Linking pipeline and portfolio management to avoid strategic drift

Posted on: August 26, 2010

Unlike lawyers who rarely have repeat business, accountants have portfolios of work – a large proportion of which is ongoing compliance work (e.g. audits) and a smaller amount which is ad-hoc advisory work. Of course, some accountants – such as those working in the corporate finance arena – will have a large transactional element where they share similar challenges to lawyers in business development.

Interestingly, when an accountant is first admitted to partnership, usually the other partners in the team will allocate some of their “repeat” work to the new partner to get him or her started and then allow them a period of time to build up their portfolio to a level comparable to established partners.

Because a new partner has a blank sheet he or she has to have a good marketing strategy and create some focus for their business development efforts – typically this is through the selection of a particular market sector such as biotechnology, green energy, property or leisure. Sometimes it is a technical area. Then they create – often with the help of a marketing expert, sometimes by themselves through trial and error – a campaign of activities that gets them into the right place to meet the right sort of people. Thus they start making contacts.

New partners then have to work very hard at managing all the contacts they make – grading them for importance, estimating the likely amount of fee income (or referrals) that they might generate at some point and even assessing, based on the needs and motivation, when the contact is likely to convert into a client. As the sales cycle can be long – particularly for audit work – they have to develop good systems to keep track of all their contacts, manage how they invest time in developing each relationship and prompting them to undertake the appropriate follow up actions at the relevant time. Thus they generate a pipeline of prospects – some of which are much nearer to converting than others – and which must be managed carefully if the target level of fees a couple of years down the line is to be achieved.

Established partners often do not have the same need or motivation to generate new contacts for the start of their pipeline. Typically, if they are good, they will have a regular flow of referrals from a handful of relationships with some key referrers (such as lawyers and bankers) and existing satisfied clients. Whilst this is good in some regards as it reduces the time they have to invest in generating new contacts and prospects it can have some negative results. First, the nature of the clients and work may start to become very similar and the partner’s portfolio can start to drift into an area that the partner hasn’t necessarily chosen and which may not be the most interesting or profitable work. Second, through natural attrition, the number of referrers and existing clients will gradually decline leading to a point in time where there is insufficient work to sustain the level of fee or profit growth that the partner requires.

The established partner is then faced with the question of how to generate new prospects. Typically, he or she will have a rather diverse portfolio at this stage and it may feel uncomfortable to draw out just one or two elements on which to focus – in much the same way as the new partner does – in order to be effective at raising profile and generating new prospects. But the established partner has to allocate some time to putting new prospects into his or her pipeline in the same way as a new partner and to develop a system to managing the process.

A confident, established partner will use the annual allocation of “smaller” clients and accounts to new partners as an opportunity to take a fresh look at his or her overall portfolio, guard against strategic drift, think about potential areas of focus or niche and set some targets for new prospect generation to maintain a healthy pipeline of work and a strategically balanced portfolio.

So when an accountant starts linking pipeline and portfolio management they can reach a balance where they devote sufficient time to nurturing existing clients and referral sources and some time to generating new contacts that will become prospects and eventually convert to clients.

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