By making a few tweaks to how your practice operates, you can improve profitability — and possibly your life, too!
This article was originally published by the Virginia Society of CPAs in the Disclosure Magazine
Finding staff feels impossible, and yet it’s the best time ever to own a CPA practice. We realize this could be counter intuitive. Our prediction is that this challenge will put CPAs on a path to find solutions that end up transforming their firms for the better.
The accounting industry is not currently flooded with new graduates ready to sit for the CPA Exam. Pay for many staff accountants, while rising, is still considerably lower than fields like coding, cybersecurity, engineering, or other STEM-related fields. As someone in their early career, would you not choose to pivot to earn more and work less?
CPAs are also leaving the profession in high numbers. This is the bad news.
The good news is that you are in a high-demand service. Supply is very low and people need assistance with complex tax and accounting issues now more than ever, so demand is high. From a purely economic perspective, when industries experience an imbalance of supply and demand, the suppliers experience windfall profits. Philosophically this is not a bad thing. The higher profits then attract more people into that industry. This needs to happen for the long-term health of public accounting. It’s a natural market signal to attract resources. Don’t feel guilty by employing tactics that improve your bottom line. It benefits everyone in the profession, from the owner to the newly graduated staff accountants.
The industry is changing and the staff aren’t out there — so the solutions are with you. Reducing your workload and focusing your practice is the path we’ve seen provide significant capacity improvements as well as improved profitability. This creates a positive upward spiral where improved profitability enables firms to offer higher pay and better hours, which further helps attract new staff and improve retention.
Here are four powerful strategies to help you create capacity.
- Analyze and prune your client list.
Where are you dedicating time, effort and money within your current list that is not benefitting your team and overall business? Review your service mix as well as individual clients within each segment.
Many firm owners consider themselves a “one-stop-shop.” They may be doing primarily business returns, maybe bookkeeping and advisory, but they also do individual returns and some compilations and maybe even some audits. The issue here is that anything you are dabbling in, you probably aren’t doing well. Part of building capacity is creating efficiency and specialization. Something you do sporadically is not going to be well systematized. It may even expose the firm to unnecessary risk if the work is not being done well. Therefore, some firms can entirely eliminate whole segments of their practices to gain significant capacity in one fell swoop.
When you unveil the mix of services that do not suit your bulk of expertise, you need to pass them along to other firms. This is not easy for most. It seems unnatural to eliminate work, but rest assured, any capacity created can be filled quickly with better engagements.
As you analyze individual clients, you will likely notice missed opportunities for more services with many clients where you simply haven’t had the time to focus on exploring their wants and needs. You likely also have many clients who you actually lose money on when you factor in overhead and hours not spent on more lucrative work — your opportunity cost. Those clients should be let go of or “pruned.”
There are always exceptions to this, of course. Be thorough in your analysis. You may be able to improve the client relationship with a combination of clearer expectations for client-provided information or higher pricing (as discussed below), or even offer more services to these clients. Some might bring in thousands of dollars through referrals — in which case, they make sense to keep.
Analyzing your client list needs to include a review of any clients you simply don’t like working with or who waste your time. In our own business at Poe Group Advisors, we are selective about who we take on as clients. When you have a really difficult client it affects team morale, and keeping company culture respectful is an important aspect of building and maintaining capacity.
If you can properly prune the number of problem clients you have and the number of services you provide, you’ll increase profitability and time off for your entire firm.
Pruning well has the potential to turn your firm into an incredible place to work, where staffing problems aren’t top of mind because you’re not swamped, and you’re only doing the most profitable and easiest work to manage. That’s a work environment employees not only enjoy but tell others about — which, who knows, might bring in high quality staff down the road.
You’ll find a good-bye letter template at poegroupadvisors.com/APAresources
2. Increase Prices
A lot of firm owners increase prices for their services in hopes of cutting back their client list. We have found that price increases rarely reduce your book of business to the extent you might expect. In the current market, a lot of firms are not accepting new business. The fact of the matter is, your clients are service-sensitive, not fee-sensitive.
Pricing is very much a trial-and-error process. Determining your optimal pricing is going to take researching firms in your market area or other virtual firms offering your niche of services and quality. Once you land on an appropriate price, quote it to your new leads.
A lot of owners feel safe in quoting potential new business far in excess of what they are currently charging existing clients. Many people are shocked to find they still get the new client despite substantial fees. This sort of experimentation is what leads to a major increase in your confidence to charge higher fees with current clients.
When you are feeling confident, the next step is to select a portion of your existing list to increase fees on a value-based pricing model (in contrast to hourly pricing). Once you have refined your pricing on a small sample of clients, you can roll out that new pricing model practice-wide. This eliminates much of the risk. You don’t need to increase everyone all at once.
Again, experiment. Practice different scenarios. If a few clients don’t leave, you did not raise your fees enough. Your goal should be to increase revenue while decreasing staff hours. You’ll likely have a queue of new referrals who would happily fill any excess capacity you may gain by losing any clients who refuse to pay you your worth. In truth, our experience has been that clients expect fees to increase and most happily pay.
We’ve never spoken to a CPA who regretted raising fees. Ever. Our experience has been quite the opposite. Fee increases are generally far more well received than anticipated. In fact, we had one past coaching client who doubled fees and lost less than 10% of his entire client base. There is no doubt an art to pricing and this column can’t cover that in a few paragraphs.
For a deeper dive on pricing, check out our Accountant’s Flight Plan podcast with Ron Baker.
3. Learn to Let Go
Analyze what partners and professional staff can delegate. Most firms find that a lot of capacity can be created by either hiring new administrative staff or through improved delegation to the current support team.
We have an incredibly simple tool for this called the “three-bucket tool” to help you and your staff realize how to rearrange tasks and projects so they suit everyone on the team. In the tool, we have three columns. Column No. 1 is for “things you want to keep” — the type of work you want to continue doing for the foreseeable future. Column No. 2 is “work you want to give up one day.” Maybe you want to delegate because you don’t like doing it, but you don’t have someone currently in your office who can capably take on the work. Finally, there are “things you can delegate right now.” It’s simple, but it’s the most effective way to get perspective quickly. Just take an inventory of what you do, categorize it, and delegate.
Give this tool to your key staff and help them reorganize their work as well. Things you might hate doing could be a growth opportunity for one of your staff accountants
A Story Example
This is an outlier story. We wrote a growth guide, a case study around the Rob Siegfried — a CPA who grew his firm from scratch to where it is now, doing more than $100 million in revenues with a national footprint.
In the guide, Rob tells a story about how he had a mentor early in his career. The mentor didn’t have a public accounting background and was a former General Electric executive.
Despite his lack of accounting experience, the mentor shared timeless insights into managing and growing a business that Rob took and implemented into his accounting firm. Because of this guidance, Rob eventually delegated himself down to zero billable hours as a managing partner.
Most CPAs think, “Oh, gosh, zero billable hours, how can that be?” It’s an extreme example, but you can literally grow yourself out of all client work and become the managing partner, overseeing the vision of your practice, protecting the practice, and managing change and team development. That’s an extreme example of delegation, but it doesn’t make the principles of delegation any less valid.
Now Rob’s working on the fun stuff, and he enjoys working. There’s nothing wrong with working hard if you enjoy it. He does the things he wants to do, needs to do, and likes to do.
Remember, you can start really small and work your way up. Find the full story in the guide, available at AccountingPracticeAcademy.com
4. Focus on the culture of your accounting practice.
No one will want to work in a practice that does not respect their personal life. Family will always matter more than work for people who are not vested in your business and respecting that will help you retain and hire key employees.
There are three interwoven things you must offer today’s workforce:
- Higher salaries that compete across industries.
- Better work hours (40 hours or less).
- Flexibility (remote work capabilities).
A good salary is crucial, but it may not be enough by itself. It’s a given if you want to retain good people. Recently, we were at a state conference and a woman voiced her issues with finding staff. She said something like, “We are offering pay that is competitive with other firms in the area and we only work 60+ hour work weeks during tax season. We can’t fill the positions.”
That’s not as appealing of a position as she may have thought. Geography is no longer a barrier for CPAs. Today’s workforce has remote options nationwide. You are no longer exclusively competing with your metro area, but anyone offering remote work. Someone in Denver might be willing to pay 20% more for remote work and six weeks of annual vacation.
The solutions come from first making changes to your firm. Make it a practice you and existing employees can enjoy working in while earning appropriate compensation. Consider remote work options. Pay at or above market salaries and protect everyone’s personal time.
Boundaries around time profoundly affect firm culture. Unfortunately, many owners have very poor time boundaries — and the team feels inclined to mirror the firm leaders. It’s imperative to start at the top.
You may not need another hire; you may need to rearrange how you currently run your practice. Capacity fills very fast in most firms. Create more of it and fill it up with profitable work that suits you and your team. Enjoy the upward spiral!
Brannon Poe, CPA, is the founder of Poe Group Advisors and the creator of Accounting Practice Academy. He is the author of several books including “Accountant’s Flight Plan: Best Practices for Today’s Firms” (published by the AICPA and CPA Canada). Brannon has worked with some of the most successful and seasoned CPAs in the industry and has been privy to the behind-the-scenes methods they’ve used to build highly profitable practices along with capable and independent te