From: How to Price Your Accountancy Services for Maximum Profit (by Mark Wickersham) I collated some figures on the UK accounting profession and they have turned out to be quite the exposé.
| MEASURE | SAMPLE | WORST | LOWER QUARTILE | MEDIUM | UPPER QUARTILE | BEST | |
|---|---|---|---|---|---|---|---|
| PROFIT PER PARTNER | 294 | -£13,319 | £35,000 | £68,706 | £103,465 | £224,372 | |
| PROFIT PER FEE EARNER | 283 | -£5,038 | £11,846 | £18,712 | £26,929 | £97,166 | |
| NET PROFIT MARGIN | 295 | -4.18% | 21.60% | 31.26% | 37.86% | 70.00% |
I found the profit per partner really caught my attention.
See BOSS for information on the new Freedom Service’s outsource accounting work
Although the UK’s top 20 accounting firms weren’t taken into account in this research, the take home profit of £68,706 for each partner is nothing to brag about!
If we dare to look at other professions like doctors or some trades such as electricians we can see that a lot of accounting firms are not making as much money as they should be.
It’s hardly any profit when you realise that most accounting practices do not include the owner’s salary in the accounts for sole practitioners or partnerships.
What are the implications of this?
How about the market salary value?
Partners and sole practitioners all say they’d have an expectation of being paid a minimum of £70K by a top four accounting firm for the same kind of work they are currently doing.
If this was to be included in the accounts as the market salary for a sole practitioner’s and partners worth, then more than 50% of accounting firms are making a loss (£70,000 minus the £68,706 profit average)!
See BOSS for information on the new Freedom Service’s outsource accounting work
If accountants knew how to get their pricing right and communicate that to their clients, as well as them learning how to value the services they offer, then they’d all be making a lot more profit.
Let’s look deeper at this. In 2010 myself and Steve Pipe looked at a number of issues around what firms charge for pricing tax-related services. And the interesting discovery was the large range of prices!
From the survey here are two examples.
The first relates to a very straightforward tax return for someone with rental income.
Here the income & expenditure account as well as the Land and Property pages are completed by an accountant.
On looking at the next example in the survey we came across an incorporation service (of unincorporated businesses) staggered in pricing from £50 to £4,500. And other services like tax planning for company cars went from £50 to £3,500.
These examples and plenty of others clearly demonstrates there isn’t such a thing as a ‘market price’ for accountancy and tax services.
What wonderful news for accounting firms!
See BOSS for information on the new Freedom Service’s outsource accounting work
