Profitability of solicitors compared with accountants
While accountants have an advantage in that the Government has decreed that we all have to lodge a tax return every year, so it keeps clients coming back, that is not the only reason why accountants are doing better.
In the last country solicitor blog I revealed the secret that :
The earnings of a partner in an average small accounting practice are around twice that of the earnings of an average small legal practice principal.
If you haven’t had a chance to read it, you can read it on “The secret that accountants desperately don’t want lawyers to know” on 22nd September 2011
Last week I explored the subject of staff leverage and pointed out that most accountants employ several accountants who work on less complex matters and parts of larger matters.
It comes as no surprise that the more profitable small legalpractices also tend to have a number of employed lawyers who fulfil the same type of function as the employed accountants.
So why else do accountants in general make more money?
Why is there a low ratio of profitability of solicitors compared with accountants?
Accountants are Proactive
Twenty years ago accountants never wrote to their clients, or if they did, they would have been a rarity.
Today they pretty much all do it. Any reason is considered a good reason to communicate with their clients.
– The Government budget has just been released- Let’s write to our clients
– Change in the law- Let’s write to our clients
– Approaching the end of the financial year- Let’s write to our clients
No doubt your accountant has probably sent you these types of letters. If you have never received one, almost certainly a number of your clients have received these types of letters from their accountant.
All of these situations are opportunities for the accountant to get in front of the client and provide valuable advice about how the client can take advantage of that particular situation.
In fact I can tell you, that over and over again, when surveys are done of small business owners and they are asked what their biggest complaint is of their accountant, it is not how much they charge.
It is that they are not proactive.
So even though many accountants may now write to their clients much more than they did in the past, it seems that business owners want more. They simply don’t know, what they don’t know, when it comes to the issues that accountants are experts in.
How small legal practices can benefit
OK so that’s accountants. Clearly the average person can’t be expected to stay up to date with changes in the tax laws.
Your clients however are different. They are all experts in all aspects of law and would know when to see you about a change to their affairs, wouldn’t they?
You know the answer to that one.
Now I have written about this before. See my blog “Are you being Proactive or Reactive with Your Clients” on 5th September 2011.
The more you can provide valuable, relevant information to your clients, the more your clients will see you as someone that they should see on a regular basis, not just when they have to.
Clearly the more targeted the information you are providing, the better. For that you will need to think about your database and what information you need to be collecting and recording about your clients.
You have probably already seen how accountants are chipping away at traditional areas of legal work. There are a couple of listed accounting consolidators on the stock market. Have a look at their public announcements; they are all looking to generate more organic growth, because the market is not conducive to buying up practices. This inevitably means that they will be looking at how to generate more and more work from their clients, some of which perhaps in the past, may have involved a lawyer. This is the public face of what has become quite a trend.
You don’t of course have to accept it, just get comfortable with communicating regularly with your clients and just do it.