Too often, for accounting firms, a reduction in client numbers is seen as a sign of poor management and an impending fall in profit.
However, this is not necessarily the case; the Renew Methodology allows you to reduce both the hours you need to work and command premium pricing from high-value clients by terminating business with those who do not provide meaningful value to the firm.
These (often numerous) clients make up what Renew firms know as the Insanity Zone and only provide a small amount of revenue for what amounts to many hours of work, reducing the overall efficiency and potential profitability of the firm.
It doesn’t have to be this way!
Accountants Kicking Goals (Renew Clients, names changed)
Our client, Stuart, started the ReNew Your Accounting Firm program 8 months ago, and has since terminated 110 Insanity Zone clients which, despite only making up 8% of total revenue, required work on upwards of 140 tax returns every year. As a result, Stuart has been able to refocus his time and expertise on high-paying clients, allowing him to raise prices significantly across the board. Additionally, for larger business clients, the firm has increased prices to provide scope for tax strategy and planning with the time freed up from dropping so many 1040s. Now, Stuart no longer accepts individual tax clients (apart from a few family members and friends...but ONLY a few!) and has time to focus more on fewer clients that command premium pricing with a goal of averaging $10,000 per client. As Stuart puts it: “Smaller can be beautiful without the staffing and infrastructure worries." And, we would add, small can be very profitable as well.
Our client Dana has seen a substantial reduction in hours worked in her firm since she started with ReNew Group 10 months ago, with work being completed and clients providing files much faster than before. Dana has cut down on Insanity Zone clients and has been able to spend much less time on low-revenue tasks making the work more enjoyable for herself and her team and allowing ongoing clients an easier time working with the firm.
Another client, Matt, has seen an impressive 15% increase in recurring since starting with ReNew, while reducing 569 client engagements to 383. He now has room to take on more high-value clients, proving the power of reducing work from low-profit Insanity Zone clients.
Cutting back your clients should not beseen as a sign of failure. If you prune those holding you back, you can free uptime for both you and your high-value clients, allowing you to command premium pricing by providing focused, exceptional service that you may not otherwise have the opportunity to do. Remember, quality over quantity will win the day!
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:
Colin Dunn, a Chartered Accountant with extensive experience inthe accounting industry, is passionate about helping accountants transform their firms and lives. With over 25 years dedicated to creating content for to help CPAs improve their profitability, Colin shares valuable insights into optimizing firms’ client base for success. Colin believes that CPAs can create a better work-life balance by learning from past experiences and applying these insights to their firms, allowing them to spend more time with their families and pursuing hobbies and leisure interests.
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 Paretofor 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!