87 Ways to Grow Revenue per Employee THE ONLY NUMBER THAT REALLY MATTERS IN ACCOUNTING FIRMS The One BIG Number The Revenue per Employee metric is calculated by dividing the total revenue of the accounting firm by the number of full-time equivalent employees. This calculation results in a figure that represents the average revenue generated by each employee in the firm. It provides a simple yet powerful insight into the productivity and efficiency of the workforce, staffing levels, and use of systems and technology. The benchmark figure was always thought to be US$150,000/£125,000/AU$250,000. In the dynamic world of accounting, understanding and optimizing key performance indicators is essential for firm growth and sustainability. One such crucial metric is Revenue per Employee. What is it? Why is it important? Revenue per Employee is a crucial metric for accounting firms as it measures the efficiency and productivity of their staff. It gives an indication of how effectively the firm is utilizing its human resources to generate revenue. This metric is particularly important in the service industry, like accounting, where human capital is the primary asset. A higher Revenue per Employee ratio suggests more efficient use of labor, potentially reflecting better management practices, higher skill levels, and effective use of technology. It also helps in benchmarking the firm's performance against industry standards and competitors. $ £ AU$ Average 83,434 66,747 133,494 Top 25% average 100,179 80,143 160,286 Median top 20% 135,022 108,018 216,036 Highest 230,269 184,215 368,430 Lowest 16,431 13,145 26,290 The Clarity Accounting Benchmarking Report 2023 shows the following for Revenue per Employee: For details of the full Clarity Benchmarking Report 2023, go here:- pages.clarity-hq.com/benchmarking-report Strategies to Improve Revenue per Employee At a recent Clarity Elite Firm session, we brainstormed ways to improve Revenue per Employee. We looked at the makeup of the number and broke it down into three key areas: increasing revenue, improving team education, efficiency, and performance, and systems. Here are the results of the brainstorming session. We may have missed a few. But hopefully, we’ve given you enough inspiration to improve your firm’s number. PS There is no particular order to the brainstormed lists. Increasing revenue Grade all your clients and develop (and implement) a plan on how to deal with the various grades. See the Clarity Client Grading Matrix. Create a matrix of clients/services to see who’s not buying what from you. Map the sales process, look at conversion rates, and consider ways to improve each step in the process. Map the Marketing/Lead Generation/Traffic or Funnel process and do the same thing. Implement an Extra Work Order (EWO) system. See the Clarity EWO template. Define what your revenue per employee should be and create a roadmap to work towards. Measure and monitor along the way. Standardize pricing, implement pricing software, or communicate how you price to the team so they can quote. Undertake the Business Model Canvas (and how to improve it) exercise on your own firm. Introduce a Business Model Canvas service for your own clients Increase your prices. Make it clear to clients and prospects what’s not included in your prices. Separate out extra work orders on the face of your P&L (ie, a specific nominal code) and report monthly against budgets and benchmarks. Review individual client profitability regularly. Help underperforming clients find happiness elsewhere, especially when new clients are won, and older underperforming clients can be removed more easily (from a cash flow and profit perspective). Regularly review timesheets to determine less profitable clients. Regular education with clients (newsletters, blogs, events, meetings, in-office material, pop-ups etc) to ensure that they are aware of and understand your added value services. Make sure you have dynamic billing (and reviews) in place - ie the 1/3/12 rule. Stop doing stuff free of charge. Use Clarity with every client. Go to clarity-hq.com to book a call. Increasing revenue - contd Have an accountability buddy (inside or outside your firm) to hold you accountable. Studies show that firms that have written action plans and are held accountable achieve 78% more. Review your goals and targets regularly (monthly if possible). Develop and publish content to attract the right clients (who will value you). See the Clarity Member Marketing Kit. Understand and create your ideal client selection criteria. Create ideal client avatars and make sure you market to those. And please be sure to only take on those that match your selection criteria. Make sure that your clients fit in with your systems and processes and not the other way around. Improve your revenue mix Check client records when they come in to ensure that they match the agreed quality standards/quality score. Decide what services your clients really need and tell them. Be the expert that they need. Ensure that there is a system to get the team to constantly refer to the proposal to stop scope creep. Install a rule that all work is assumed to be out-of-scope unless proved otherwise. Improving team education, efficiency, and performance Create the right/ideal culture and make sure the existing teams and any new hires fit the culture. Make sure the team time-block their diaries or introduce default diaries. Quarterly brainstorming sessions with the team on set topics to improve systems/processes and communication and increase buy-in. Daily huddles to review workload, work-in-progress, billings, etc Make sure the team is up to date with training and software updates. Analyze the productivity gap regularly, i.e., compare what work is theoretically possible to undertake and bill and compare to actual work undertaken and invoices sent. Time and motion studies to establish efficiency against benchmarks. Group incentivization and targets/rewards. Introduce performance-based incentives to motivate employees to increase their productivity. Help less productive and disruptive team members find happiness elsewhere. Introduce the 1-3-1 methodology to improve problem-solving and team members coming up with solutions rather than problems. See Clarity Resources. Improving systems and processes Create your firm playbook. Systemize everything. Never let emails dictate your day. Only check after, say, 12 and only at set times. Don’t accept manual paperwork. Use OCR software and apps. See what the Net Promote Score says about your business. Introduce clear service lines. Automate the low-value work, i.e., bookkeeping. Have a ‘budget on job’ approval process. Standardize working papers. Regular management reporting - including time, admin time, and profitability. Look at Benchmarking for you and your clients. Go to clarity-hq.com. Analyze and act upon time reports regularly - say weekly. Undertake a regular review of processes and systems and introduce an updating system. Regularly review the firm’s software stack. Have weekly work-in-progress meetings to resolve issues and remove roadblocks. Have an onboarding manual for new team members. Introduce a high-performance system and train team members. Ban internal email, get the tea, to use Slack/Teams or at huddles. Ban pointless cc’ing on emails. Encourage phone calls rather than emails with clients. Consider always responding to a client's email by phone where possible to improve efficiency. Charge extra for “report’ style emails. Get the team onboard building systems. See the Clarity Resources. Introduce the before/during/after calls system to keep clients up to date. See the Clarity AgendaCreator. Review all client-facing systems and how clients interact with your firm. A client sale opportunity with respect to the own systems. Invoice for everything - even if you have the credit (on the same bill) so the clients understand the value. Include the value added on invoices, not just the work completed. Talk to the client in meetings about the value you have added. Have a central repository for all business-related information, such as Notion or Intranet. Systematically use video (on systems, with clients, etc) to improve efficiency. Stop over-engineering the compliance process. Optimize Work Processes: Streamline work processes to eliminate inefficiencies and redundancies, making it easier for employees to be productive. Improving team education, efficiency, and performance - contd 10 or 15 minute time limit on all calls - otherwise classify as a meeting and bill accordingly Make sure that you have 2 or 3 members at every meeting to help with training and understanding, i.e., one senior and one or two more junior members observing and note-taking. You run your business rather than your clients or your team. Outsource or offshore. Delegate as much as possible to remove bottlenecks to growth. See the Clarity Time Machine. Weekly or monthly 1-2-1s for career development and what we should start/stop/keep doing. Clearly define roles for team members and try to ensure those doing bookkeeping just do bookkeeping. Team KPIs based on outputs, such as expected turnaround times. Appraisal system, regularly undertaken. Value your own time, inside and outside work, and ensure your clients do the same. Monitor non-fee earning time. Help yourself and the team to develop confidence around pricing and how to have the right conversations with clients. Have ‘champion’ team members for not just software (implementation) but for productivity too. Make sure that the right team members are working at the right level and with the right clients. Ensure that the right team is in the right roles. Enhance Employee Skills and Training and ensure the team has the right tools, skills and education to perform at a high level. Core values must be living and breathing throughout the whole organization. Lead from the front. Foster a work environment that motivates employees, as engaged employees are often more productive. Implement technology solutions that automate routine tasks, allowing employees to focus on higher-value activities. Use these ideas to create a who/what/when action plan. But make sure to focus on only three things at a time. Compliance is not dead. However, studies show that firms who introduce a repeatable business advisory service triple their profits. Traditional business advisory In the past, traditional business advisory hasn't properly leveraged the right combination of people, processes and technology. It has been heavily reliant on partners or managers to deliver, there isn’t enough time, it's difficult to scale, and only the top 10/20% of clients can typically afford it. Repeatable business advisory Clarity® is the complete business advisory platform that can help you introduce and create a profitable, repeatable and scalable business advisory service for your firm. We help progressive accountants market, sell, price and deliver re-imagined business advisory services at scale. From 90 minutes per week Starting from just 90 mins a week for the first three months, our simple step-by-step implementation plan, coupled with our education systems and member success team, will ensure you generate $37k/£30k/AU$60 GRF, or your money back. Thereafter, we help you build a well-respected and successful transformational accounting firm that earns three times your existing profit with a happier team and clients. Clients love it and ‘get’ it Our multi-award winning solution creates significant value for your small business clients, at a price they’d love to pay. Contact us Why not book a discovery call with one of the team to see what a difference Clarity could make to your firm? www.clarity-hq.com