Last month we talked about the fact that workload compression is forcing us to change and modify our staffing models, but in many cases, we’re still barely making it through tax deadlines. As we come to grips with the fact that staffing will remain a key challenge for the foreseeable future, we’re forced to look elsewhere for solutions to making it through crunch periods.
It begs the question – are we simply trying to serve too many clients?
Most of our firms were not built to handle a high volume of low dollar clients, in fact quite the opposite. We built our firms to offer high value services to fewer higher paying clients. But along the way, we never culled the list, accepted too many clients out of our scope, and now we are serving too many clients at the lower end of the spectrum. It’s these “D” clients – not your “A” clients – that are bringing our firms to the breaking point at tax time.
The criteria for “D” clients ranges from low fees to low realization to chronically late to unethical to difficult to deal with. But let’s face it – you know who they are – identifying them is not the hard part. Rather, getting rid of them is the hard part!
Here are a few ways to separate yourself from “D” clients:
- Create a channel relationship with a smaller CPA firm or independent operator. While the client may be too small for you, it may be the perfect size for another firm.
- Raise fees to a point where they will leave on their own. Highly fee sensitive clients may walk on their own if you raise their fees. Feel free to have a discussion with your clients about the need to raise fees to maintain service levels. (While you do this, make sure to set a new higher minimum for new clients so you don’t perpetuate the problem.)
- Have a tough conversation about their bad “behavior” as a client and give them a chance to improve. If they don’t/can’t/won’t they won’t be surprised when you tell them in a year that we can no longer serve them.
Most firms that I work with on these types of initiatives usually restrict all “D” client firings to phone calls or face to face meetings. This creates even greater angst on the part of the partner, but these are usually long term relationships and a form letter or generic blanket email isn’t an adequate means of accomplishing the objective. If it makes you feel better, practice your discussion with a colleague to help you anticipate reactions and prepare responses. But remember, this is for the good of the firm, your valuable people, and ultimately for yourself. It’s kind of like the phrase “short-term pain for long-term gain.”
A good goal is 5% forced attrition annually. Not only will this make busy seasons less painful, but you’ll also be able to spend more time with your high value top clients. And those are the clients you built your firm to serve in the first place.