As business owners, we all know the importance of pricing and pruning for the growth of our company.
These topics have been a major part of our conversations lately, and we've come across some valuable takeaways that we want to share with you.
First and foremost, it's important to set clear goals and begin with the end in mind.
Take some time to envision what you want your business to look like in the next three years. This will give you a clear direction and help you make better decisions when it comes to pricing and pruning.
It's also crucial to have clarity on what you want, what you don't want, and why you are making the changes you are making. This will not only help you stay focused but also help you communicate your vision to your team and clients.
One of the benefits of having a smaller client base is that it reduces the amount of email, calls, and information that you have to deal with, leading to more sanity. However, it's important to be mindful of the type of clients you take on, especially friends and family. We've seen firms take on too many of these clients, which results in a lot of additional work during tax season.
Moreover, be sure to be aware of the danger zone, where firms create services for clients that don't fit their model, resulting in a loss for everyone. Instead, focus on incremental steps and next steps to upgrade your client base.
Keeping an eye on the numbers is crucial for the growth of your firm. Pay attention to the monthly recurring revenue (MRR), revenue per professional, labor as a percentage of revenue, average price per client, and average charge rate. Trading dollars to pay for under-performing team members is not sustainable in the long run. Remember, revenue is vanity, and profit is sanity.
Identifying friction points in your business can help you make improvements that will save you time and money in the long run. For example, if you notice that you're spending too much time on administrative tasks, consider hiring an administrative assistant to free up your time for more important tasks.
Finally, it's essential to dictate the terms of the client relationship. As service providers, we often allow clients to dictate the terms, but this can lead to a lot of frustration and resentment. Instead, set clear expectations and boundaries from the beginning to avoid any misunderstandings.
Remember that each firm runs its race, and there is no one-size-fits-all approach to pricing and pruning. Use these takeaways as a guide, but don't be afraid to tailor them to fit your unique needs and circumstances.
Happy Thanksgiving!
Taking Action:
If you're interested in more insights like these, consider signing up for our Renewsletter: https://www.renewgroup.com/newsletter. Alternatively, if you'd like to discuss your CPA firm's specific needs, feel free to schedule a call with us: https://www.renewgroup.com/contact.
About the Author:
Shannon Vincent has dedicated his entire career to working with accountants in various capacities. He has consulted with Top 100 firms to Sole Practitioners, helping them create sustainable and profitable businesses. A member of the California Society of CPAs, he received a Bachelor’s Degree in Economics with an emphasis in accounting from University of California, Santa Barbara, and now resides in the San Francisco Bay Area. Shannon is passionate about helping accounting firms refine their business models to generate better results into the future.
About Renew Group:
Are you tired of being on the diet but not seeing results? Most consultants to the CPA Profession do lots of talking and deal in 'fluff'. But there's no accountability and no focus on RESULTS.
At Renew, we start with your numbers. Our firms complete a Pareto for Profit analysis EVERY YEAR, set new targets to improve their profitability and then 'weigh in' regularly. We give you a roadmap to transform the profitability of your accounting firm by accessing our content, collaborating with other firms on a similar path and being held accountable by our coaching team and your peers.
Get paid what you're worth, create a better life based on a scalable business model and eliminate tax season insanity once and for all!