Episode 59: Where to invest your marketing budget to find new quality clients consistently
“The aim of marketing is to reduce the need for selling.” - Prof Philip Kotler.
In this episode of The Wize Guys Podcast, Ed Chan Jamie Johns, and Thomas Sphabmixay discuss where the marketing budget should be spent to find new quality clients consistently. The mentors discussed the analogy of "building a garden that attracts butterflies and not be dependent on a butterfly catcher" and how important is to get the marketing in place to ensure a steady flow of quality clients.
0:00 - Intro
0:34 - How to scale your accounting or bookkeeping practice with marketing
2:54 - The concept of “building a garden that attracts butterflies and not be dependent on a butterfly catcher”
4:56 - The importance of getting in place to ensure a steady flow of quality clients
12:01 - Practical insights on how to implement a consistent marketing strategy
14:24 - What is the resource mix in marketing when it comes to strategy, management, and production & tips for allocating the marketing budget to attract new clients?
18:31 - How to improve and invest in the marketing activities
"You should be spending around investing around 5% of your turnover in marketing activities and you've gotta see it as an investment." - Ed Chan
“The biggest thing is once you start to do marketing, don't stop it.” - Jamie Johns
"Being persistent and consistent is the key. The firm has to have a good foundation so that when you go about your marketing, you're not going to be held back by your production." - Thomas Sphabmixay
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Thomas Sphabmixay: Today we're onto the topic of scale. This is a really interesting topic, as I'm sure a lot of us, you know, in one way or another have dived into marketing or scaling our own practice. This is something that we focus on in our way of thinking When you get your recruit and your design all embedded down, your foundation is all set, then you're ready for scale. And like Ed has mentioned to us and to me many, many times, you don't want to build a second or third story until you got your foundation, right? Otherwise, everything's going to come crashing down. So that was drilled into me and all of us.
Now that we're onto the topic of scaling, there's also a very specific way that we go about approaching scale. Look, the aim of marketing is ultimately to reduce the need for selling. You're going to hear a saying that we have over and over again where we want to be building a garden that attracts the butterflies rather than relying on butterfly catches, and where you can make marketing and develop your marketing to a greater extent to develop those marketing systems. The pressure that your client managers are going to have, and even yourself as an owner are going to have in selling and converting, and attracting new clients are going to become a lot easier. It's not entirely a scalable method to be hiring extraordinary super charismatic technical client managers and expects them to go out there and network and schmooze and attract leads and get amongst it. There are definitely people out there that can do that, but those people are quite extraordinary, of course, come with an extraordinary price tag associated with them. But where we can develop our marketing, where we can put our brand and our image out there into the world, ultimately the effect that we want to be able to have is when your potential clients or leads come to your website, or they come to look at your resources or your materials, they get a sense that, ‘Oh, I'm at home. This firm is speaking exactly to my needs.’ This already is the trust and the relationship-building aspect has already begun. And hopefully, by the time these leads appear as an appointment calendar with your client managers. Your client managers wouldn't have to do such a hard job from going from zero to a hundred with actually having this lead convert into a client.
So today, this is all about marketing. If we can improve our marketing, this is disses also build an extraordinary system so that we can hire ordinary people.
Ed, starting with you. You have this analogy that is so ingrained in the WizeTribe about building a garden that attracts the butterflies and not being dependent on a butterfly catcher, do you want to share with all of us about this and what you mean by this and how this play into our marketing division at all?
Ed Chan: Yeah. Thanks, Thomas, and welcome everyone.
I used to be the biggest butterfly catcher in my firm. I was getting 6, 7, and 8 new clients a week just from referrals. I grew it by 30% on average year on year. But that became a problem because my business became people-dependent, well dependent on me. Instead of being systems dependent on the system of attracting new clients. I needed to change that otherwise, I'd become a prisoner in my own business and I couldn't leave it. If I left it, then the growth stopped and that was a problem.
I talked about building a garden that attracted the butterflies rather than being the butterfly catcher. When you look at the way firms run, not just in Australia, but right around the world, their business model for some of the firms often relies on the people within the organization. You read sometimes that this firm's pinched that partner off that firm. It's like a bit of a badge of honor because their growth model is dependent on butterfly catches. So they try to recruit the best butterfly catcher to bring into the organization. But as I said, the problem with that is that organization becomes very people-dependent. And then when those people leave, that's the end of your growth model. So I think it's much better to invest the money into the systems or into your own garden. Because you own the garden whereas you don't own people, and often firms who have a growth model that depends on the butterfly catcher then they offer equity to retain those people. You give half your, or a certain percentage of your business away but that's their growth model. I think that's problematic. I'd rather invest the money into building this garden, which you own and you own forever. So that's the principle behind building a garden that attracts butterflies.
Of course, you gotta maintain that garden and that requires a certain amount of investment each year, and often accountancy marketing is an expense and not an investment. It requires a certain change of mindset to approach this garden building if you like. It does require a change of mindset. Otherwise, most accounting firms, don't spend anything on marketing, which you need to snap out of, and understand that any business needs a certain amount of investment. I'll call that investing in your balance sheet. So that's a general concept.
There are different ways that you can do it. Obviously, the first one is your website. You've gotta invest into that and make sure that it's current and it's right up there with what's happening. But the garden itself is made up of not just the website, but a whole lot of things. I break it into low-hanging fruit. The low-hanging fruits are things like, the first thing is referrals. You should be getting your clients referring you more clients or referring you their friends because that's the greatest accolade for doing a great job. That doesn't cost anything. So if you do a great job and you get a happy client, and the happy client goes out and refers a friend to you ~ not only are you going to keep that happy client and he's gonna pay you really quickly and not argue about the fee, but he's gonna refer you a friend that costs you nothing. So it's in everyone's interest to make sure that you are giving a really good service so that you are getting lots of referrals.
I've talked about this many, many times, but the biggest mistake that people make in terms of running their practice or their business is to finish the work and just send it off to the client without any discussion. They just get it in an email, they sign the tax return and they send it back. That's being efficient and it's not being effective. Being effective is the people calling the client up, taking them through a journey of what you did. If it's a large client, we always have this client approval meeting, and we do tax planning in that meeting despite the fact that most of us, already know how to finish it off. If you're efficient, you'll go and finish it off and send it out. But if you're being effective, you spend 10 minutes, 15 minutes, or 20 minutes talking to a client, taking them through the journey of what you're gonna do and that's a larger client. Often, I'd bring them into a meeting and take them through this journey of what I was going to do to finish it off, or I'd ask some questions about tax planning.
Then if it's a small client, like an individual client I'd just ring them up and explain to them the results, explain to them what was done, and so forth. That used to really get me a lot of referrals. But the effort to do that was 20% because 80% of the effort was actually getting the work done. But the last 20% of that effort, which often might take 10 minutes or 15 minutes, if it's a meeting, it could take up to an hour for the larger clients. But that last 20% effort gave me all the referrals. So that produced all the outcomes for me. And the outcome for me is not finishing the work, the outcome for me, my definition of outcome is that the client referring me to a friend. That's the outcome, that's the end result.
So if you're looking at what is the end result, the end result is, the clients are really happy, so happy that they'll refer you to friends. But if you don't do that last 20%, you won't get that referral. Often, you know, I did that instinctively for some reason, but you need to encourage the staff to do that. I see client managers not doing that. They're just finishing the work and sending it out and they don't go that extra at 20% and they won't get any referrals. So that's the very first one.
The second one is you need to have to sell more services to your existing clients. You've got a gold line in your database, and the research shows that the clients are crying out for more services. There are surveys done over and over, and the clients are always saying that they wish their accountants would provide them with more services. We're not doing it, including ourselves, I call it on a monetization sheet. So you should get a big spreadsheet, put your client's name on the left-hand side and go from left to right, putting down all your services, and then ticking them off as your clients are taking up those services. You could easily double your turnover if you provided more services to your existing clients. They're the two lowest-hanging fruit.
So they're the two things that you should be doing because it doesn't cost anything to do that. In fact, it's detrimental to your business if you're not selling more services because the clients currently are asking for them. Then the last two are, which will cost money? Well, I call it an investment in marketing, digital marketing. You need your website, your SEO, your search engine optimization, your newsletters, your webinars, your blogs, and those kinds of things which require an investment. So we'll talk more about that today.
Then the last one is acquisitions. It's very profitable to acquire a firm. If you look at the typical key performance indicators, generally if your cost of goods sold runs at about 40%, and your overheads at 35%, then your EBITDA will be a minimum of 25%. That includes the owner's salary. So I'm talking about inhibitors after the owner's salaries. So as a pure return on your capital, you should be doing around 25% or more. That's a typical firm, but when you do an acquisition, your costs are well sold, isn't it 40%? It's maybe 20% or 30%. It could be zero if you've got excess capacity in your own firm because you're using your staff to do the work that you'll really have and you're not having to go out and hire any, any new staff.
But let's just be conservative. Instead of being say 40%, it's 30%, and your fixed overheads are much, much lower instead of being 35%, it could be at 5% or 10%. So your profit, your EBITDA is not at 25% on attacking or an acquisition, it's around 60% to 65%. If you are borrowing money at around 4% or 5%, and I know the interest rates are going up, but even if it's at 5% and you are netting around 65%, you can see it's a very lucrative activity to pursue. That's probably why the demand is so, so much greater than the supply. So it's certainly in Australia, there's very few. Well, when the firms come up for sale, they get bought very, very quickly the prices have gone up because of that. So just in a quick summary, there are four things that we should be doing to build a garden that attracts butterflies, and he requires an investment. He requires a team of people to run that, and that requires an investment. He often uses this statistic that you should be spending around investing around 5% of your turnover in marketing activities and you've gotta see it as an investment.
Thomas Sphabmixay: That's a really great point. You are honing in on there, Ed, it's really important for us to be able to at least take advantage of our low-hanging fruit first before going out there into the wide ocean.
As for your analogy, I heard from you many times, it's like shooting fish in a barrel. We want to be focusing on that first before going out there into the wide ocean. Also, without having those systems in place and capitalizing on making sure that we're doing our client approval meetings and collecting our client NPS and encouraging referrals and working on our monetization sheet, and getting in touch with our clients to talk to them more, and discover more about them. It makes it hard to justify, ‘Oh, are we going to go invest in running ads now or something?’ When we haven't even gotten the way we treat our existing clients down the path. I wanted to dive into that a little bit further with you though, Ed.
You also mentioned that we don't want to be sporadic. We don't want to be a bit of that marketing. We're gonna do a bit of this and there's a much more systematic way to think about it and to approach it, especially when we're looking at it from the context of our seven divisions and division two being our marketing, that in terms of the roles and hiring people into this division, how we bring in a strategist, how we bring in a minder, and how do we bring in production people for our marketing. It sort of sounds a bit familiar, right? Sounds familiar to our client manager, senior production manager, and deep narrow teams. So there's a whole other deep narrow team that we're also building out in our firms so that we can at least approach marketing from a systematic way rather than what's hot right now. I'm going to just chase after it.
Ed Chan: Yeah, a hundred percent. We see people do that. Just dip their toe in it and then come back out of it, because they're not committed to it. You need to see your business as a holistic thing where you need to invest in production. Obviously hiring the right people, but you also need to invest in your admin because you need administration, the glue that holds the business together. Then you gotta invest in your marketing. So it's a holistic approach to running a business. It's not just reactive marketing.
Depending on how big your firm is, of course, not everyone has an unlimited budget. So if you are very, very small, you won't be able to afford as much. But if you are, then on the flip side. If you're very small, then you are probably a lot more hands-on, and if you're a lot more hands-on, you can have a greater influence on the referrals that you'll get. When I was working in the business, I was getting lots and lots of referrals, and that was my contribution. But then as the business got larger and I was further away from the pulse of the organization, meaning the clients, then I needed to invest and invest the money in making sure that I had a stream of, referrals and a stream of clients, new clients, prospects coming into the market and into the business. So it just depends on how big you are, but generally, you need three activities happening. If you are larger, you can have all three full-time. But if you are smaller, then some of them are part-time, and some of them are only every now and then. And as a minimum, the grinding should be full-time. But if you are really, really small, then you may not be able to afford a full-time grinder that does all the marketing for you. You may need to look for someone that sort of is an agency.
So the three areas that you need are a strategist, someone who can look at your business and run strategies for you from a marketing perspective, then you need a manager to keep the whole thing moving forward. The last one, there's a minimum you need is a grinder, someone to do the marketing work. So what we have is a marketing person that we've hired in the Philippines and they're full-time. They do everything that requires them to do if you like, but you also need to manage that person because often the grinder is not a manager and is not a strategist.
Our firm is large enough, we have a full-time strategist. But often you can point an agency to provide some of the strategy parts of your business on which direction and market you should be pursuing and getting deep and narrow in your target market so that the clients that come to your website when they log into your website, they feel like they're at home because you're talking to them. It's just that you are talking directly to them. So you need to identify which market it is that you should specialize in. Because if you become too general, you won't pick up the kind of clients that you want. You need to be quite narrow and deep, very specific. And a strategist helps you identify that and then they work out where you should be doing your remarketing, your SEO, and or that kind of stuff. But you may not need that strategist full-time. So you may need that strategist for an hour a week or an hour a month and you pay just for that hour. But the work that gets done by the marketing grinder. If needs to be constant because you need that person to be marking to your existing clients because you need to be communicating with their existing clients as a minimum you need to have a newsletter. Because the research shows that if you don't keep in touch with your clients for more than a month, they start to forget who you are. Whoever Johnny on the spot is, or whoever's marketing to them at the time will take their attention away from your own firm.
Now if you're doing work with them every month, then that's fine and you're keeping your finger on the pulse. But often firm clients only deal with this once a year. Just seeing them once a year is way too long as a minimum you should be sending them a newsletter once a month as a minimum and not just spamming them. But giving them some really good content and really good, announcements, some real stuff that they need not just, spam kind of stuff, but as a minimum. So you need the marketing grinder to be doing that as a minimum. You could be running some webinars with them. As I said, the minimum is newsletters, then announcements, and communicating with them. So you need that person to be doing that as a minimum.
Now I found that the marketing grinders are not always strategic. So you may need to engage someone that's strategic, but you don't need that person full-time. It just depends on how small or large your firm is. That's the level of involvement you need from a marketing perspective. You need someone to run your website. That's another minimum because things are constantly changing and you don't want a website that just sits there and doesn't do anything. You want it to be active because Google gravitates to the areas that are very active. So it's a very complicated sit arrangement in terms of your marketing, but you need to bring the experts in those three different areas to run marketing properly for you.
Thomas Sphabmixay: That was a really enlightening lesson that you taught me as well. To run a good business and to be a good leader, we have to entrust and bring in the right experts to help us. That a strategist can help so much. They don't need to necessarily be working, like you mentioned, full-time producing the marketing as well. That would be like trying to get a client manager to do a tax return. But a strategist is coming in with their own set of expertise. They help landscape and plan what our garden's going to look like. Even in most cases, also help you identify and hire what the right marketing production person will look like as well. So that arrangement of that strategist and that marketing manager and then the marketing grinder, it works really well.
Marketing can be something an owner again gets dragged into. We're trying to rack our brains for what the next 12 topics of our newsletters are going to be when a strategist has the lay of the land and they're able to set up a program and then have the production person carry that out. We are just focused on making sure that we've hired and we've brought in the right strategist. We can afford it and it's producing an outcome. So thank you for that, Ed.
I wanted to get to you, Jamie. At Sky Accountants, you invested in your brand, logos, and advertising as well as really fleshing out quite a solid marketing division in your own groups. This has really helped you remove yourself from your own firm. Can you tell us a bit about your experiences improving and investing in your marketing activities at Sky Accountants?
Jamie Johns: Yeah, we just took Ed's advice all those years ago and consistently did, I think around 5% of the investment of the firm in terms of the revenue. So that's the first step if you've gotta invest in it.
The second point would be you've, I think it's massively been consistent and persistent. Thomas, over the years I'd started some marketing, I'd stopped and started, left it for six months, and then went back to it and it just didn't get traction. So the biggest thing is once you start it, don't stop it. Because with SEO for example, it does take time and it does take an investment. I think now, it's probably close to six or seven years. We've just consistently done it.
For example, a monthly newsletter. One of the guys internally has helped with the content or made the content very relevant and very timely. They love enjoying that. Then we had a girl in the Philippines who worked with us for that long as well. So yeah, Thomas, it's important to invest in it and don't start and stop it, which a lot of firms I'll probably relate to and then consistently do it. And then over that time, I know particularly with SEO, the internet just loves that new content. It loves that consistency and we would get three or four leads a week just based on the content on our website and our newsletters.
So our newsletters are webpage based, so the newsletters will go out and people will click on them and then they'll take them back to our page, for example. So the content is part of the website and as Ed said, you really do need someone who's got the expertise in this area. We've had Anne for many years now and she just understands things around SEO, websites, and webpages that I just don't have a clue of. You must bring in someone who's knowledgeable and got experience in that area and then, just make sure you monitor the results as well. Monitor the results and see the number of leads that you're getting. Even at a higher level from a strategic level, it's great to choose a niche. I think Ed might have touched on that, but I've seen different firms with all types of niches. It's important to sort of understand who your ideal client is as well so that when they get to your website or they read your newsletter or whatever it may be, the medium that you're using, they feel like, ‘Oh yeah, this, this firm understands what my problem is. This firm understands my industry.’ That is a big opportunity as well for bookkeeping and accounting firms to really offer that holistic service as well.
I know at Sky Accountants, these days we can offer right through from bookkeeping, payroll, and even with our joint ventures. Now we can help people with financial planning or finance for example. I think it's pretty important that you just be consistent with it, get the specialists in, get the experts in, and over time you'll build up a vault of keywords on your own website and the internet's just so powerful these days. So I think statistically speaking, we would get about 30% of all our leads from SEO, Thomas. Just from the internet and over the many years now doing it, we'd get about 30% of our, of our leads from referrals. So from warm referrals. So that's a really good indication that you are servicing clients as well. Then you've got all the other aspects that you can do as well might be running workshops or seminars or webinars or podcasts wise. Entering is a great example of all the different things that we do in our marketing team as well. So hopefully that helps a bit.
Thomas Sphabmixay: Yeah, It definitely does, Jamie. You and Ed have both implemented this philosophy of marketing, especially in the context of how Wize approaches it to produce such an excellent outcome. You're not in a situation where you are, it's just become a whole other job for you. Now you have gotta come up with all these marketing ideas, you have to get your hands involved as well. You've built a deeper narrow team structure and you've made the most of the people that you've brought on your strategists and your production people. So thank you for that, Jamie.
It's really important to differentiate between marketing and sales and how you actually go about what it means to invest in your marketing. It's not just a bit of Google AdWords and a bit of Facebook Ads and maybe random social media posts. It's how we actually set up a nice and proper division and a nice proper marketing team that you can rely on to achieve an outcome. And as well as talking about marketing growth and then mergers and acquisitions.
We really want to make sure that we have our design, our recruitment, our extraordinary systems, and our foundation in place. Because one of the biggest roadblocks to marketing and the reason why so many firms start and stop it and start and stop it is that we started. It does produce a result. We are getting clients and then our production becomes the roadblock. It's got nothing to do with what we should be doing in the marketing. It's happening in our production or our back office.
So if you really want to be able to have a good time being able to, as Jamie, you rightly mentioned, being persistent and consistent is the key. It doesn't just mean waking up every morning and making sure we get onto the marketing. The firm has to have a good foundation so that when you go about your marketing, you're not going to be held back by your production.
Another analogy that I visualize a lot, as mentioned by Ed and Jamie is it's like a bowling ball and we're tapping it along and we're building up all this great momentum. All the social media posts, seminars, webinars, and newsletters are going out, the momentum is building up and then we have to stop it because our staff can't keep up or our systems can't keep up. Then we've lost all our momentum and we have to get it going again. It takes up so much more energy once order inertia is lost. You've put all this investment to be at the top of people's minds and now you're not there.
A really great point about the client approval meeting ~ yes, it's about showing the clients how much work you've put in, but that's really just another great opportunity to be able to present more of your own services and to discover more about the client. Because now they're sitting in front of you and have gone through a long journey, right? After getting their tax return done, collecting that information, answering that query, and now we're at the end of this journey.
The interaction is at its highest point. It's like a hot iron. Being able to use that opportunity to ask them about doing a Google review if they're satisfied and doing their client NPSs. You get the signing, paying, and telling them how much they get a refund or payable out of the way, and then here's a whole other door to be able to discover more.