Fix Your Declining Accounting Referral Rate
Interview with Lee Frederiksen of Hinge Marketing
Did you know that accounting has one of the lowest marketing spends than any other industry? And did you know that might be what’s holding your firm back? In this week’s Grow Your Firm podcast, we’re talking with Lee Frederiksen of Hinge Marketing. They provide marketing services to professional companies.
Hinge Marketing recently released a benchmarking report about the state of marketing in accounting. We’ll be talking with Lee about some of the highlights from this report, some of which were quite shocking to us! You can get a free executive summary by going to the link in the resources section.
- About Hinge Marketing
- Why old assumptions about accounting and marketing will kill your business
- Why you have to meet your audience half-way online if you want to grow
- What the report reveals about the marketing practices of the fastest-growing firms.
Why Marketing Cannot Be Ignored If You Want Growth
A major downfall for many businesses is assumptions that have solidified into facts. One of the strategies that marketing companies use when first working with a client is to do interviews and surveys with some of their customers or clients, and then do the same thing with the company. The answers might be radically different because of these assumptions.
One of these assumptions in the accounting space is that most new business is generated through referrals and not through marketing. We also reinforce this assumption by cherry picking our information. If you think that your website can’t generate new business then you won’t put effort into your website marketing, and thus it doesn’t get any new clients. It proves the assumption, but it could be wrong.
The benchmarking report released by Hinge Marketing aims to show accounting firms just where their assumptions are wrong about marketing. The truth is, things have radically changed over the past few years.
It’s Not Face-To-Face Anymore
Here’s the traditional viewpoint. If a potential client has a question about accounting issues, they would reach out to the phone and schedule a face-to-face interview about their questions. An accountant interview was the single source of information to get a quick answer.
The internet has blown that dynamic apart. 70% of the research process is now done online. That’s for both finding answers about accounting and about finding accountants. Just because you have CPA or some other credential is not an automatic “in” to getting people to come to your door.
People always seek the easiest way to do things. Instead of going through the hassle of scheduling an appointment and paying for some of your time, people will do what they can through web searches first. This includes vetting referrals from other people. It used to be the case that a friend’s referral was the best way to get new business. But according to the new report, the number of referrals has dropped by 15% in the last five years!
Why is this happening? It’s because it’s so easy now to gather more information about a referral recommendation before committing to an appointment. Hinge Marketing states that people look at an average of four or five pieces of information before deciding whether to contact a firm. Three years ago, 52% of people would rule out a firm before talking with them first based on this additional information. Now it’s 90%!
This is why marketing your firm is a crucial part of growing your firm. You have to meet potential clients mid-way while they’re still gathering information and take steps to counter bad information about your business (like a negative review). Instead of waiting for them to talk to you, you need to go to them first through marketing.
Signs Of Healthy Marketing
So what does healthy marketing look like for an accounting firm? The full report compares the fastest and slowest growing firms in their sample to see what the differences are. The first thing our guest mentioned was that the fastest-growing firms generate more than $1 million per partner than the slowest ones.
Granted, there’s more to this than just marketing, like having good workflows, but if you want to replicate that kind of success in your firm then it’s wise to look at their marketing as well. First, the faster-growing firms tend to spend more on access to marketing resources, either internal or external. The fast-growing firms have one marketing person for every 24 people in their firm. The slower ones have one for every 50.
Don’t panic if you have a small firm! If you’re a smaller firm, the question to ask is how you can get access to marketing talent to do things that you can’t do well or don’t know how to do. That could be done through an early hire or it could be done through hiring an external agency to help. Larger firms usually have the resources to hire a marketing employee.
Second, your marketing efforts must balance with good workflows. If your workflows are excellent then your marketing can draw in extra clients without causing the staff to become overwhelmed with new work. Good workflows without good marketing can still land you in the feast and famine cycle because there’s not enough new business coming into the pipeline.
The reverse is worse. If you have excellent marketing and don’t have your workflows in place, you’ll burn through your potential client base and have a lot of unhappy former clients. And if they go out and talk to you online, it’ll make it much harder to draw new business later.
If you do manage to hit the right balance, you’ll still have to make adjustments as you grow. One of the companies Hinge Marketing worked with experienced a 45% growth rate in the first year. To be able to handle that growth, the firm had to keep adjusting their systems to cope.
Also, if you do hit the right mix and start getting attention, don’t forget to have the right talent. You may find you need extra people on your team sooner than you’d expect.
Third, spend your money on the right things. The slow-growth firms spend their money on traditional activities like networking events, conferences, and sponsorships. Fast-growth firms are investing in things like educational events. The amount they’re investing, for a moderate-sized firm, is between 1.5-3% of revenue, excluding salaries for marketing personnel. It is not the case that the more you spend, the better results you get, but you do have to spend enough in the right areas to get the boost you want.
We want to thank Lee Fredrickson for taking the time to talk with us. You can get the executive summary in the resources section. The full report can be purchased through those links.