Why Becoming More Efficient Costs Your Firm Money

Speaker A: Your firm has evolved from um, when you first started out. Think about the changes that you've made. You've added in technology, you've improved processes, you have expertise that you didn't have when you first started this journey. And as a result of that it means that your systems, they are so much faster than they were when you first started. This is Lauren Fogelman with Business Success Solutions. And I am showing accounting firm owners how to be able to double their revenue working half the time. So automation now, something that is uh, done in a couple minutes, maybe used to take an hour or so, everything is a fraction of time when you add automation in um, and AI has been changing the game as well. So when you go ahead and automate things, it's possible that you end up earning less revenue. Yes, yes, I know that that sounds backwards. You're supposed to be gaining because of efficiency, but uh, when your fees are tied to time, and I talk about this over and over and over again, then the more efficient you become, the less revenue potential you earn from your current client base. So this applies whether you have a fixed fee or an hourly rate, the more that you are improving efficiencies because of expertise, technology, improved processes, it takes a hit because the work that you used to do manually or at a slower pace is now done a lot faster and your fees are still connected to time. So we want to be able to change that because this puts you on a catch 22. And this is something where we want to be able to give you the uh, way to be able to set up your firm based on the value instead of the time it takes or the technical side of what you're doing. Because when you focus on the technical aspects of what you're doing, the time it takes and the only way to be able to grow your revenue is to either work more hours or to add more clients. And neither one of those is, is really sustainable for firm owners over the long run. And huh, this is something that Sandra experienced also and I want to be able to share about this. In about 60 days she acquired another firm. And as a result of that she went from 40 clients to over 100 clients. And in the beginning she was thrilled because it seemed like success to her. But uh, the growth brought on a new set of problems, especially having such rapid growth. As a result of this, Sandra added two new employees to her team. Her schedule was at capacity and she ended up working between 50, 60 hours a week. But she also was juggling so many roles to keep everything moving forward and that's because that rapid growth that she had created a new set of problems. So what we had to look at was not the problem that her firm had grown, but that the structure of her firm had remained stagnant with less from when she had less clients. So once again she went from 40 to 60 in a very short period of time. But the systems, the processes, the infrastructure remained as if she was still operating with 40 clients on her road. So, so the other part of it that was coming up for her now and she couldn't ignore it any longer, is that her long term clients that have been with her from the beginning, they were still paying the same fees that they, uh, were paying when they first onboarded with her. And of course like so many pheromones, she thought about raising her rates. Of course it's a very, very attractive, appealing thing to do. But as you know, she held back, she postponed because she was concerned about the pushback. And that might be something that you've experienced as well, is hesitation. So she knew that she couldn't avoid these things any longer. Something had to change in order for her to be able to continue growing her firm without it taking a toll on her or with her team also. So that led to Sandra making three strategic decisions. And I'm going to go ahead and share them with you first, the very first one, reviewing her client list. So Sandra, she started evaluating her clients based on two factors. That's it. She opened up a spreadsheet. She put all her clients on that spreadsheet. She had two columns. She was looking at fit and profitability. Those were the only two things that she was looking at. And basically the fit was whether the client was a good fit for the firm moving forward. If they were someone that was aligned with their culture, they were someone that followed through. They were the type of relationship that Sandra wanted to have with clients moving forward with her firm. So that was the first thing that she assessed was fit. Uh, the second one, profitability. That meant looking at her client engagements and deciding does this type of engagement support the firm moving forward financially and which one maybe required a lot of time, but uh, it had low profit margins. There wasn't the ROI that she was looking for. So once again, fit and profitability, those were the only things that she looked at when assessing her clients. And this helped to, by putting it all down on a sheet, it really helped to make things so much clearer for her. Uh, basically she realized her firm didn't need more clients in order to be more profitable, in order to be Able to grow without increasing hours or workload. What she needed to focus on more was being able to devote time and attention to her quality clients. Being able to put in the type of client relationship and infrastructure that those clients wanted and would benefit from instead of trying to tolerate everybody, all things to all people. And the other part is because she didn't need new clients at the time, she was already at capacity with new potential new clients that were reaching out to her. She became selective. It was no longer an automatic yes to everybody want to pay her fees. So potential clients who just weren't a good fit for her firm, whether it was fit or for the work that they required or something else, she just went ahead and politely declined them. That was so new to her, was turning down someone who wanted to work with her firm. But she realized that not all clients were a good fit for her firm moving forward. So by doing that, looking at focusing more on her current clients that were a good fit, better quality clients, and also not accepting all new clients that reached out to her. This improved the breathing room. It automatically led to less stress for her as well as for her team. It allowed them to offer a, uh, higher quality services. It elevated things as opposed to diminished so yet less clients. But it was a higher quality service and it was a lot more profitable now. Okay, that was decision one number one, the ideal clients, quality clients and really focusing on those. Decision number two was packaging her services and using value pricing. So this is how she started to change the infrastructure as well with how they delivered services. This meant no longer having a bill by the hour, send out invoices, get paid in a rear. She now created packages, they were value priced and she started getting prepaid for the service instead of having an invoice after the fact. And with each package that we created together, it was very, very clear as to the level of support that a client would receive. The type of services that were included in uh, for clients, the financial reviews, communication and how that was handled when questions came up, and also advising meetings. This was the start of her being able to finally separate her fees from ours. And also the benefit for her as well as her firm is that it created predictable pricing for her so she knew what to expect each month. She wasn't now chasing money. It also gave predictable pricing to her clients and that helped them with budgeting. It created a lot of transparency. Um, there was one other thing that we added in which created a whole new stream of income. The paid diagnostic before doing any cleanup work or any projects. So with that Instead of having a potential new client reach out to her, quickly reviewing the books and then moving them forward into uh, giving them some type of monthly estimate, she slowed down the onboarding process. Remember, she didn't need every single new client, so she felt comfortable putting this in place. And as a result of that, she was able to really charge for reviewing the books, something she previously gave away for free. Like I said, it created a whole new stream of income and also it was able to give them more clarity with assessing the scope before diving into the project or before diving into a monthly recurring engagement with a client. So as a result of that, we tried it out on one client that came to her. And if she would have done it the original way of just quickly reviewing the books during the initial assessment or consultation, she probably would have quoted $800 for the project. But uh, she moved them into a paid diagnostic. She was able to really thoroughly scope the project. She found things she would have missed on a quick review. She go, she went ahead and priced that same project. No additional time spent working at $2,500 because now there was transparency into what needed to be changed. Nothing else had changed but the uh, ability to really scope things out thoroughly as well as how she talked about it with clients. So there was clarity, there was confidence in being able to come to that conversation with the investment for it. And this led to number three of her changes resetting her legacy client pricing. So that was the one thing that she had been postponing for years. She was afraid of it. She didn't want the pushback. But she realized that she's had these clients for years and nothing changed as far as the fees that they were paying. Even though the scope had changed or the complexity, or she now had more expertise than when she first started out with these clients. And because that uh, some of those clients had a rate increase of 50%, some a little bit less, some, um, a little bit more. But on average it was about 50%. With her long term legacy clients, she of course expected resistance, that they would come back and question her and challenge her. But that isn't what happened at all. She was so amazed because the majority of her clients immediately accepted the new pricing without any pushbacks. And yes, a couple of them asked questions. They wanted to know why or they needed more clarity or they wanted to understand what was changing. But uh, once Sandra went ahead and explained the services, the structured, they said yes and continued moving forward with the firm, they did not leave in mass as she was concerned about. And because that Those adjustments brought in an additional $50,000 in revenue without any additional time spent working or needing any new clients. And that was an eye opener for her. Everything started to change because of that. So as a result of this, moving forward with the packages, the value client, the value pricing, being more selective with her clients, she was able to reduce her workload from that 50 to 60 hours a week down to about 35 on average. And she regularly took Fridays off. It was something that she now had blocked out her Fridays no longer putting out fires or trying to do catch up or anything like that. She was now taking care of herself instead of trying to take care of everybody else at the cost of her own well being. And she also found that her client base so much more enjoyable to work with. Plus her team enjoyed working with them. Revenue increased without adding more clients to her roster. And this is because everything was more transparent with the packaging, the pricing. It was no longer a guessing game or saying something to bring on a new client and then having regrets later on. Now I know that with potential new clients, you might wonder how the conversation goes, uh, especially when you hear what do you charge for bookkeeping? And what I want to say is do not, do not immediately quote a price. You want to first understand their situation. So their question might not change, but what happens is your response does. Instead of giving them that hourly rate or giving them a monthly fee and then later on regretting it because you undercharged and you're hoping to make it up later on, you want to say, before I go ahead and quote a service or a fee for you, I, uh, begin with a financial diagnostic to really look at your books and assess where things are at. And that is a way for me to be able to see what's required, be able to give you something that is accurate and it removes all the guesswork. And after that they might ask um, how that works. And what you going to say to them is, is, well, before we move forward, why don't you tell me about some of the financial challenges that are coming up for you right now and they will go ahead and explain what their concerns are. And that's when you offer or discuss the next step. You're going to tell them about the financial diagnostic review, you're going to let them know that it reviews their books as well as their financial structure. And then you're going to recommend the things after you do that review of how to get their books up to date and accurate, you'll let them know that the investment for the diagnostic is $500. Remember, it was something you previously gave away for free. Now you're getting that new stream of income, just like Sandra does. $500 for the investment and you get prepaid before you start doing the work. It is very, very client centered, trust me. So once the diagnostic and cleanup are complete, then you can go ahead and confidently recommend the right service package. And it is very, very transparent. You are very clear and confident with what they need. Moving forward removes all the guesswork. So this focus on clarity and support, not on hours or the tasks that you tend to be doing for your clients. So if you want to start moving in this direction, then I want you to just do one simple exercise. Open up that sheet just like Sandra did, put all your clients there, and then grade each client from A to F. And you want to look at two factors, just two factors when grading them. Fit and profitability. That is it. And after you do that, you want to identify which are the clients who are, identify who are a best fit for moving forward for your firm and which are the ones that are maybe taking more time, their headache to work with. They add stress, they lower profit margin. And, and as a result of that, they might not be a good fit for your firm because not only are they not a right fit, but they also have low profit margin on what you're doing for them because of all the additional things or the headaches that go with it. And that is going to give you some insights as to how your firm can start to evolve. Right now, right here, you don't have to wait any longer. So getting back to Sandra, because these strategic changes that she made, she realized that growth does not mean having to work longer hours or adding in more clients. Her, her firm very, very quickly became more profitable, easier to operate, because she was very intentional with the decisions about client selection, service structure, as well as pricing. So if you're looking at your own firm, wondering where you might be undercharging, where you're undervaluing the work that you deliver, that is exactly what I help firm owners uncover. So during a strategy session, if we meet and we talk, we're going to review your current services. We're going to, uh, identify where revenue may be leaking, explore how service packages and value pricing could support the type of firm you want to build sooner than rather than later. And if that interests you, then go to businesssuccesssolution.com let's talk to get started. I'll go ahead and have that below as well in the notes. This is Lauren Fogelman with business success solution. Showing accounting firm owners how to be able to double their revenue. Working half the time.