The last year has been unexpected, unprecedented and unpredictable. On top of the loss and personal stress experienced by so many, it has also been a period of rapid market change, requiring businesses to adapt and evolve without a clear roadmap.
This is why for the 5th time, the Association for Accounting Marketing (AAM) joined forces with the Hinge Research Institute to conduct the industry’s most comprehensive study on CPA marketing budgets. The 2021-2022 AAM Marketing Budget Benchmark Study outlines industry benchmarks for marketing spending and provides a special section on the spending behavior of the fastest growing accounting firms.
The timing of this study allows accounting marketers to see the many ways these changes have impacted the industry. But perhaps even more importantly, it also allows us to learn what is and is not working in this new marketplace. While many firms struggled, others innovated and found new pathways to success. We can learn from both.
Key Findings of the Study
This study sampled 140 CPA firms representing over 23,000 employees and a combined revenue of over $6.7 billion. Outlined below are some of the key findings of the research which can be read about in further detail in the reports Executive Summary. The full report is available for purchase on the AAM website here.
The COVID-19 pandemic had an unexpected positive impact on 45% of firms.
The COVID-19 pandemic affected firms in a wide variety of ways. And while almost one-third of accounting firms experienced negative impacts, a greater proportion (45.3%) actually benefited from the situation.
Those that saw positive impacts adjusted their service offerings (Payroll Protection Plan support was a popular addition) and took advantage of remote work and new technologies to gain leverage.
The top negative impacts center around the loss of in-person meetings and events and their corresponding affect on business development and company management.
Innovation flourished as 85% of firms experimented with new marketing and BD initiatives.
The waves of uncertainty that dominated most of 2020 led most accounting marketers to innovate and rapidly change their strategies. According to the research, 85% of firms experimented with new marketing and business development initiatives in 2020.
Some of the most successful strategies involved shifting to digital marketing channels, such as webinars and virtual events. Others included pivoting to a focus on new services that address high-priority client needs, such as PPP loan assistance. The complete list of successful strategies are available in the full research report.
Marketing budgets doubled in a two year period.
Accounting firms aren’t just innovating in their approach to business development and marketing… They are also spending more. While greatly impacted by firm size and the nature of services offered, the average marketing spend, including staff compensation, doubled from 1.5% to 3.0% of firm revenue since the last study. On average, firms grew their top line revenue by an impressive 10%.
High Growth firms outpace their peers by a wide margin.
One of the primary contributions of this study is its focus on the fastest growing firms and their particular spending behavior. In the case of this study, we define “High Growth” firms as those that achieved an average annual growth rate in roughly the top 25% of participating firms. And in this year’s study, we observe an astonishing 31.9% growth rate for the High Growth firms.
High Growth firms are investing more in marketing resources.
When it comes to the High Growth firms, where do they spend their additional marketing dollars? Well one area is in the recruitment and retainment of more marketing staff.
High Growth firms have one marketing resource for every 26 employees. In the slower growing firms, it’s approximately 45 employees for every marketing person. This gives High Growth firms an advantage when implementing complex or more specialized marketing programs. Undoubtedly, larger teams are able to concentrate on more marketing techniques while also making room to dive deeper into certain areas that work best for them.
One survey participant noted that, “Marketing has become more front and center of our Partner’s day to day, increasing their need for more online BD and allowing me to grow our team.” Increased investment into more marketing staff appears to be a boon for High Growth firms.
High Growth firms also devote a greater proportion of their marketing budget to digital techniques.
When we break down the overall marketing budgets, a clear pattern emerges. Compared to the last budget benchmark report, Average and Low/No Growth firms increased their spending on digital techniques. High Growth firms, however, also increased their spending on digital techniques by a similar amount, so they continue to outspend their slower growing peers on digital marketing.
Another survey participant commented the following: “Recognizing the fast changing environment at the start of the pandemic, our firm created and/or modified several strategies and marketing programs. Education is a cornerstone to our firm’s ability to market and develop connections with new clients through live events, and as a result of the pandemic we established a purely digital online platform that continued providing learning opportunities for our clients/prospects.”
High Growth Firms not only spend a greater proportion of their budget on digital techniques, they also spend less on some widely used traditional techniques.
When we examine the top 10 marketing expenses for High Growth firms (the complete list of marketing technique usage is available in the full research report), we notice the use of outside resources to supplement their internal marketing talent comes in first. You may recall that High Growth firms also have a greater ratio of in-house talent, so clearly having access to the right skill sets—inside or out—is a high priority with these fast growing firms.
Besides the obvious tilt toward digital, also note the value High Growth firms placed on education and training. The Low/No Growth firms trail in these vital investments into their people while tending to overspend in categories like sponsorships, print advertising, networking events, and direct mail campaigns.
In a time of historic adversity—when confronted by the mind-bending challenges of a marketplace turned upside down overnight—two out of three accounting firms were able to adapt and even thrive. Many added timely and lucrative new services to help beleaguered businesses, such as Paycheck Protection Program assistance. And all were forced to find creative ways to develop new business and deliver services in a social-distanced world. Change, like the virus itself, was in the air.
Of course, a third of accounting firms fared less well. To them, this study should be a revelation. It details specific ways firms have adjusted to a radically changed world—and provides a roadmap they can follow to growth and profitability. And to the three quarters of firms that attained average or below-average growth, the high-growth data provide a similar blueprint to achieve exceptional financial performance.
Every firm can emerge from this experience stronger and wiser than before. This study provides a clear path forward.
Purchase the full research report on the AAM website here!
Download the free Executive Summary of the 2021-2022 AAM Marketing Budget Benchmark Study here.