You can’t manage what you can’t measure, this has been one of our key messages ever since we launched Business Health in 2000. And while a lot has happened since then, this message hasn’t changed – it simply makes good business sense in our view to know your key metrics, track them over time and to know how you compare in the marketplace.
So, in an effort to contribute we thought we’d share with you our latest analysis of the key financial data provided by 300+ Australian practices – in a series of communications over the next couple of months. Hopefully, these will help you to paint a picture of your business – pretty or not. And, armed with this knowledge, we hope you’ll gain some insight and a few pointers towards a stronger, more sustainable practice. (<<Click here to receive a consolidated pdf copy of all communications – to be issued in December>>)
The following are marketplace averages. Factors such as the practice’s business model, development phase, size and location will impact your practice’s numbers.
Practice Management by the Numbers 1: Revenue per client
Marketplace average: revenue per client = $3,558
This is one of our favourite measures as it directly calls into play the relativity of the business’ offer to the fees it’s charging its clients. It’s easy to calculate, review each year and ultimately allows the business to gain a sense of its profitability.
If your number is higher
If you are providing highly technical services/advice to higher net worth clients for example, it would not be unreasonable to assume a higher level of revenue per client. Is this you?
Of course, the more you charge, the greater the client’s expectation. Are you confident that your clients are satisfied with the services they’re receiving (for the fees they’re paying) or do you think it’s perhaps time to actually ask them?
If your number is lower
While there is nothing necessarily wrong per se with this, it does beg the question – why are your clients paying on average, less than the marketplace? Perhaps it’s because you are deliberately focussed on a lower net worth clientele. And, as long as you’re delivering your services profitability then you’re good. But if this isn’t the case:
- Is it time to review your fee structure/level?
- Are you giving away value that others are charging for?
- Are there some clients who are receiving much more from your practice than their fee justifies – perhaps they are taking up a disproportionate amount of your time and resources for example. Most likely, your staff will know. Is it time to review their fees and/or move them on?
The bottom line
You need to be confident that your clients are satisfied that the fee they’re paying you represents value to them. And, on a related note, how would the practice stack up in a ‘look back’ compliance audit? And if you have any doubt:
- Ensure that your service offer, CVP and actual value is being reinforced at every opportunity through your various communications, website, social media and review meetings.
- Are there any additional services that should perhaps consider as part of your offer?
- And, to be doubly certain – regularly seek feedback from your clients (confidential, anonymous, benchmarked surveys are best).
If you’d like to discuss in a little more detail and discover how your own business stacks up (and what you can perhaps do as a result), let us know <<click here>>.
Yours in best practice,
The team at Business Health.
Please note – ‘revenue’ includes licensee fee, excludes all grandfathered and/or volume related payments.