The 'Smart Client Management' model

Darren Root, chief strategist at Right Networks, offers a new framework for executing on your firm's business model — if you have one.

Transcription:
Dan Hood (00:02):

Welcome to On the Air with Accounting Today, I'm editor-in-chief Dan Hood. Just about every aspect of how accounting firms are run — from marketing and HR to IT, and recruiting and retention has been professionalized over the past 20 years or so, but it's only of late that firms have begun to focus on really bringing the client experience into the 21st century.

Here to talk about that movement and about the smart client management philosophy that he's envisioned to further it is Darren Root. He's the chief strategist of Right Networks and both a practitioner himself and a long-time, and highly-sought-after consultant and teacher to accounting firms. Darren, thanks for joining us.

Darren Root (00:33):

Dan. It's great to be here. Thanks for having me.

Dan Hood (00:35):

Yeah, I'm looking forward to this conversation. How don't we start maybe with a quick overview of what smart client management is.

Darren Root (00:43):

Probably the simplest way to think about this as is the daily active management or execution of your business model. A lot of firms have business models, but they don't necessarily execute on the business model. So smart client management is the daily active execution on that.

Dan Hood (01:04):

Gotcha. All right. So why is it, when you put it that way, it's easy to imagine this is important at all times. Why are we, haven't we been talking about it before? Why are we talking about it now? Why is it a big deal at this point?

Darren Root (01:17):

I feel like post pandemic if we can say that I feel like firms, or I'm seeing firms really struggling to do business as usual and moving in into this new environment. Firms have to do something to change or to execute on a business model that's sustainable. And I say that because staff and potential staff are pushing back on the traditional business model. It's not sustainable. So there is a new sustainable business model, but if you don't actively manage to that, you end up with the same old thing.

Dan Hood (01:55):

And I'm gonna go ahead and say this. I can say this, you can tell me I'm wrong, but it seems like the previous business model for a lot of firms had been clients show up. We don't really know how they kind of show up, and then we do a lot of work for 'em. And that's kind of our model. And then we bill them and sometimes they pay the bill. And that's how it works. There isn't really, the model isn't, that isn't maybe sophisticated as it should be or as intentional, and maybe that's a better way to put it. It's not as intentional as it should be. And it sounds from what we've, I know a little bit about the smart client management, and I know that at the start of it is an in-depth review of your business model and your strategy. What should that look like and what do they need to do to really create, to put in place a business model as opposed to the default business model? A lot of people who've been using for a while,

Darren Root (02:40):

I would start with, I define business model, at least from my perspective as who you want to serve, figuring out who that is what you want to sell them, and then how you want to deliver that. So if you think of who, what, and how smart client management is, the daily execution of who, what, and how. Most firms, to your point, Dan, just check new calls into the system and they move on to the next one. And so there's no real business model to it. If somebody needs something, you react to that, you check it into the system and you go on. What I find happens with firms is they end up with too much of the wrong kind of work, and that creates pressure on the organization. When I say the wrong kind of work, I mean people think that tax returns are a great thing and tax returns in the right quantity can be awesome, but tax returns in too much quantity is a challenge.

(03:39)
But to kind of go back to what smart client management is, in my mind, I think it works best with an example here, Dan. But imagine you have an optometry client, you've just picked up an optometry client. The idea and what that client wants from you is being holistically served, however you define that. So holistically serving them is making sure they're using the right technologies. Maybe it's maximizing the credit card use so that they're maximizing points or rewards. It's making sure they have the right retirement plan, the right health savings account. I mean, whatever holistic means, a firm should take the time to define that up front. We should know what that is. And holistically serving an optometrist versus a dentist versus a doc or somebody else is not vastly different. But the KPIs may be different. There are some differentiations. So once you have a picture of who you want to serve, create a picture of what it means to holistically serve them, then the whole goal is to figure out where you're at with that client at any given point in time. And to me, advisory services, Dan is filling those gaps. It's saying, Oh, this is what holistic means. My client is over here. There's all these products in between. That is advisory services. And if you have the right data, you can be proactive in delivering those services. That make sense? Yep,

Dan Hood (05:10):

Yep. Well, let me just to clarify to make sure I understand, is holistic service, is that a part of smart client management? I mean, because some firms would say, Well, I just wanna do this one service for, as you say, optometry clients, I just wanna handle their billing. Cause whatever the reporting from insurance companies for visual insurance is weird. And I, I'm making this up. I dunno that, but I'm good at that and that's all I wanna do is can that be smart client management or do you really wanna expand it out to fill in those gaps?

Darren Root (05:41):

Well, I think holistic D depends on the firm that you are. Let's say you're a bookkeeping firm, Holistic may just be holistically bookkeeping for that particular client. So define that an all in service that you want to provide and how you should be providing that, and then figure out what the gaps are from what you're currently doing and try to fill those.

Dan Hood (06:01):

Gotcha. So

Darren Root (06:02):

There's so much revenue in between where a client is at and where they should be.

Dan Hood (06:07):

Yeah, <laugh>, no question. Well, and as you say, that is what advisory services are all about. It's finding those gaps and filling them and oftentimes those are things the client doesn't even know about, which is why they're gonna be valuable services. So there's a fair amount of self assessment there. Should you be doing that based on your desires, your firm's desires, capabilities? Or should you be looking out at the market or however you want? Or is it just the main thing is to go out and look and identify the right client, the who, what now?

Darren Root (06:37):

Well, I mean, think it starts with the kind of clients you like to serve. I mean, I practiced for 35 years, and when the person that answered the phone at the office pinged me and said, Hey, we have a prospect on the phone, I kind of knew who I wanted that to be. In my case, I wanted it to be a service based business maybe a professional physician, optometrist, dentist, that sort of thing. So just identifying who it is you want to be on the other end of that call, whether it's a tax client or a bus, an SMB client. And then what it is it that you want them to be asking you for. Maybe they just wanna know how you can help them. And then you need to be ready to explain that. Right. But I think it all starts with, well back up just a second. Before the pandemic, we had a learning center in Indianapolis and we brought hundreds and hundreds of firms to that learning center. I

Dan Hood (07:36):

Was there,

Darren Root (07:37):

It was great. And I would ask firms, What percentage of your clients would you consider ideal clients of clients that you have? And it was funny, Dan, it was always less than 50%. Most of the time it was closer to 25%. And I could never figure out for the life of me why you wanted to come to the office every day and serve 75% of the people that are not great customers for you. Right? Cause there's so much demand. It feels to me, and correct me if you think I'm wrong, but it feels like there's so much demand out there for services right now. Cause everybody's busy. Why not make the effort to have a hundred percent ideal clients? Even if you go from 25% to 75%, that significant job?

Dan Hood (08:20):

Definitely. Well, but it starts with that sort of self examination of who is the ideal client. And I think to your point when people answer the phone now, they don't have what you have had in mind, which was, Hey, here's who I'd like to work with. And or even if they did, it never occurred to them to say, Well, I'll just say no to them if they're not that client. Accountants, and this is one of the great things about accountants, is that they wanna help. They wanna solve problems. You bring 'em a problem, even as a problem. They don't like solving and they don't like, that's what they wanna do is fix things and help people out.

Darren Root (08:50):

I think the challenge today is that staffing, as you well know, is a major issue in the profession. You can't solve everybody's problems with a limited number of staff. So you better figure out with the team that you have and the resources that you have whose problems you really wanna solve, right? Because if you burn out the limited people that you're able to find today, the problem just keeps getting worse.

Dan Hood (09:16):

Excellent. All right. So is that's a big chunk of it, is identifying the what and how you want, who you wanna work with, how you wanna help them and how you're gonna do that. That's pretty crucial. I wanna talk more about the other elements of smart client management but we have to take a quick, Before we do though, I just thought this is a great point. I always think that it's some point someone is going to make a huge fortune by being the person who's willing to serve all the jerks that no one else wants to work with. <laugh> somebody somewhere has gotta be like, Yeah, I don't mind dealing with jerks. I don't mind being yelled at or having calls at all out hours or feeling my soul's been sucked outta my body. Every time they call, I'll just put up with it and they'll be able to make a gazillion dollars, a huge fortune. They'll be desperately unhappy, but it's a great business

Darren Root (09:56):

Opportunity. You're probably right, <laugh>.

Dan Hood (09:59):

Well, let's think about that while we take a quick break. All right. And we're back with Darren Root of Right Networks, and we're talking about smart client management, and we've identified just, we can call it the first step in it, which is knowing who you wanna work with, how you wanna work with them setting up your ideal client and understanding your own business model and who you wanna wanna be part of that. What can we talk about services? We talked a little bit about how you're gonna offer services. How do you make sure you got the right mix? How important is the right mix of services to

Darren Root (10:28):

This? Yeah, I think the mix is critical. The challenge with most firms that I run across right now, Dan, is that they're too heavily weighted in busy season. So tax season is too big of a burden and tax season. In the old days, it felt like we were kind of done on April 15th for a little while. But today it feels like it goes to October 15th and you got a couple months and then you start the process all over again. And so right now, product mix is critical. And most firms that I run across wanna mix that can be 12 months a year and is not so deadline driven. And so if you can create that mix that's not incredibly deadline driven, you can figure out what you're really good at doing. I mean, I was terrible as a practitioner working with construction clients or inventory type clients or manufacturing clients, but I used to have all those kind of clients at one point cuz I was chucking 'em in the system.

(11:30)
Today our practice is a hundred percent service based businesses. Cuz I mean, whether you're a dentist or you're a public speaker, differences are, I mean, they're both service based businesses, both fairly consistent in the way you serve them. But you have to figure that out. You have to figure out who it is that you really want to serve. That doesn't mean that you're gonna go fire all the clients that are not ideal clients right now but it does mean that you're not gonna take on a new non-deal client and you're gonna work towards weeding out over time the clients that are not ideal. I think that's really the first step, Dan. Yeah,

Dan Hood (12:07):

Well I think that's a crucial point, right? The notion that, yeah, you don't have to fire all those, the other 75% of your current client roster that you don't like working with and that'll pay your bills. But you can start now in going forward. And then also slowly weed them out. They'll retire, they'll die, they'll get acquired and hopefully they'll take care of that problem for you. But yeah, setting that boundary going forward is important. There's a role here for technology. Maybe we can talk about what that looks like.

Darren Root (12:33):

Yeah, I think as we think about this daily execution of your business model, anybody listening to us that's run an accounting firm would say, Duh. Yeah, I know what that makes a lot of sense. But the challenge is everybody in the firm is really busy and nobody is doing this. So what you have to do is identify somebody in your firm, and depending on the size of your firm, it may be more than one person, but somebody has to become what I call a smart client manager, Dan, which means that they get up every single day trying to make sure that that optometry practice is being holistically served. And one of those pieces is certainly getting clients into the right technology stack and getting in the right technology stack means that you have to actually pick the technology stack that you want to use. Again, it goes back to what, Well, when you think about who and how, it goes back to how, So if I wanna serve optometry clients, how do I want to serve them? You know, pick that tech stack. Then you have to identify what technology is the client is currently using. And then somebody has to get up every day with the notion they're going to help transition those clients to the right stack. And that's really the <laugh> special sauce here is that somebody's actually executing daily on the business model.

Dan Hood (13:55):

It's not just a question of you going in every month and going, I wish you would really switch to this system. Right? Someone's, someone's gotta be out there evangelizing it and implementing it. I'm assuming, would that be part of that? Being able to implement those systems for people?

Darren Root (14:08):

It's not like firms today don't know what technology stack they would like their clients to use, but I guarantee you, Dan, if I went into a firm, any firm right now and said, How many clients do you have on qbo? They would see, I don't know how many people still give you a backup QB file. I don't know the answer to that either. How many people are on bill.com? I don't know. So nobody knows anything. It's because it's not data that they paid in the attention to what we need is somebody that gets up every day paying attention to all that stuff.

Dan Hood (14:39):

Gotcha. Well, it sounds like, let's expand that idea. If you've got someone whose job it is to pay attention to that stuff, is the team of people involved in smart client management, is that gonna look different from the people you've or the team look different from the team you currently have handling engagements? Are you gonna rearrange your staff internally a little bit around this?

Darren Root (14:59):

I think this is a role. So the question is, I think is it a full time role? I guess that depends on the size of the firm, but I do think the team gets rearranged a little bit around this. I think that whether have a daily stand in your team, which is a 15 minute meeting every Monday morning to talk about what clients need or you have a staff meeting every week or two, but your smart client manager needs to be running these meetings. They need to be saying, Hey, we have this client giving us a QuickBooks backup file. We need to make sure we get them moved to QBO by this time next meeting. Whose responsibility is that on the team? Is it the client manager? Is it the customer service manager? Who is that based on the way you have your firm structure set up? But somebody needs to be paying attention to that in the meeting and they need to be delegating those tasks. Otherwise nothing changes.

Dan Hood (15:56):

Gotcha. All right. Well let me go through this to make sure I've got the who, what, and how all set up. Who is identifying your ideal client? What is identifying the right service mix to make sure they get what they need, that you're holistically serving them based on how you wanna serve them? And then how is right, getting the technology in place, getting the people and the systems as well, the people to manage those, the technology and those systems. Is that, have we touched on all the major elements of smart client management?

Darren Root (16:22):

You have, but the thing that I think that's worth noting, Dan, is if we think of the the things that we want to sell, what we call those services, I call 'em products. So let's say I wanna sell client accounting services plus payroll. That me is a product that we sell inside the firm. I should have a presentation. Some people would call that sales material, but I just call it education material. So it's a presentation, maybe it's four slides, maybe it's five slides in PowerPoint that talks about what the service is like, how you deliver it, what tools you use. So when the client calls up, you're operating off that slide, same slide deck for that product every time. If you identify all the products that you want to sell in a product, if you go back to that optometry practice, I think of it of as the optometrist in the middle with all the services that make up of the holistically serving that client.

(17:20)
So let's say it's client accounting services, it's payroll, it's the 401k, it's the health savings account, it's using qbo and whatever those things are. One of those things become a product. And you should have a presentation tied to every single one of those or the way you package those things. And then all of a sudden you've got sort of a turnkey thing, Dan, I mean, you who you wanna serve, you, you know what you're selling them. You got a presentation for each one of those. And that goes all the way to the proposal, let's say. Right? So it gets signed off on. So when the next person calls, it's like, I mean, it's just like a system. It just happens

Dan Hood (17:57):

So well on that. Scalability, they talk about it a lot with cast, right? The importance of standardization of processes and systems. Cause it also means that if you've got those presentations, you don't have to be the only one in your firm who goes out and sells

Darren Root (18:07):

Them

Dan Hood (18:08):

Or sells them, educates about them. However we hate, don't wanna use the S word in front of accounts. Excellent. Right. Well, we could probably talk about this a lot more, but we're almost up against time. Any final thoughts you would give people as they look at smart client management and now why they should adopt it or how they should adopt it? Or maybe a first step they should take?

Darren Root (18:29):

I think the reason to be thinking about this is the practices that we've created in the past are not sustainable in the future. Something has to change. And that's the impetus here. Things have changed. Clients want to be holistically served and your team, so your client list is one of your most valuable assets in your firm, but your teams the other most valuable asset and they both want something different than they've had in the past. And that's the reason for smart client management.

Dan Hood (18:56):

There you go. All right. They want it. Firms need to figure out how and wait, I missed it, What and how. I've already got them all out of order cuz I'm going with the news of why, when and where but I will get the other one. Right. That's awesome. All right, Darren Root of Right Networks. Thank you so much for joining

Darren Root (19:15):

Us. Thanks Dan.

Dan Hood (19:16):

And thank you all for listening. This episode of On The Air was produced by Accounting Today. Read or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest and thank you for listening.