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Pruning your client base for success

February 15, 2023
Too often, for accounting firms, cutting back on clients is seen as a sign of poormanagement and impending falls in profit. However, this is not necessarily the case.
Colin Dunn

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 be seen as a sign of failure. If you prune those holding you back, you can free up time 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!

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