Not long ago, I celebrated a milestone birthday with my wife at a fantastic resort with a Michelin-rated restaurant. It was so much more than just a place to sleep and eat. They did everything — and I mean everything — right, and we were happy to pay a much higher fee than we would at other places. The experience was amazing! While there, I had one of those rare “come to Jesus” moments: I started reflecting on my work and my practice, and how I can make them better. Is it possible to create the CPA firm version of this A+ resort?
It was at that moment I decided to change my practice. I wanted a business that was an A+ practice. The first thing I did was talk to my staff, explain my vision and make sure they were on board. I am excited to report that everyone was enthusiastic about the new direction and still are.
Next, I started making a list of all the things I needed to change to get to that A+ point. One of the top items on the list was my client base. I wanted to change the perception of my practice from one that just does tax returns because someone needed one done to a firm that only does tax returns for people that want us to prepare them. You don't go to the hot new restaurant in town because you are hungry; you go because you want to be a part of something and take part in what others are deeming the best. Even though it may cost more, you want that service and experience; I want to be the accounting firm version of that cool new restaurant.
Guess what? You can’t have a bunch of B, C, D or even F clients if you want to be an A+ practice. The all-too-common scenario in accounting firms is that we are too scared to fire bad clients who take up a lot of our time, and therefore we do not have enough time to focus on the work needed by our great clients.
I knew what I had to do. I had to go where few CPAs had gone before; I had to "fire" my clients. Yes, I was scared and nervous, and I didn't know what they would say or even what I would say, but if I wanted to get to where I wanted to go, I had to do it.
As I shared this plan with colleagues, they looked at me like I had three heads. "What are you going to do if you can't find more work?" "What is your staff going to do?" "Do your other partners know?" "What if you fire a bad client today that could be a great client in the future?" I get it. There was no guarantee, but I had to trust myself, as well as my staff, and commit to my decision.
My first step was to identify clients that had to go, and a friend helped me develop a way to classify my clients. On a pad of paper next to my phone, I made three vertical columns:
1. Transition.
2. Fire.
3. Raise rates.
As I worked over the next couple of weeks, I placed specific clients into one of the columns. Clients in the "Transition" column would be moved to a younger staff member. Clients in the "Fire" column would be shifted to another firm. Clients in the "Raise rates" column would start getting billed at a higher rate at which point they would decide if they wanted to stay or go. I also looked at how long clients took to pay, if there was any chance of growth, or if they were becoming a risk. Note, these are not "bad" people or clients. They are great people; they just did not fit what I wanted my practice to be in the future.
Near the end of the year, I looked at my columns and decided to make some phone calls. As I was putting together this plan, many people told me that I didn't have time to make all these calls and to just send an email instead. I thought that was like breaking up with someone via email or text, and how awful I would feel if that happened to me. So I stuck with my original plan and started calling each client. I positioned these conversations so they were all about the client and truthful. I told them that my role had changed with the new tax laws, and I was focusing on a different area with the firm and transitioning to work with our larger client base. I shared how this shift was an excellent opportunity for me, and as I was not getting any younger, this was something I wanted to explore. I told them that with this change, I would not have as much time for them, my rate was going up, and I didn't want to bill them more and give them less. I let them know how much I appreciated all our years of working together, and while this decision was not easy, I thought this was the best move for both them and me.
So, with my heart beating out of my chest like a cartoon character, I made the first call. You know what? The client could not have been nicer; they congratulated me, thanked me for all my service, and most of all, they were appreciative of the fact I took the time to call and not send an email. They asked if they owed me any money. They then asked for a referral, and we talked about what would be best for them going forward. It was like hearing your obituary before you die; they were terrific, which made it a little harder. It made me realize how lucky I am to have clients who respect me and the work we do at the firm. Let's face it, when you work with someone for many years, they are not just clients but become friends.
Now fast-forward a year. I was talking to the friend who helped me develop the category plan, and he asked how the first year went, and if I could see a difference in my practice. I thought about and said the most significant benefits so far were:
- My A clients were starving for my attention, so I was able to see them more, involve my staff further, and provide added services.
- Since I spend more time with my A clients, they make more referrals. Seven of my last 10 referrals had come from my A clients — not from attorneys, bankers or other referral sources, but the top clients I was servicing.
- My revenue went up as I was only working on those clients that paid full rates on time, so I was no longer writing off time.
- My collections came in faster.
- My staff was happier, as they worked on the A clients more and enjoyed the challenges instead of some of the more cookie-cutter work.
Now I go through my list each year and try to transition out the old clients that do not fit and focus more time on the clients I want to work with, consistently working towards the goal of an A+ practice. I now look back at this learning experience as one of the best decisions I ever made, and I enjoy my work so much more.
