Lee Frederiksen, Hinge
On some level, we all realize that accounting firms are not like retail or product-based businesses – their success is based on expertise, relationships, and trust. Because of that, their marketing has to be different.
To find out what works for successful accounting firms – what they spend on marketing and where – AAM and the Hinge Research Institute conducted our third benchmark study of marketing spending and organic growth among 84 accounting firms with revenue ranging from $1 million to more than $100 million (Fig. 1). Almost half of those companies have revenues of less than $10 million, while slightly more than half pull in between $10-30 million (10 percent of which earn more than $30 million annually).
The firms surveyed were spread out over a wide range of marketplaces – approximately two-thirds were located in metropolitan areas while slightly more than one-third were in what could be considered rural or small-town markets (Fig. 2).
We asked participants to complete detailed worksheets, allocating dollar amounts to a standardized set of spending categories. Additionally, participants were asked to identify categories that they believe required increased spending.
The average marketing spend for firms that include employee compensation in their marketing budget was a little less than five percent (4.58 percent) of their annual revenue. When you exclude marketing staff compensation, firms spent an average of just under three percent (2.92 percent) of their gross annual income.
The Top Ten marketing expenses
While the survey included two dozen different marketing expense categories, we have shown the top ten that garnered the greatest investment. They are shown in Figure 3.
Interestingly, the categories in which accounting firms spent the greatest portion of their annual marketing budgets (sponsorships and charitable giving) were among the ones that they felt delivered the least results.
Return on effort
In past research, we learned impactful marketing could be achieved without significant dollar investment. Some impactful marketing techniques require more of a time investment. To test this finding, we asked respondents to rate the effort expended and the impact received for each marketing technique. Return on effort was calculated by taking the difference between effort invested and impact received.
According to the survey, the top four marketing techniques that provided a negative return on effort were, in order:
- Charitable giving
- Internal firm events/parties
- Direct mail
The techniques that provided the greatest return on effort were:
- Outside consultants, agencies, or freelancers
- Website expenses and search engine optimization
- Email marketing
- Marketing automation/customer relationship management and other software
What makes these results even more interesting is the cost involved. Marketing techniques with a negative return on effort accounted for 25 percent of firm marketing expenses. On the other hand, marketing techniques with the highest return accounted for less than 15 percent of their respective budgets. In short, there is a significant underinvestment in the most effective and impactful marketing techniques.
What high-growth firms do well
What we learned from this survey is that many – if not most – accounting firms spend their limited marketing budgets on the wrong techniques. High growth firms spend more of their marketing money on techniques that improve their functionality, help them showcase their expertise, and build visibility in meaningful ways – creating what we call Visible Experts in their organizations.
So where do high-growth accounting firms spend more of their marketing budgets? Here are the top seven marketing expenditures for the most successful accounting firms:
- Online advertising
- Networking events, trade shows, and conferences
- Content creation
- Educational events/Outside consultants, agencies, or freelancers
- Marketing automation
- Internal education and training
What do high-growth firms spend less on? Things that, at first blush, might look and feel good, but yield little result:
- Marketing materials
- Memberships & dues
- Internal events & parties
Effective marketing for professional services such as accounting firms is less about expense and more about impact. High growth accounting firms do not waste their time and money on traditional but ineffective marketing techniques such as sponsorships and charitable giving. That does not mean you should not give to worthy causes – of course you should, just do not do it as part of your marketing budget and expect significant results from it.
Instead, focus on the marketing techniques that build value for your firm by highlighting your areas of expertise and help you establish thought leadership in your market. As prospects come to recognize your expertise and ability to provide value to their businesses, they will be more likely to engage in a dialog with you. That, in turn, will provide you with opportunities to prove your worth and secure another new client.