Boosting Your CPA Firm’s Profits: 4 Great Ideas

Do you want to find quick, easy ways to increase profitability?

If your answer to the above question is “yes”, this blog may disappoint you.

If your firm is not as profitable today as you’d like, there are no easy ways to turn things around. There are few quick fixes.

The following ideas embrace concepts that you’re likely already familiar with. Properly applied, they work. Some work better than others, and some techniques are preferable, depending upon your firm’s current situation. But they do work.

1. 1. Generate more revenue by focusing on mergers and marketing. The #1 way to increase profits in virtually every environment and economic condition is to generate more revenue.  The make-up of an accounting firm is such that increased revenues fall almost totally to the bottom line because most firms can handle a lot more business with very little change to their staffing and overhead structure.  That being said, and given the sluggish economic recovery, firms today are focusing on these two ways to grow:  mergers (i.e. “buy” more revenue) and increased focus on marketing and practice development.

1. 1. Keep the bar high for promotions to equity partner. This may not be the most sophisticated or enlightening tactic, but it has a huge impact on partner earnings:  raising the bar on who is admitted as equity partner and keeping it high.  Obviously, the fewer the partners splitting the pie, the larger will be the size of each slice.  Driving firm profitability and growth is the #1 definition of an equity partner.  Many valuable managers lack the ability to truly drive the firm; firms should make these people non-equity instead of equity partners.

1. 1. Personal visits by the MP to the firm’s biggest clients. Line partners who service the clients do a great job keeping them satisfied and cultivating great relationships.  But hard data consistently shows that most partners are reluctant to ask their clients for more business or referrals to their best friends.  But the MP can and will do this in a heartbeat and hopefully, walk away with additional work.

1. Specialization.  There are 101 reasons why the Top 100 firms are the Top 100.  One of the top 10 is specialization, something that many firms under $15M really don’t practice in a major way.  Specialization enables firms to charge higher rates and makes marketing easier and less costly because when the firm and/or one of its partners is “famous” for their special expertise, word travels quickly, thus enabling partners to practice their favorite form of practice development – picking up the ringing phone and taking the order.

Our monograph What Really Makes CPA Firms Profitable? condenses 20+ years of consulting to accounting firms. Download a free excerpt by clicking 40 Great Ways to Increase Profitability.