Jean Marie Caragher, the president of Capstone Marketing, talks about why getting rid of bad clients can make a difference when it comes to keeping good staff, and much more.
Transcription:
Dan Hood (00:04):
Welcome to a special edition of On the Air with Accounting Today. We're here recording live at Accounting Today's Firm Growth Forum in San Diego. We're very excited to have with us Jean Marie Caragher. She's the president of Capstone Marketing, which by the way, is celebrating its 25th anniversary of providing fantastic marketing advice and consulting to accounting firms of all across the profession. Jean, thanks for joining us.
Jean Marie Caragher (00:24):
Dan. Thank you so much for the invitation.
Dan Hood (00:26):
Yeah, we're excited this morning be before this recording, you were doing a session. You're talking about culling clients and both the importance of culling clients, but also the importance of retaining the right kinds of clients. And maybe we can talk about how do you determine who to call and who to keep?
Jean Marie Caragher (00:42):
Right. Well, Dan, it's a process. I'm always recommending firms analyze their client base so that they can make these decisions based upon solid evidence and not just a gut feeling. So we know that firms can PR report to their clients and they could look at what industry they're in, what fees they're paying, do they pay on time, what's the realization, you know, get the idea, the performance of those clients. And then to really analyze who are the top ones and who are the bottoms. So I use A through D. Okay, so we don't want too many levels here. So being the best D, being the lowest, and then really having a heart to heart discussion with your partner group about not write off who needs to go, but what can we do to improve the level these clients are at. So how can we take some of these D clients and make them see clients?
Dan Hood (01:40):
Gotcha. Does that happen much? I'm always curious about it because a lot of firms will just, it's an either or, right? You keep or you kill, right? Not kill, keep or call. Let's, sorry, I got a little, that was a little Freudian there, but is that possible to really, to move people up from
Jean Marie Caragher (01:55):
It is levels it, especially when we are talking about the 10 40 practice. My first advice is how would the situation improve if those clients paid more money? So what if you that some firms have a minimum required fee, others don't, but ask yourself, if you were to raise the fee on these clients to whatever that level is, would that improve the situation? Would that make the relationship better? But don't do, don't raise the fee on your worst clients that you really do want to fire off in stage one. Right? Because those are the clients that even if you're generating more revenue from them, the situation is not going to be any better. You're not going to like them any better. They're not going to be easier to work with.
Dan Hood (02:46):
One of their key characteristics is obliviousness, right? So they're not going to get that the hint.
Jean Marie Caragher (02:50):
Exactly. They're not listening to the CPA's advice. They're not on time, they're not doing any of those things that they really need to be doing.
Dan Hood (02:57):
Alright, I, well see. I want dive more deeply into the firing clients because there's a visceral satisfaction to it and we're going to do that. But before we do that, let's be a little more positive and talk about client, the clients you want to keep and the client retention. Maybe talk about some tactics for client retention.
Jean Marie Caragher (03:10):
Yes. So we can't talk about firing clients or transitioning clients out without having the conversation about client retention because client retention is the foundation. Because if you're not retaining clients, any business that you bring in is just replacing what you've lost. Merry-go-round, if you will. True growth is going to come from client retention and then adding on newer clients and keeping those best clients. So that's the foundation of everything. Excellent.
Dan Hood (03:42):
Alright. I want to talk a little bit more about client retention before we take the satisfying thing going and how you going to get rid of those, the losers. But we're going to take a quick break before we do that. Alright. And we're back. We're talking with Gene Marie Cariger of Capstone Marketing. We were talking about the importance of client retention. Obviously as you said, it's a platform, you can't really have strong growth if you, you're not keeping your good client base. But there's also a role that you talked about of client retention in staff retention, which we know obviously is a huge issue for accounting firms. Huge. Maybe you can talk a little bit about the role of client retention there.
Jean Marie Caragher (04:18):
Oh boy. Because we can't get away from this staffing crisis. When I asked that this morning, all the heads are nodding up and down that, and I've only had one firm ever tell me that no, we're all staffed up, we're good to go. And I've told them they're the only firm in America who could say that because everybody else is looking for people. That's
Dan Hood (04:35):
Where all the accountants are. Does this firm have a 6 million people? They're just, oh gosh, they're hiring everybody.
Jean Marie Caragher (04:41):
It's an interesting situation there. But when we think about client retention and staff retention, since we have such a staffing crisis, your firm really needs to have those clients that are fun to work with, that they listen to the advice they're given, they are on time, they're organized it, there's that enjoyment. I made the joke earlier that when you see that caller ID and you see it, who it is, and you're like, oh no. Right? Do I really need to answer that call or could I just let it go to voicemail? And in the days now when truly people can work for anyone from anywhere, it's really important to have the best clients on board who are going to challenge your people and to be fun to work with.
Dan Hood (05:35):
Well, and the interesting thing is because I think firms have begun to understand maybe earlier than the importance of client retention to staff retention, they've understood the value of staff retention to client retention, that they know that oftentimes clients say whenever there's a big change, they say, well, does this mean I'll be working with somebody different? Or does this mean my team will be different or will I still be talking to Bob? And so clients viscerally understand to having the same staff members working with them over time. Absolutely. Firms don't necessarily see the reverse value. Right,
Jean Marie Caragher (06:03):
Exactly. And this also I need to make a pitch for nicheing, and that's been mentioned a couple times already. Sure. That is nicheing the most effective strategy to grow a firm that there is. And nicheing also can play a role in determining which clients to keep and which clients to transition out. Because you can use building niche strength as part of that scenario.
Dan Hood (06:32):
Excellent. All right. We've been positive enough. I want to fire some clients. I want to get rid of some people. I got a lot of long list. What are some of your best advice for tactics for going about that? Obviously I don't want to hurt anybody. I don't want to, I don't really, really want to kill them, but both of the best ways to go about, okay,
Jean Marie Caragher (06:52):
So the first one we already covered is send the, raise the fee letter to those clients who you feel that would improve the situation if you generated more money from them. The next move would be trying to get your declines to be seized, seized to be bs. Now, I know Alan just said no D clients are always D clients, not true. D clients can be C clients and you can do different things with that. You know, can change up the time of year when you do the work. You can change out some staff, you can charge them more. So when you're approaching this, it's not looking at the list and saying, okay, who are we getting rid of without trying to do anything else before that. And then if those efforts don't work the next cycle around the next year around, you have to take another look at that and say, you know what? The situation is not improved. It's time to transition them out. So we'd recommend that, you know, could start that dialogue in person or via phone, but clarify that in a written letter. And that's not a negotiation. That's the decision being made excellent, but in the most polite, professional way possible, sending the letter by certified mail. So you have a record that the client has gotten a letter and five months later they're not telling you, you're not doing my work. I never got that letter. And
Dan Hood (08:19):
More importantly, they're not suing you because the tax return to get file
Jean Marie Caragher (08:22):
Yes is right. It's very late. Yes. So you want that evidence of the certified letter and then be as cooperative as possible in the transition of transitioning files and whatever else needs to happen.
Dan Hood (08:37):
Yeah. Let me jump in here real quick. Just a quick question because I was curious about the transition. You talked to some people and say, I kind of want to make sure they land somewhere and then talk to other people who are like, I don't care and I don't care. My gut figure is always, I don't care. I want to fire them anyways. But do you feel people have firms have a responsibility to help client land
Jean Marie Caragher (08:56):
Somewhere? Yes. Thank you, Dan. I do. I think to help make the process go as smoothly as it can, if a firm knows one or two or maybe three other firms in the market who are reputable, who they may have a relationship with, they know the players there that they can recommend to the clients that they're transitioning out. I think that helps a lot. The only exception to that are the clients who are the deli who are not going anywhere. And you're transitioning out immediately who the really troublesomes, I would not recommend to another firm. Gotcha. No one would appreciate that. But I would recommend you're
Dan Hood (09:37):
Doing it all at once. You never have to worry about it. Again,
Jean Marie Caragher (09:41):
I would recommend they're contacting their local chamber of commerce or other business organizations where they have CPAs as members to give them a start. Gotcha.
Dan Hood (09:51):
That is all disappointingly professional. It's very professional and it's the way a good business should be. Right? You're right. It's not as viscerally satisfying as screaming into the phone. They're tired. Can they just do that for one client? Just maybe one out of 20? Alright. No.
Jean Marie Caragher (10:06):
Oh, why not? Yeah,
Dan Hood (10:07):
There you go. There you go. Pick that decline that you're not going to recommend to another firm. But while we're talking about, I mean, don't mean that all makes sense. As I said, it's sort of disappointingly professional. It is what a well-run business should do. But what are the challenges? Cause people have been talking about firing clients for years, and we know that. I will should say, we should point out that during your session when you asked everybody if they had fired a car, most people said that they had, which was fantastic, which means the message is getting through, but it's still a lot of firms. What are the challenges they're seeing? What's holding 'em back?
Jean Marie Caragher (10:37):
So in my surveying attendees of this workshop, the top two challenges that always come to the top are they don't want to offend a client. They don't want to disappoint a client, and they are concerned about generating the new revenue to replace the revenue that they're transitioning out. Gotcha.
Dan Hood (11:00):
I do not, I am not worried about offending them. So that's fine. I'm good on that. But the revenue thing is fascinating because yes, and it speaks to sort of a broader issue that a lot of accounting firms have is that the revenue is the, and obviously no one's suggesting the revenue is not important, but there's a degree to which more firms are saying, it seems that more firms are saying there's a quality of life issue and a quality of practice issues. Like I'd rather have a little less money and better clients. I'd rather work with people who are exciting and interesting and whose businesses I want to see grow as opposed to just anybody who can sign a check. I know obviously no one wants to be poor, no one wants to go have their business run into the crowd, but there should be seems like more people willing to make a little bit of a trade off or to try it at least to risk it,
Jean Marie Caragher (11:37):
Right? Yes, I would agree with that. The other way I look at it is the firms that are worried about replacing the revenue are not implementing a consistent marketing program. Otherwise they would have prospects in the pipeline, they would be doing their networking and whatever other components of a marketing point that they are comfortable and effective doing. They are in the position where if they transfer business out, they have lost revenue and they don't know quite when they're going to be able to replace it.
Dan Hood (12:13):
That makes sense. No, right. Because in that sense it's important to think this is the firing. Well, retention is a separate issue. Protection's important for everybody. The firing is only one half of it. The other half of it's bringing on more of the better clients, bringing on more a-level clients.
Jean Marie Caragher (12:27):
Absolutely. Yeah. So I always encourage firms to have that description of their ideal client. So look at the client base, which of the clients you really love to work with, what industry are they in, how big are they? Like what similarities do they have? And that's the picture that you want to have, not only internal for your own people, but when you're talking to your referral sources, they want to refer business to you when they can and you're going to get better leads when you're very specific about the types of leads that you want. Right.
Dan Hood (12:57):
Excellent. Ari, with that I think is our big takeaways. Have a strong idea of who you want to work with and keep that in front of you at all time and it'll make it easier to get rid of the old ones and obviously stay professional and be nice and don't be terrible, but mostly keep that I that a client in mind. Excellent.
Jean Marie Caragher (13:14):
Yes, absolutely.
Dan Hood (13:15):
All right, gene, thank you so much. This was great, Dan.
Jean Marie Caragher (13:18):
It was awesome.
Dan Hood (13:18):
Thank you. All right, Jean Marie Caragher of Capstone Marketing. Thank you all for listening. This podcast was produced by Accounting Today with audio production by Kellie Malone. Ready to review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. I want to thank again our guest, Jean, and thank you all for listening.