The Great Reality: Where We Go from Here
Written by guest author, Art Kuesel of Kuesel Consulting
Over the past few weeks, I have been working on some thoughts that I wanted to share with you. They have finally been penned with a clear mind mostly free of distractions. Like many of you, I am inspired by the amazing clients I have the privilege to serve. While I see considerable fatigue out there, I also see brilliance, resilience and optimism. While some of you need a pep talk, some of you need an “Atta boy” or “Atta girl.” Please take a moment to read and reflect.
Phase 1: Talent Squeeze
Great people leave—and, for most of our firms, at a higher clip than in the past, which explains the emergence of the term “The Great Resignation.” New people/replacements are considerably harder to find, even interns, normally a busy season relief valve. Be as open-minded as possible with the terms for new hires (where they work, how they work, when they work, and their experience and background). With every viable candidate, think only in terms of “how can we make this work?”
Phase 2: Costs go up—Maintain your target rate margins
People costs increase. Higher starting salaries, raises, bonuses, counter-offers and retention bonuses drive up our people costs. Raise your rates to keep up with increased costs. You need to know the true cost of serving clients at margins that maintain desired levels of profitability.
Phase 3: Raise the bar
Establish new minimum fee thresholds and establish ideal target client criteria for each practice. Pull all existing ideal clients up toward these thresholds. Existing clients and new business coming in the door needs to come in and be served under the terms of our new reality. Remember the 80/20 rule, which states that 80% of your revenue and profits come from 20% of your client base. Every dollar of revenue is not created the same.
Phase 4: Solve the capacity quiz
Many firms will be challenged to serve the business they already have, let alone any new business. Match the hours available with the hours of client work that needs to go out the door. This is how to do it:
- Exit all challenging, slow, late, and irresponsible clients. Your staff will thank you. You may also retain more staff if they don’t have to deal with these clients.
- Exit clients below the newly established minimum fee thresholds. Consider smaller, lower realization, one-off (e.g. non-sweet-spot), one-service type accounts. Allow only very selective exceptions; for example, a client who is a great referral source for ideal prospects or an influential person in the community.
- Explore all possible technology tools and resources that will boost efficiency and shave time off each job.
- Free up capacity by utilizing on-shore and off-shore resources for certain types of returns; for example, SurePrep, Taxfyle, etc. Yes, this is possible and being done by local firms.
- Utilize on-shore and off-shore resources for monthly accounting and CAAS services; for example, domestic and off-shore platforms in Puerto Rico, the Philippines and India. Yes, this is possible and being done by local firms. It’s no longer just a “large firm” initiative.
- Consider finding more capacity than you need for the next busy season. We always want to have capacity for special projects that come our way from top clients, not to mention a great new ideal client who walks in the door having been “exited” from a larger firm.
Phase 5: Serve a smaller, yet more profitable and more desirable, client base
This reality should fuel greater people retention, firm profitability, and the ability to attract the best and brightest team members with leading compensation and benefits. This talent will come from diverse backgrounds and with diverse experience and will serve the ever-growing compliance and advisory needs of your top clients. Sleep a smidge easier.
Is this everything? No. Is it a good start? Gosh, I hope so. Do you have anything to add? Please do so.
Many of these “phases” are not easy to come to terms with or execute. Phase 5 may seem like unachievable pie in the sky. And what about Phase 6—what’s after this? However you see the problem, solution or opportunity, start chipping away at it. Businesses in all sectors are navigating their own considerable challenges. Remember that we are brilliant people who can and do solve some of the most confounding challenges our clients face. Turn that perspective toward your own firm and ask yourself “What would my smartest client do?” “What would I advise my best client to do given these challenges?” Get more hands on deck and turn these problems into opportunities.
Opportunities exist for those firms who do this. Some of you are already making lemonade with lemons. I am inspired by you every day. Let’s do this.
Art Kuesel, of Kuesel Consulting Inc., has unique perspectives and valuable insights that come from his business development, marketing, and people development leadership at two leading CPA firms plus ten years of consulting to the public accounting profession. Firms count on Art to help them shape their objectives, strategies, and tactics, driving more robust firm performance, growth, and sustainability. He can be reached at email@example.com.
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