Good clients, bad clients: How to manage them all

By Cheryl Meyer

Managing clients is tricky business. Some clients are interested in many services and pay on time. Others use just one or two services but still bring in profits. And then other clients complain, treat employees badly, and pay late or not at all.

Jamie Thomas, director of marketing for BDO USA LLP’s Southeast region, addressed the complex topic of “effective client management” during a session Wednesday at the AICPA ENGAGE Conference in Las Vegas.

For 20 years, Thomas has helped public accounting firms identify, attract, and retain profitable and valuable clients, and in turn grow their respective businesses. She is a former partner at The LBA Group, an accounting firm in Jacksonville, Fla., that BDO acquired last year.

During a telephone interview before the conference, she offered these tips to firms that want to better manage their clients:

Determine your sweet spot. Firm leaders should begin their “effective client management” process by focusing on their specialties, strengths, knowledge base, and experience. For starters, examine your client demographics and service mix. Are you focused on the middle market? Do you mostly work with not-for-profits, family-owned businesses, or corporations? Then measure client satisfaction, and figure out which clients tend to be the most contented. Conduct a SWOT (strengths, weaknesses, opportunities, and threats) analysis of your firm. And finally, know your competition.

Build your profile and focus on profitability. Firms also must understand their practice client mix. Are you 40% audit, 30% tax, and 30% consulting? Where are you seeing the most growth? Create a spreadsheet, slides, or a chart “so that you understand the majority of your successes and where your revenue is coming from—and then you can go out to market and find more of that,” Thomas said.

When scrutinizing profitability, firms also need to identify their most lucrative clients based on various criteria, such as realization. Overhead and administrative costs also factor into profitability, and some firms apply these costs to individual engagements as they measure profitability.

Retain your best and profitable clients. While all clients require attention, firms should provide their best clients with a top-notch experience. The best clients are the ones that generate revenue for the firm, treat your staff well, and are pleasant. They call you before they make a significant move.

“They don’t question your fees,” Thomas said. “They recognize the value they are getting from the services you are providing. They send referrals.”

Thus, it’s imperative that your firm keeps tabs on these clients, and informs them of issues that could impact their businesses. Make them a priority.

“Just because we’re not in the midst of auditing their financial statements doesn’t mean we set them aside until next year,” she added.

Grade your clients. Firms also need to look at their total client base and essentially “grade” them on an “A to F” scale, Thomas said. Criteria for grading vary, depending on what makes sense for each firm.

In general, an “A” client uses many different services, while a “B” client may pay for a couple of services and pay on time, but could possibly benefit from other work you provide. Firms should also examine how “C” and “D” clients can move up in status.

“F” clients require serious review, and partners should ask, “Why are they scoring so low on these scales?” and decide whether to retain them.

A free client evaluation tool in the AICPA Private Companies Practice Section (PCPS) quality toolkit can help firm leaders with this task.

Develop cross-servicing initiatives. CPA firms should also determine which existing clients could benefit from other offerings. Create a cross-servicing spreadsheet listing all your firm’s services, such as estate planning and consulting, on the top of the grid.

On the left side, list all the clients in your particular niche. Then place an “x” in each client’s box if there is a service they don’t need. When you are finished, look at each empty box to get an indication of where you could potentially sell additional services, Thomas said.

Develop your niche. Once firms have outlined their strengths and areas of specialty, and their ideal customer profile, they need to actively develop their niches to gain new clients. “Firms that successfully niche their practice are more successful,” Thomas said. “But it is not just about knowing what your largest niches are—you have to dedicate resources to those niches.”

To do this, she advised, get involved with local professional associations. Participate in chapter events, or write articles in industry trade publications. Speak at networking events, and meet others who could provide referral business. Be proactive and don’t wait for new clients in your niche to knock on your door.

Cultivate referral sources. Firms should also actively seek out other professionals—such as attorneys and bankers—who may have ideas and connections. Meet with these professional leaders, and question whether your firm and theirs can work together. Ask, “Can we do a joint seminar? Do you have any clients that are looking for a new CPA?” Thomas advised. “Be a lot more strategic and hone in on the ones that service the same industries you do.

“You are shifting from being tactical to being more strategic, and shifting from being reactive to being more proactive,” she said.

Do market research. To gain new clients, firms also need to research their market. If your firm’s niche is construction, uncover construction companies in your area that have yet to be tapped.

Read up on their decision-makers. Talk to your referral partners, such as law firms, to find out if they work with any of these companies. Ask for introductions. Do your due diligence prior to making contact.

When necessary, let clients go. Clients that fly solo, bring little to no profitability, and don’t value your service may need to take their business elsewhere, particularly if they are difficult and tough on your staff. To end things tactfully, partners may say the firm is moving in a different direction than where their client’s company is heading, or that the firm can no longer deliver the services the client requires.

PCPS members can access a sample client disengagement letter on the AICPA website; firms also can ask their liability insurance carrier for a sample disengagement letter.

“It’s very hard for CPAs to let go of a client,” Thomas said. “But yet, when you are able to do that, it is actually much more productive and effective for everybody.”

Cheryl Meyer is a freelance writer based in California. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, editorial director, at Kenneth.Tysiac@aicpa-cima.com or 919-402-2112.

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