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How does a partner move up the value chain and spend less time on prospective clients that aren’t a fit for the firm?

A hot topic that is brought up quite frequently is “How does a partner move up the value chain and spend less time on prospective clients that aren’t a fit for the firm?”

Let’s address each matter separately.

*Moving up the Value Chain. My interpretation of this is, “How do I work with higher value/bigger clients?” It is simple. As a part of your Pareto analysis, it is imperative that you assign every client in your firm a “Client Manager.” The assignment can be based on service, industry and revenue. The Client Manager is responsible for Client Service, Communication and Profitability related to the Client. It is critically important that you send the Client a note and let them know who their Client Manager is and what role they play. This is analogous to the Loan Officer who gets promoted to Bank Manager and lets you know he/she will no longer be your first point of contact but he/she will be there for you as needed.

*Prospective Client Triage. I recommend that you have your “Director of Operations” handle the first touch so that he/she becomes proficient at directing the prospect to the right place in your firm.

Here are some sample questions your DOO could ask:

We value your time. To ensure the highest quality service, we would like to connect you with the best person to assist you in our firm. Is it okay if I ask you a few questions? Also, please note our minimum price for individuals is $500 and businesses is $1000. Have your DOO pause….i.e. if they hang up on you know they aren’t a great fit for your firm.

*How did you hear about us?
*Are you an individual or business?
*If a business: How long have you been in business?
*Who is your current CPA? If they aren’t currently using a CPA, the likely next step is not a Partner.
*Why are you contacting us today?

These simple questions, if handled appropriately, will help your firm leverage its resources more effectively!

Lastly, here is a firm in San Jose, CA that asks its prospects to complete questionnaires prior to a meeting. Please have a look.

Happy Prospecting!

Don’t let underperforming clients drain time, energy, and profits from you and your team!

Firms are focused on assessing how they are ending the year financially and how next year is going to look.  One key variable in the assessment to help determine where your firm is (and where you are going) is to perform a Pareto Analysis.  I’m surprised at how many firms DO NOT perform the analysis.

Let’s start out with a few definitions:

Underperforming clients: Clients that are below your target average hourly charge rate ($175 is a good number to target) or Gross Profit Percentage (75%).  Please note that high realization doesn’t mean profitable.  It means high realization.  Put another way, if your charge rates are low relative to the cost of your labor you could still have high realization and generate very little profit.  Many firms utilize much of their capacity servicing clients with high fees but low profitability (as measured by Average Hourly Charge Rate or Gross Profit).

Best clients: Clients where you are achieving your target average hourly charge rate/Gross Profit or higher.  The clients provide you and your team with challenging work, value what you do, they are growing and refer more business (like them) to you.

Our suggestion is you perform a Pareto Analysis (smart guy check him out on Wikipedia) to see where you are generating above average profit and where you are “just busy.” Please don’t confuse busy with profitable (many firms do).

Here’s how you do it:

Export your client list with respective Revenue, Profit, Cost and Average Hourly Charge Rate and sort away.

Shannon Vincent ReNew Group LLC

The Power of the Pareto Analysis

The premise is simple, 20% of your clients generate 80% of your profits.  Sometimes the numbers are astonishing. Two recent cases come to mind – 2% of revenue coming from 49% of clients. And, another way of looking at things in a separate firm, 2% of revenue generated by 270 clients! The problem is, the true cost of servicing those lower priced clients is almost always higher than you think. In most firms we find it’s around 30/70.  Nonetheless, still a sizeable number that has all kinds of business model implications.  Business model implications meaning clients drive costs (including driving qualified team members out of the profession).

You will find it very enlightening to view your firm in this way. It’s always eye opening to see that some clients are generating $300 per hour and others $100.  The question is why and what can you do about it?

The next step is to start looking at ways to upgrade your clients.  We personally aren’t big advocates of firing clients straight away.  We believe you should give them a chance to stay with the firm on your terms.  As an aside, we find far too many firms let their clients dictate the terms of the relationship.

Further, Partners should only be handling A and B class clients. In most cases if A class clients are being properly serviced they will realize at least $25K in fees each year. So you should limit to around 20 A class clients per partner.

Incidentally, when you are talking with potential A class clients (who may be either existing B class clients or brand new clients to the firm) partners have found it very helpful to position themselves well by indicating that ‘I only work with a small number of clients in this intensive way at any point in time and I am very particular about who I take on.’

Pareto in Action

Here are the key numbers of a Partner in a firm we work with:

500 # of Clients

118 # of Clients with a Gross Profit of greater than 70%

The result of having a number of underperforming clients is you have made a choice to have increased overhead (team members to support the clients) and working increased hours for less profit.  The opportunity cost is less time to pursue better clients, spend time with A clients or spend time on leisure activities.

As explained, the Pareto is a very powerful exercise to perform and action with your team.  The worst thing that can happen is you find out where you are making money?  Isn’t that what you should be doing as an accountant after all?


The best people to ask about your performance are your team

Stop the madness! How not to repeat last tax season

How are you making your Firm its #1 Client?

Hello.  I presented a webinar to a group of firms last week which included a polling question asking them to respond to the question about which Profit Driver they need to focus on the most.

Interestingly, 60% (Wow!)of the firms responded we need to work on Making our Firm the #1 Client, which leads me to a question for you and your firm as you think about and prepare for next tax season:

  • What practices are you employing that are Making the Firm the #1 Client?
  • What practices are you employing that are NOT Making the Firm the #1 Client?

As a reminder, the best people to ask are your team members!

Related article: Stop the madness! How NOT to repeat last tax season!

Considering if an industry speaker can enhance your business in 2014?

Already thinking about 2014?

Wondering if an industry speaker might add value to your business planning process?

Accounting industry speaker and recognized expert Shannon Vincent at work

ReNew Group delivers industry topics which are relevant and timely to CPA firms.

Often an external speaker who is a recognized industry expert can deliver information with fresh eyes and provide insights that you don’t normally have when running a firm on a day-to-day basis.

To that end, we’d appreciate if you could let us know your budgeting and planning requirements for external speakers – either short or long format presentations – in 2014?

If there is a formalized process to which we need to submit information in advance, do let us know as we’d be grateful of the opportunity to apply.  Read More…

Stop the madness! How NOT to repeat last tax season!

Time to put a stop to tax season madness!

Time to put a stop to tax season madness!

4/15 and 9/15 have been some of the most stressful in years for tax practitioners.

To get on top of that, we know many firms who held tax season debriefs to get some things off their chests and develop actionable items around the issues of clients, technology, team and creating value.

Thinking about the forthcoming tax season, one of the matters to focus on is how CPA firms allocate their time in a way that reflects their values, strengths and vision for their life and firm, and examining if they might be holding onto old ways of thinking, or doing business that limits their abilities.

Thankfully, there are some questions that CPAs can ask now

This is not intended to be an all-inclusive list, but will get the conversation moving and help determine how your firm might be better equipped:  Read More…

Adapting to and methodically embracing technology

Technology will continue to displace jobs and if we want to excel we need to continue to adapt and methodically embrace!

Technology continues to displace jobs. If we want to excel we need to continue to adapt and methodically embrace it!

I attended the Xero conference in San Francisco last week and a number of firm leaders have gone back to their firms gung-ho to implement!

However, what they are finding is resistance from their team members (sometimes this is disguised as “our clients won’t like it.”)

My suggestion is to take one small step back and make change a core value or core competency in your firm.  Read More…

Thought about priority vs time management to focus on the right things?

Priority management trumps time management for focusing on the right things.

This is what I often hear at this time of year:

“I can’t get it all done.”

“I can’t get anything done.”

“The day seems to slip away.”

The issue is NOT time management.  The issue is priority management.  You don’t want to get more done.  You want to get more of the right things done.  Priority management trumps time management.  We all have 24 hours in the day.  We choose to do different things with the time.

What does it mean?  We need to focus on the right things.  Read More…

It’s Summer! To avoid the Summer Doldrums we need to engage our people

Hello.  I am re-reading a great book (and one that I recommend) by Dan Ariely (James B. Duke Professor of Psychology and Behavioral Economics at Duke University),  Predictably Irrational.

predictably irrationalThe book is about decision making (behavior and economics).  Ariely has some very powerful examples on Price Anchoring and Price Relativity that I will share on our August call.  Ariely also has a free course which a CPA/CFO friend of mine has taken and said it is very good.

Finally, Ariely’s work led me to an interesting (TEDTalk) he did titled “What Makes Us Feel Good About our Work”.

Ariely has, not surprisingly, some very relevant findings about what makes us more productive and happier at work which is the reason for my post.  I believe his themes below are very consistent with our ongoing dialogue about how to engage our team members at more productive and higher levels. Read More…

Technology, labor supply and attitude shift impacts accounting firms and the roles people play

Technology, supply of labor, and a shift in traditional attitudes has dramatically impacted the accounting firm and, most importantly, the roles people play at all levels.

Accounting firms do more with less meaning at all levels accountants do varied things from varied locations. People do their work from home, the office, client sites and the coffee shop.

NICA suits

The new world of a flat accounting firm, along with a rapidly changing business climate, punishes fixed skills and rewards flexible ones. What those in accounting firms do stretches across functional boundaries including client service, sales, project management and workflow driven almost exclusively with technology.

In short, everyone in a firm must do everything. Read More…

4 Major Milestone Shifts

Many practitioners and partners experience a seminal moment as they move towards 50 or shortly thereafter where four major shirts occur

  1. time fliesYou realize your time on earth is finite! That is, you have had many successes, made many mistakes and for someone who ‘feels’ their time is finite you know there are some things that have to change! The sense of urgency you have been waiting for (or avoiding) has finally arrived.
  2. You have not made enough money. For the hours, stress and risk have endured you think you would be making more money. You have held onto that underperforming team member too long, held on to too many small clients, a good client went bankrupt or it always seemed like this year was going to be your breakthrough year. Did not happen. Read More…