Tax season deadlines are upon us. You’re in the home stretch.
How many individual tax returns did you and your team complete this year?… In Accounting Practice Academy (APA) we have found that firm owners are often surprised by the analysis they perform on their individual tax clients that are not associated with a business. (Orphan personal tax returns). Many of our APA members do in fact decide to let a portion of these clients go.
This sounds harsh, we recognize that you take a great deal of care with your clients, and this sounds like an insensitive move. We do not suggest just kicking your individual tax clients to the curb. You have a few options. You can offer them more services or find a local or national firm you can recommend they use instead.
Individual tax returns are often cumbersome for you and your team, they are time consuming and worse yet, not always that lucrative when compared to other opportunities within a practice. The kicker is that accounting firms with a heavy individual tax focus are actually oftentimes harder to sell. Those individual returns can be like an anchor to your ship. They are hindering your growth.
I want you to take a look at your book of clients. How much revenue are you bringing in with just those orphan tax returns? How many hours are you dedicating to them? What is it doing to your tax season hours? Your team’s morale?
When you do the math, it is oftentimes unsettling. If you were to get rid of those clients, how much time would you free for you and your staff to focus on higher-fee work?
One of our APA members reduced his client list by 150, largely comprised of orphan individual returns. He got rid of the lowest priced work, taking his client list from 650 to 500. He then offered more services to his existing clients while increasing his fees. He took his firm from a $350,000 practice to a $500,000 practice all while working less hours.
Another firm originally grossing around 1.2m, increased their revenue by $500,000. They too let go of their time-consuming low producing work and created the capacity to offer more services to business clients. They increased their fees and watched their revenue and profit rise.
Both of these firms achieved this growth in less than a year.
Oftentimes it’s hard to see the forest through the trees so to speak. You get in the grind of tax season, working sixty maybe seventy-hour weeks and you don’t see a way to slow down or gross more. Pruning your client list might be just the thing that takes you to the next level.
If you want a free “good bye” letter to send to clients, click here!
P.S – Whenever you’re ready, here are 4 other ways we can help:
- SellerFAQ: Answers to the questions sellers are asking. From practice value, to timing, we’ve got you covered.
- Strategic Guide to Selling your CPA Practice Video: The how-to of selling a CPA firm.
- Accounting Practice Academy: If you’re looking for benchmarks, our 8-week workshop has a community of established firm owners that will help you get perspective, reduce your owner hours, and raise your bottom line. email email@example.com with “APA” and we will fill you in on the details.
- If you want to chat about your exit strategy, email firstname.lastname@example.org with “strategy call” or request a call here.