Go to the NEW FORUM
I get a lot inquiries from CPA's asking about what they can do to grow their practice. My first question to them is always, "Are you already servicing your current clients as best you can?" The response is always a resounding YES! So then I follow that up with this question, "So on average, what are you billing per year per client?" The usual answer is somewhere between $1,000 and $1,500 for business clients and somewhere around $200 to $300 for personal tax clients.
What comes next usually shocks the CPA because the next words out of my mouth are, "So what you're telling me is that you don't believe in providing the best possible service to your clients. Because if you did, you would be billing between $5,000 and $10,000 per year for your business clients and $500 or more per year on the personal clients."
Sounds harsh right? Well not really when I break it down for them. You see, I know their business model so well that I can tell by how much they are billing their clients how well they are servicing them. In fact, I believe if you are just doing the basics for your clients and not providing them with everything that they need, you are in fact providing a disservice to them. This leads me to the 3 Biggest Dangers Facing CPA Firms Globally!
Danger #1: My clients only need the basic services
If you truly believe this you are either delusional or you truly don't know what your clients need. Either way, that's not good. First you need to understand what services your clients could use and what you can provide. Most CPA Firms that I deal with only provide about 6 or 8 services to their clients when I meet them. 6 to 8 months into our relationship they have over 40 services that they provide to their clients. Now not every client uses every service, but on average most clients will use between 8 and 10 of my clients services versus the traditional 1 to 2 services from the average CPA Firm.
Here's why my CPA clients are able to provide 8 to 10 services per client. This may sound overly simple, but they understand their clients' needs and recommend solutions to their clients on a quarterly basis and do this by literally diagnosing what their needs are and prescribing these services almost like a doctor would for a patient. You see, you the CPA are the expert in your field and YOU know what a client needs and WHY they need it. So they need your leadership and expertise to guide them. Instead of thinking about what the service costs to provide, you have to think about what benefits your client will get from the service and what this is worth financially and mentally to them.
Danger #2: My clients can't afford more than what they are already paying
The first mistake here is believing that your services are just an expense to your clients. You have to understand how your services are an investment into their business. That is if you are servicing them properly. Think of it this way... Your services need to be self-funding. What does that mean? You need your services to provide enough value to them to pay for themselves.
Here's a quick example. After reviewing a clients P & L, I noticed that they had 5 loans in their business all related to their building but with different banks and different interest rates. I also knew from their balance sheet that they had 70% equity in their building and land. All these loans amounted to just over $12,000 per month. I asked them what their CPA thought of this and they said he had never brought it up. So we sat down together and in the span of an hour found 3 banks willing to consolidate the loans, reduce the rates, and get them under $8,000 per month. They invested $3,600 with me to help guide them through this process and the return to them was $4,000 per month for the next 20 years (the length of the loan). That's without interest savings. That's $960,000 over the life of the loan.
So get this, I took it another step with this client and showed them how they could reinvest that $4,000 a month into paying off the debt faster and partly into improvements into the business that would double the business.
So how much was this service worth to them? Well, if you are keeping track $960,000 without even touching the business. It was worth double that when we paid down the debt in half the time and doubled their business.
This is the worst part of that story. After we started this process I asked their accountant if he offered these services. He said, yes. I asked why he never offered them to this client and he said, "They couldn't afford it." Needless to say, he isn't their accountant anymore.
Now not every client has a hidden pot of gold like this, but many could use and would pay for a service that really guided them in their business. You have to ask, "What do each of my clients need?" And then you have to provide them with it.
Danger #3: I don't have the time to service them
This is usually the first thing CPA's tell me when I start talking about servicing their clients better. You see most businesses in general don't appreciate or care for their current client base like they do about new clients. So most businesses (including CPA Firms) are spending 80% of their "Free" time marketing for new clients. What they don't see is the cost of that. And by the way, what you invest most of your time toward is what you care about most. Just ask any child how they spell love... They spell love - T-I-M-E...
You see it's as much as 9 times more expensive to get a new client as it is to service your current clients better.
Here's an example... First, you need to know how much time it takes networking to get a new client. Let's assume for this example that you are really good at networking and for every 4 hours of networking you can get 1 new client. That's a pretty good ratio. And let's say that this client bills out at $1,000 per year. That means you are generating $250 per hour in revenues. For the sake of this we won't get into the real cost of the networking, your added travel time, etc. This could add another 2 or more hours to this.
Now, what if you on a weekly basis, revived 5 client files for 5 minutes each and selected services that would greatly benefit their business and gave each one a call (roughly 10 to 15 minutes each) to go over the value of doing this? We know from tons of research studies by the Harvard School of Business that current clients are 80% more likely to add-on more services than brand new clients who don't know you. So let's say 4 out of 5 say yes to an extra $250 worth of service. That's $1,000 in services for less than 2 hours of your time. And there's no drive time, no networking fees, and no lost productivity. That's $500 in revenues per hour you invest in this method.
The beauty of this is that you could replace the 4 hours of networking with this method and significantly increase your business. And if you look hard enough you can find several other 1 hour slots per DAY that you could invest in this method. Whereas networking can usually only be done once or twice a week due to availability. And you can't control when people call you on your ads. BUT you CAN CONTROL how often you call your current clients. So my advice is to block out an hour a day to this method and between April 15th and December 15th block out 2 to 4 hours a day doing this.
The numbers don't lie!
So let's look real quick at a small accounting firm and what this would do for them. This firm has 750 individual tax clients at an average of $300 per year and 200 business clients at $1,500 per year in services. Now we come in and systematically and professionally show them how to increase individual tax clients to $400 per year and the business clients to an AVERAGE of $5,000 per year. That would generate an additional $75,000 in revenues from the individual tax clients. You would have to add 250 new tax clients to generate that kind of return.
Let's look at the business clients now. These numbers would generate an additional $700,000 in revenues for the business. It would take adding over 460 new business clients at your old rate to produce this!
Here's the best part!
When you serve them better, your clients will stay longer and refer you more business. This gets into the lifetime value of the client and drastically explodes your business.
One more thing before I sign off...
Because most CPA firms only operate at 20 to 40% capacity outside of tax season, they have PLENTY of TIME to service these clients for all of those added services. So that means the MARGINS are MUCH greater on these added services. That translates into more money in your pocket as an owner and the ability to pay your people more and get and keep the very BEST people. It gives any CPA the makings of an unstoppable business in any economic climate.
Traditional accounting firms are in my opinion, on the decline. With the advances in software and technology, many people can now do their own bookkeeping and managing their finances. So this has left many accounting firms just doing taxes and a few odd jobs for their best customers. This article is about the dangers facing CPA/Accounting firms and what they can do about these dangers to not only grow, but thrive! Online CPA Services
Extremely useful information.Thank you and best of luck for future! Lords Exchange new id