnel? and we’ll tread your path to glory together.

Or if that sounds a little too forward because we’ve only just met, you could benchmark your existing marketing effectiveness by going here.

#accounting #clv #leadgeneration #ffr