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Many CPA firm partners hesitate to boost the firm's spending on marketing on two grounds: that the firm is growing anyway (and thus, no more marketing is "needed") and it is too hard to identify and measure the return on the marketing investment.

AOMAR disagrees with both of these theories. As we have frequently discussed, marketing is important for a number of reasons even when the firm is growing. And, you can—and should—be measuring ROI for marketing expenditures, just as you do with any other expense of your firm in operating the practice.

As a matter of fact, there are many ways to put a dollar figure on the effectiveness of your firm's investment in marketing and business development. And these methods are helpful in all walks of professional services firms.

Measure right. However, the firms that are measuring nowadays tend to take the easy way out, notes law firm consultant Suzanne Lowe of Expertise Marketing. Only 23% of respondents to a survey calculated a monetary ROI from their promotional vehicles, according to Lowe's online newsletter, The Marketplace Master. "Most of them were measuring only the initial and most easily trackable cash outlays," Lowe wrote.

Another problem is that firms often measure the wrong outcomes. As marketing consultant Janet Sanders, Ph.D., president of The Clayton Consulting Group, Inc. (Innsbrook, MO), explained at a recent industry meeting, "Sales is the wrong outcome. You need to measure value—the kind of good business that brings in revenue, profit, referrals, repetition, and reputation."

Focus on business acquisition. Sanders defines marketing as "everything done to get work until the client asks for something" and sales as "everything done to get work after the client requests something." She also lumps both activities into the category of "business acquisition" (or BA).

"Firms must measure BA costs and outcomes as specifically as possible internally in order to be managed efficiently and effectively," says Sanders. She proposed a number of ways for firms to identify and track real BA costs, measure BA outcomes and link with BA activities, and develop better comparative measurements of market/client share and client value.

Identify and track real BA costs. Sanders proposes a "two buckets and a trough" way of determining costs.

First, you divide all costs into two buckets: doing work and selling work. If something (e.g., the electric bill) doesn't fit into either category, then it goes in a trough. Whatever is in the trough then gets divided up between the two buckets. For example, you might decide to put 70% of the electric bill into the doing-work bucket and 30% into the selling-work bucket.

"The more you can track all kinds of marketing activities, the better you can market," she told attendees. "You can come up with data to show how you're doing and what you can do better."

She recommends setting up the following categories of BA activities: visibility, referrals, lead finding, lead qualifying, information gathering, client cultivation (including meetings and entertainment), planning and strategizing, submitting, and debriefing.

Define and detail your desired outcomes. Define such things as repeat clients, overall revenue, fees billed and realized, and profit before and after taxes. "You need to measure consistently all these things by lead/project if possible, client if necessary, and job type as a last resort across the firm and over time from the point you hear about the job," Sanders explained. "Only then can you measure if all your marketing efforts were worthwhile."

Measure BA costs and outcomes to find BA effectiveness and efficiency. "To determine what it costs your firm to market, you can quantify cost-to-revenue or cost-to-profit ratios," Sanders says. However, she cautions, "don't worry about the rest of the industry. What's important is to work with your firm's definitions of marketing and compare them year-by-year. Then the firm can tweak BA costs and activities for optimal results." Another ratio that may be helpful is what Sanders called the bucket ratio: selling to doing. "You may want to use that to achieve a better balance between the two."

Sanders recommends setting up a BA plan with specific goals, such as, "Get 10 leads producing at least one new matter from attending two trade shows."

Develop comparative measures to determine market/client share and client value. To determine the value of each client, you can quantify the profit produced in relation to BA costs, and you can compare the BA costs of one client to other clients'.

Additional ways to measure the value of clients are by the number of referrals and jobs the referrals produce, the length of the cycle from lead to contract, and the frequency with which clients purchase your services.

This article was originally published in IOMA's monthly newsletter, Accounting Office Management & Administration Report, and is republished here with the express written permission of IOMA, Copyright(c) 2006. For more information, visit www.ioma.com or for copyright permissions please call 212-576-8747 or email content@ioma.com.