Why Relying On Referrals Is Killing Your Accounting Firm

“What marketing do you do to get new clients?”

“I don’t, all my business comes from word of mouth and referrals.”

When I ask accountants and bookkeepers how they get new leads and clients the answer is more often than not referrals.
I worry about the industry for this reason.

I totally understand the attraction of getting clients in this way, it means that you think you don’t have to invest time and money into doing any marketing, but this thinking is wrong.

Don’t get me wrong, I am a HUGE advocate for referral marketing. In fact, at the agency one of our tag lines is get remembered, recommended and referred. We see the value in referrals. But you cannot rely on referrals alone.
And there are other challenges with relying on referral only: 

Wrong Fit

You have an ideal client. Hopefully you will know who your ideal client is. The problem with referrals is you have no control over who you attract to your accounting firm. If you get a referral from a current client, you may be put in the position where you have to take them on. Chances are if they are not a good fit then you have just accepted a bad client. You will not be happy, and quite possibly neither will they. 

Referral By Chance

Unless you have set up a proper referral system, referral channels and a referral team the chances are the consistency of new leads will fluctuate. Odds are that you are only being asked for when it’s tax return season. The problem with this is you are at your busiest. Your quiet times will not see many referrals as you are not front of mind during the quiet periods. 

Running Out Of Referrals

You are good at math. So let’s do it regarding referrals. Each person that refers you has a certain number of friends/people they influence. Eventually the referral well will run dry as peoples sphere of influence crosses over. The Universe isn’t large enough to sustain you in the long term, and you will need to reach out to new people that haven’t heard of you before. 

Advances In Your Industry

Your industry is changing at a rate of knots. Where one accountant used to be the same as another accountant, and the differentiating factor was relationships, this is no longer the case.
Accounting firms need to think of themselves like every other business out there. Which means they need to niche, differentiate themselves and provide huge value to a prospect, before anyone will buy from them.
With changes in the industry, accountants can no longer rely on referrals. Clients will want more than just a good relationship. They will want advice, Cloud Accounting expertise, insights and an accountant that is their trusted advisor. If you are just number crunching the referrals will dry up, and your client acquisition model will break. 

Referred Clients No Longer Just Trust The Referrer

Bob runs a plumbing firm. He has been running his firm for 3 years and his accountant hasn’t been giving him the care and service that he wants. He decides to ask his good friend Darcy, who runs the local florist, if she knows anyone who can help him:
Bob: “Do you know a good accountant?”
Darcy: “Yes, you need to speak with Sam of ABC Accountants, he will look after you”
Bob calls Sam:
Sam: ”Hello, ABC Accountants”
Bob: “ Hello Sam? Darcy has recommended I speak with you about having my year end accounts completed. Are you able to do them for me?”
Sam: “ Yes…..”

That is how it used to work. Now it works like this:

Bob: “Do you know a good accountant?”
Darcy: “Yes, you need to speak with Sam of ABC Accountants, he will look after you”

Bob runs off and checks out the ABC Accountants out of date website. He finds no Facebook page, can’t connect to with them on LinkedIn and when he Googles ABC Accountants he can’t find his website or any social proof online, all that comes up is the Companies House registration details. Bob does not feel secure about using ABC Accountants even though Darcy recommended them.

Bob then decides to Google “Accountants that specialise in plumbing businesses”.

He decides to ask on his LinkedIn profile if his connections can recommend anyone.

He asks in the local Facebook group also.

After a couple of days Bob has nearly a hundred recommendations for accountants, as his friends and connections have shared their advice on his social media. Now he has too much choice, and has to start sifting through the options.

Bob is frustrated so starts devouring accounting blogs dedicated to his industry. He finds one company that provides lots of information about how Plumbers can make more profit and pay less tax. This accountant is called Niche Accountants UK.

He decides to download their free eBook and he immediately gets a message offering a free 30-minute consultation. This company isn’t local to him, but he decides to book a Skype call and see what they have to say.

And his relationship with Niche Accountants UK starts.

Bob already knows that they can help him as they specialise in his industry.
He already has an idea on how they can save him money as he has read their ebook “How to save tax in your plumbing business using these three ideas”.

He knows what the person looks like that he is going to speak with as he has seen them on YouTube.
 Bob understands what working with them will be like as they have given case studies on how they have helped previous plumbers.

Bob is excited about doing business with this company. He confidently signs up with them, even though they are more expensive than his current accountant. He knows that they will look after him.

Bob is happy. 

And that is why solely relying on referral marketing to grow your accounting practice is bad for business.

Even if you want to solely rely on referrals you still need to have marketing in place to back up the referral process. People purchase services differently to how they used to. Which means you need to market your business and have a different buyers journey, compared to how you used to.