The talent shortage isn’t just a staffing challenge, it’s a barrier to growth for firms that sit in an awkward middle space of being large enough to demand real infrastructure, but not yet large enough to support a strong management layer. The result is a cycle of overwork, turnover, and stalled progress. Ironically, it’s also the constraint that can spark massive firm improvements.
Why These Firms Feel It the Most
Firms in this $1 to 5M revenue tier often grow organically, adding clients faster than adding managerial capacity or standardized processes. Also, staff resignations hit particularly hard for firms this size because partners get pulled back into lower-level work. Breaking free can seem impossible. Many firms experience these common pain-points:
- Partners continue doing production work, reviewing files, and managing too many client relationships, and working long hours.
- The middle layer is thin, making it hard to delegate higher-level responsibilities. They also end up working long hours.
- Salary competition is intense, but margins are too thin to simply “pay more.”
- Processes are inconsistent, slowing down onboarding and creating inefficiencies. How can you document or modify processes when there is barely enough time to serve clients?
- Client lists become bloated because no one is periodically pruning due to lack of time. The low-margin accounts further drain capacity and perpetuate this cycle.
As time passes, many CPA firm owners come to believe “This is just the way public accounting is.” This combination makes burnout almost inevitable. When one person leaves, the impact is felt across the firm meaning more hours, lower morale, and more turnover. This hardly describes an environment new people would want to be a part of.
The Hidden Cost of Burnout
The financial and strategic consequences of burnout are often underestimated. It can be costly to replace senior staff members or managers. With very low capacity, you are probably turning away more profitable work or not growing and offering more profitable services to existing clients.
From an M&A perspective, team and capacity are two important drivers of accounting firm value. A burned-out team lowers both.
The most impactful solution to staff turnover is strategically narrowing the client base and raising prices. This creates almost instant capacity. You have to first create capacity in order to transform the firm.
What Your Firm Can Do
- Culling a significant percentage of low-value clients immediately reduces burnout and improves margins. We speak with firm owners daily who have not sufficiently reviewed their client lists. There are likely plenty of clients you have that are slow to turn in documents, have difficult attitudes or are low paying individual returns that can be adequately serviced elsewhere. It seems obvious, but this is the fastest way to create time for you and your team. Fewer small, high-maintenance clients means fewer emergencies, fewer partner touchpoints, and fewer review cycles. You can download our letting go of clients letter template.
- Price increases at a higher percentage on remaining clients create the financial capacity to hire and retain talent or invest in software that can free you and existing staff up. Again, this seems obvious but it takes time and energy to research what your market should be paying and fear of client loss can be a hold-up. This work is worthy of your time and we encourage you to run the numbers. If you went up on fees and X% of your clients walked away, would you have less work and the same profits? Sometimes testing with new clients can be less intimidating or with clients you were on the fence about firing anyway. What ever your plan, it’s smart to make one. You can use our client price increase template to get started.
- Firms that simplify their client mix improve onboarding, workflow efficiency, and staff satisfaction. Everyone probably knows the saying, “A jack of all trades is a master of none.” If you have a small firm and are offering every possible mix from bookkeeping, specialized tax, payroll as well as audit and reviews, you can’t possibly stay up to date on all the strategies and tools to benefit your clients. When you analyze your client list for cuts, it may be an entire service offering. A cleaner, more consistent client base is easier for staff to manage, reducing stress & turnover plus, it creates a deeper knowledge on your team to better service clients. Maybe most importantly, it can lessen partner intervention. If you’re interested in the service mixes that create the most value, we have information on this in our valuation factors report.
Hiring more staff into a system that is already overloaded, underpriced, and misaligned simply leads to more turnover and wasted salary dollars. Research shows that firms that prune their client list with intention experience:
- Lower turnover
- Higher productivity per employee
- Stronger recruitment success
- Better partner work-life balance
- Higher valuations when the time comes to exit your CPA practice
This is the fastest path to a healthier team, stronger margins, and a firm that’s built to scale, not just survive.
If you want to work on your firm before this tax season to cull your client list and make strategic improvements, we are running a virtual Accounting Practice Academy™ bootcamp day this January just before tax season. Information on this is to come, you can email ibrennan@poegroupadvisors.com if you want to learn more.
