When the time comes to sell your firm, a quality prospect database is the equivalent of a council-approved granny flat in the backyard.
It will make your firm stand out from the pack, it has value and some buyers will consider it an income-generating gold mine. Gone are the days of “trust me, there’s a lot of goodwill”. Nothing proves goodwill and brand awareness quite like a sizable and frequently contacted database.
It is no secret that the accounting industry is not known for its marketing prowess and today’s buyers of firms are not necessarily reviewing a prospect database as part of their due diligence checklist. The buyers of the not-too-distant future and particularly buyers who are outside the industry, however, may see significant value in such a list, especially if it is specific to a niche, and is well-managed and data rich.
We know that in other industries, databases are critically important to asset value. Facebook paid $19 billion for WhatsApp in February 2014, arguably for the size and quality of the database in a market it was targeting – being tweens to early 20s.
In business valuations, databases form part of the intellectual property of a business and a number of factors determine the possible value. Let’s explore how an accounting firm can grow a prospect database that substantially moves the needle on valuation when it comes time to exit.
Like almost all strategies to maximise the value of a business, there are significant merits to this project aside from valuation. The most obvious reason to start, grow, maintain and interact with a database is to increase the client base and revenue. That said, even if you are close to selling your firm, it’s not too late to start a database so the new owner can take the reins and make it rain.
To a potential buyer, the elements that might be important include how old the database is, where the initial list originated from, how often the database is contacted, how responsive the list is to marketing messages, the size of the list, the accuracy of the data and how relevant the list is to the target market of both the business that owns the list and any businesses the potential buyer also owns.
Quick start guide:
- Clearly define what an ideal client looks like. The more detail you can add about this persona, the better. Of particular interest, when thinking about building a database, is where do these people hang out? What’s their preferred social media? Who are the centres of influence you can connect with to get exposure to as many ideal clients as possible?
- If you don’t have a CRM already, choose an application that’s user friendly. No need to invest in an enterprise version, there are decent options for a couple of dollars a month.
- Add your current active clients with the tag ‘client’. It is important to split your database into segments so you can send tailored marketing messages. Clients do not want to be treated like prospects so this is critical.
- Add any previous clients you would be happy to have back or who might refer work to your firm and add the tag ‘alumni’.
- Download your LinkedIn connections list, remove any names that are not relevant to your business and add this list to your CRM with a tag ‘LinkedIn’.
- Grab all the business cards you have collected over the years. Don’t forget the pile in the home offices. Ask someone else to check that the card data is still correct and add these to the CRM too. Sounds like a good job for extra pocket money.
- Social media is a great way to grow your database, but it is not adequate to exclusively build your list on social media. Your Facebook community list is owned by Facebook, likewise Twitter and the rest. Devote some of your social media activities to bringing people back to your website and into your database. This is property you own, control and can sell.
Once you have your list, there are four elements to maximise the value of it, both immediately and for future sale of the business. Systematically nurture the database, grow the size of the list, increase the amount of data for each record and undertake activities that maintain the integrity of the data.
The most basic way to systematically communicate with your database is via a regular email. Some firms have cancelled their newsletter in favour of other regular segments, like a fortnightly business tips blog or a weekly financial freedom video. One firm that does this very well sends an email every Sunday night, without fail, on a business issue that they’ve dealt with during the previous week. This predictability and regular contact demonstrates that the contacts are happy to receive information from you as they haven’t unsubscribed.
Other messages, campaigns and communication can be sent in addition to this and you don’t need to only consider email. Depending on the target market, SMS and regular mail might also be valuable channels.
Having a number of repeatable strategies to grow the database with quality prospects is ideal. Social media activities, either organic or paid, that drive prospects to your website to subscribe can be a great way to target a certain buyer persona and even a specific issue that your ideal prospect may be experiencing. There are plenty of offline methods too, like attending networking events and conferences.
The amount of data you can gather will also play a role in how valuable the database is. Take Facebook’s purchase of WhatsApp. It wasn’t just the 450 million users, but the data that was known about these users that was valued. Start with the essential contact details, but add more data when you can.
For example, we add a flag when we determine that the person fits into one of our three ideal client categories – ‘Ambitious Solos’ for sole practitioners with more than $1 million in revenue, ‘Happy Couples’ for two-partner firms with significant respect at the partner level or ‘Functioning Multis’ for multiple-partner firms with $2 million to $6 million in revenue and a business manager or general manager. That way, we can tailor our marketing specifically to the needs of say, a multi-partner firm where the partners likely have varied ages and different growth objectives.
Importantly, it is critical to maintain the integrity of the data. Regularly clean the database, removing email addresses that bounce, deleting deceased records and updating contacts for people who have moved companies. Abide by data protection legislation and react immediately to data removal requests. Make sure to update prospects’ data when they become clients and equally if they join your alumni.
When it comes to selling and buying accounting businesses, ego plays a significant role. It is said that many brokers would be out of the game if buyers weren’t overly optimistic about their chances of turning a $1 million compliance firm in the suburbs into a diversified profit machine. Having a well-maintained, responsive database gives buyers another platform on which to project their future success.
Finally, if value is derived from the income stream that an asset can attain, then when it comes to a database, beauty is in the eye of the beholder. If you have an accounting firm specialising in dental practices with 1,000 dental practices in your database and the potential buyer is a firm also in that space, but in addition to accounting, they offer financial planning and property, the potential income stream from that database could be significant. Depending on the buyer, the database might transform from a granny flat to a block of flats.