It seems like growth is not a challenge for most accounting firms. For the past 10 years, most firms grew at rates of growth not typically achieved by professional service firms. With all the challenges we have faced, from COVID and work from home to staffing shortages, firms still found ways to improve their top lines and their bottom lines.
Even with economic uncertainty in our near-term future, all forecasts still look pretty good for CPA firms. With exceptional rates of growth likely in our future, I'd propose that now may be the best time of our professional careers to seek intentional growth.
Upon reflection, growth was easy. My question is this: Was your growth part of a well explored vision of where you wanted the firm to go and be known for, or was it merely more of the same old stuff? I'll define the same old stuff as the traditional bell curve where 10-20% of your clients may be exceptional, dare I say ideal. Between 60-80% of your new clients are your firm's classic bread-and-butter middle-of-the-road clients, with the remaining 10-20% being ones that you really wish you didn't have.
I will define intentional growth as the type of growth that materially moves the needle in terms of the long-term vision for the firm. Intentional growth can be broken down into components such as industry type, service offering, net realizable targets, niches or whatever other criteria your firm uses to rank clients, career tracks and staff satisfaction.
Unlike growth along the bell curve continuum, intentional growth is hard and takes a team effort. This effort is best led by a dynamic managing partner or the business development leader for the firm. It is harder to do for larger firms than for smaller firms, because to get running at full speed you really need buy-in from all of the partners, or at least all of those you see as a material part of the firm's brighter future.
Know where you're going
This starts with an exploration of who you want to be in five or 10 years. This vision is best built on the reality of today's best clients. Dreaming is OK here, but if the dreams stray too far from today's reality, you are gearing up for failure. For example, if your top 10 clients today all desire accounting and business planning services and generally pay your firm about $50,000 per year, it would be unrealistic to say that you want to work with clients who are looking for similar services but willing to pay $250,000 per year.
In short, I believe the best way to start getting CPAs, many of whom are non-visionaries, to investigate building a better future is to imagine their life and workday if all they had to do was interact with those top few clients that they truly adore. These are the clients that love you, appreciate what you do, ask for more of your time, never question invoices, pay their bills on time and love you so much that they want others that they care about to benefit from the terrific work that you do for them. These are the clients where you get up in the morning all fired up because you know that you'll be spending most of your day with them or working on their needs.
Realizing that the vision of an ideal client may differ from partner to partner can make this exercise much harder and more difficult to monitor. A skilled leader will work with each partner to help them with two objectives: First, to help them understand how they can up their game to get their vision of the ideal in line with the firms' bigger vision of what is ideal. Second will be how to help that partner transition their day-to-day utilization of staff and their time to manage their activities.
A third possibility is to redirect some partners' day-to-day activities to line up with leading the firm's division for less-than-ideal clients. Skillfully navigating your way to intentional growth does not include kicking your old C and D clients to the curb; it is designing a service model so those clients can also feel proud of the work that you do for them.
You couldn't afford to, nor do you want to, lose those relationships and revenue overnight. But the reality is that the composition of your C and D clients will also change over time, where today's middle-of-the-road client will eventually become one of your bottom 10-20% while you're implementing an intentional growth strategy.
Ultimately, however, a well-implemented, intentional growth strategy will involve discontinuing service for some clients. This is an area that doesn't sit well with many CPAs, and I've personally witnessed some very bad methods of doing this. My least favorite way is to raise your fees so much that clients themselves eventually realize they should make a change. To me, this feels disingenuous and disrespectful to your clients. Even though the fee-raising method of thinning the herd may increase profitability in the short term, you are not building good relationships when deploying this method.
Another lousy way is to simply send them a Dear John letter, and tell them that you will not be doing their work anymore and they need to find another firm. While this is better than bilking them out of usurious fees, it still doesn't sit well with me.
The best way to offload clients who no longer fit the profile of clients you want in your new ideal client profile strategy is to help them find a firm that can continue to deliver what they need. This may take some time, but I feel it is the most professional way to disengage with clients you otherwise had a good relationship with. The best way to do this may be to find one firm who can acquire all these clients. Not only might you get some cash for the sale, it will ensure a more orderly transition for your clients, who should appreciate your thoughtfulness and care for their ongoing service needs.
Improve your ideal
Now back to the vision of creating your firm of the future. It is best to now examine your ideal client relationships. What makes them ideal for the firm? Once you have the criteria that define an ideal client documented, test this reality and actually interview these best clients. Let them know they've been identified as one of the top clients for the firm, and that your firm is considering ways to enhance their services and then create a plan for the firm to only work for clients just like them.
Your interview with them is a sort of survey. You want to know what they like about your firm and what they'd like to see more of. Many firms will hire an outside firm for this part of the engagement. It can be very costly and time-consuming, but for me, it is the best way to define what your clients love the most about you and help to define your firm's ideal client.
What your best clients love about you can become the way to talk about the firm when meeting prospects that may want to receive those same services and feel good about their experience. The interview would also provide a glimpse into how you may go about finding more just like them. You want to know of any groups or trade associations that they also value or any other service providers that they consider critical for their success.
Many CPAs find it hard to believe the firm can actually build a steady stream of new A clients. This process is time-consuming and must be methodical. The hardest part may be rejecting prospective clients that do not meet your desired criteria — but that must be done.
In raw numbers, the first few years of an intentional growth strategy may actually deliver fewer new clients than the old "take anyone who can pay our bills" strategy. To simplify this part of the discussion, we must go back to the bell curve continuum of your existing client profile. Over the years, your annual growth also mirrored that bell curve where 10-20% were ideal, with the rest fitting the middle of the curve or the low end, which you really don't want at all. If that client flow was 100 per year, with 10-20 being ideal, under the new strategy your new client flow may drop to less than 30 in total.
But if all 30 are A clients and find that you fit the bill for precisely what they are looking for, you are on the right track. Your growth in terms of revenue growth will catch up quickly. In fact, it is possible that your growth in terms of revenue may be better in the first year of an intentional growth strategy than it was the prior year where clients all over the bell curve were admitted. Each year, your new A client acquisition will grow to the point that somewhere in your future you'll be back to the same flow of new clients per year, but they will all be ideal or very close to it.
