A Modest Post-Tax Season Marketing Suggestion

I have extolled the virtues of personalized marketing on numerous prior posts. I define “personalized marketing” as an approach that is focused upon an individual prospect instead of, for example, a print ad in the Elks Club newsletter, a radio spot or post cards to a given zip code.

So, here’s a simple process with proven effectiveness that is both easy to do and very appropriate right after tax season. To set the scene – it’s just after April 15th you will have just been involved in prep work for dozens of client returns. Now that they are fresh in your mind, the first step is to think about which of these clients you could be doing more work for.

Are you doing a business return for someone but not their personal returns? How about the flip side: the owner of a business who only has you doing their personal returns? Or, the client who has the temp help business, but you don’t do any work at all for his wife who is a doctor with a thriving medical group just down the street? And maybe you’re doing the returns for the owner of the local theater who is close to retirement … what are his plans for funding his retirement, etc.? Is he taking advantage of all the options available to set aside pre-tax money for later years? How might he minimize his tax exposure if he wants to get rid of the theater? The potential examples are endless.

There are a lot of billable hours hiding in the files of your present clients.

Your present clients are your easiest source of additive business. There’s an existing relationship; they like you, they have nothing but good will for you, they trust you and believe you are competent. There’s no reason why you shouldn’t be doing all their work.

The second step is a simple procedure. First, scan through your files and set aside all those that fall into the, “there might be more business in here” category. The third step is to grab the file on top of the pile, open it and look for some opportunity to, a) increase their income, b) cut their expenses/costs or, c) reduce tax liability.

Opportunities are everywhere. If they have a business it usually is not difficult to scan the numbers and pick up something, e.g. the client has a reasonable amount of AR but too much of it is 90+ days out, while at the same time he is experiencing a cash squeeze. Or, a client’s business is profitable but his bank line that was put in place years ago is now too small … maybe he’d better raise the limit while he still can. Or, a client mentioned she wanted to expand her warehouse and storage area … what’s the best way for her to do this? Lease? Purchase? Sublet? And, what about taking title … should she, for example, acquire it personally and then lease it to her business?

Another way to isolate issues is to look at one or more prior years and look for trends. Perhaps the pretax percentage has been declining, or certain cost categories have risen faster than expected.

If you are only preparing personal returns for a client the opportunities are fewer, but if a client mentions that they are looking into the possibility of starting a business, buying a franchise, selling a major asset, etc. there is certainly the suggestion that some planning or “what-if” projection would be in order.

Here’s the fourth step: You have selected a file (“Laura’s), found the a), b) or c) hot spot, and now, e.g. you make a copy of her Schedule C’s from TY 2008 and 2009 and put yellow highlight on lines 7 and 28. You then take a regular 3M stickie and hand write, “Laura, check out the highlighted lines. Your expenses have risen much faster than your revenue. I think you are leaving some money on the table. Let’s talk. Please give me a call.” And, you sign it with your first name. The fifth step is to tri-fold the two Schedule C’s with your stickie affixed so she sees it when she unfolds the envelope’s contents, and then mail it.

What’s her reaction when she sees what you’ve sent? First of all, the two copies are highlighted, so she knows immediately what to look at. She reads the stickie and has several conscious and unconscious impressions. They include noting the personal touch communicated by the handwritten note, that you have a personal interest in her situation, that you didn’t treat her like a number and instead noticed – and took the time – to put this together and write her, that you care about her success and welfare, that you have taken the time to make it simple for her to understand the issue, that your note conveys concern, that you are trying to help her, etc. etc. Even if Laura never calls you, she will retain all these positive impressions. If nothing else, the likelihood of her referring you to a prospective client is higher than it has ever been. As my son says, “It’s all good.”

My clients who have taken these steps report they get calls back from about half of the clients. Each one represents a marvelous business opportunity for more billable hours. Planning, project work (e.g. running what-if projections for the client contemplating acquiring more warehouse/storage space), advice, consulting are all on the table.

The percentage of responders you convert into additional work will be maximized if you meet with them personally, but if you have a strong relationship with the client you can do well on the telephone. The positive result isn’t just more short term billings. For example, it is axiomatic that the more different things you work on for a given client, the greater the probability they’ll remain loyal, less fee sensitive and stay with you long term. Another bonus is the more proactive you are for a client, the more apt they are to refer business to you.

Elliot told me that in 2008 he spent part of the Saturday following April 15th reviewing files and writing stickies. He put together 22 that afternoon; had 13 return calls and he converted 7 to project or consulting work.

Not bad for an afternoon’s work.

Successful Strategies For Raising Fees – Part 2

In Part 1 we talked about how the “best practices” employed by professional sales people can be of value when you are raising your fees while at the same time maximizing the probability of maintaining good relations with your clients.

I received some feedback on the subject from readers you may find both interesting and humorous.

Eric in Tennessee has a long time client/semi-friend whose billing rate hadn’t been increased for many years and needed a significant jump to be in step with 2010. The client is a painting contractor and Eric had recently engaged him to paint the exterior of his house, so he thought that would soften the blow. He was wrong. The client became absolutely apoplectic, got red in the face, began yelling and carrying on like this was the worst thing that had ever happened to him. The meeting ended badly. Still distressed by the experience, when Eric got home he plopped down dejectedly and told his wife about the confrontation. She listened politely, excused herself and he headed to the liquor cabinet to make himself a stiff one.

His wife returned a couple of minutes later with a file. She showed him how much they had been charged by the same client when he painted their house in 1995 and then what the price was in 2009. It was two and a half times as much! Armed with the evidence, Eric drove to the client’s office in the morning, put on his angry face, and stormed in waving the painting contracts, demanding to know how it is that he’s expected to pay more when the contractor’s costs go up, but Eric’s cost increases somehow don’t count. He continued his rant and the client finally held his hands up in submission, called it even and agreed to pay the new rates. Two weeks later they had a beer together and laughed about the experience. Eric is still shaking his head.

Janice, in Phoenix, has a neighbor Marco who is also a client. The client owns an insurance agency and does very well. Once again, a great deal of time had gone by and the rates hadn’t kept up with costs. Marco has a big personality and is, as Janice puts it, intellectually aggressive. She had a strong sense of trepidation about approaching him to talk about the increase.

She made an appointment and met the client at his office. Laying out her case, she began explaining the reasons for the increase. Marco interrupted her and asked, in effect, “Are you telling me you’re going to charge me more money for doing my accounting?” Not knowing what would happen next, Janice nodded yes. He said nothing further, so she continued.

After a few minutes he interrupted her and said he had a great idea. He began explaining how this was a perfect opportunity for a quid pro quo – a tit for tat – he would consider paying the higher rates if she would consider expanding the coverages of the insurance she carried through his agency. Marco launched into an explanation of the advantages the upgrades he envisioned for her would bring, noting the risks covered, the reduced deductibles, the greater peace of mind, etc. Janice couldn’t get a word in edge-wise and realized very quickly that he’d turned the tables on her and now she was being pitched to add revenue to his agency instead of the other way around.

Taken completely out of her game plan, and feeling the situation slipping away, apparently Janice’s facial expression revealed the distress she was feeling. Marco paused, and then began chuckling. He reached across the table, patted her hand and apologized for upsetting her. He explained that he’s a sales guy; that he couldn’t help himself when faced with the temptation to, as he put it, “play around a little bit.” He told her he had been expecting an increase for the past couple of years and that she shouldn’t be concerned because he was OK with the change. Like Eric, Janice is probably still shaking her head.

Ray, whose practice is in Northwestern Florida, talked on the phone with one of several clients whose rates he was determined to increase. The client listened and then asked if he could get back to Ray. About a week later the client phoned and said that he’d obtained several bids for his accounting work and began naming some of the firms off and the rates they had quoted.

Now, we all know there are any number of questions related to what is included in “accounting services” and what is extra, and that if someone claims their rates are “low” you need to check into exactly what you will be getting for that price. Ray’s client didn’t do that. Instead, he simply obtained hourly charge rates, not the number of hours to perform any particular set of services. And, of course, this is meaningless for comparative purposes.

Nevertheless, the client pressed on, saying that he intended to conduct an “auction” for his business; that he’d select the most competitive firm to do his work. He was going to “accept email bids between the hours of 10:00 a.m. and noon” on the appointed day, etc. etc. Then, he’d take two days to evaluate the offers, and notify the winning bidder no later than, etc. etc.

Ray pointed out to me that his client owns a landscape maintenance business that is neither large nor especially profitable. He was only charging the guy about $2600 a year and wanted to raise him to approx. $3000. Ray decided he didn’t want to play and didn’t send a bid in. Three days later a competitor whom Ray considers to be a bottom feeder called and asked Ray to send over some of the client’s documents, to which Ray agreed. Later the same day the (former) client called over to boast about how he was now only paying $115 (!) per hour for his accounting work and how glad he was to have discovered Ray had been overcharging him all along.

Ray is very glad he decided not to bid. Some clients really shouldn’t be clients. Maybe you have a couple like that?

Successful Strategies For Raising Fees

In previous posts I have offered several reasons supporting why I believe it is a poor choice to raise fees in today’s economic environment. I have also written about tactics you can employ to maintain fee levels in the face of client pressure to reduce them.

But, what if there really is a strong reason (or even a need) to raise fees? For example, you may have a long time client who is paying you below market level and after an analysis you realize you are literally losing money with the client. Their fees need to be raised. Or, you realize your charge rates are below the market and to arrest your eroding profitability you need to raise your fees. Or, you acquire additional/upgraded capability (personnel, space, computers, etc.) and you want to not only cover these new costs, but you want your rates to reflect your practice’s higher service level.

There is a source we can draw from that tells us in clear terms the best strategies for raising your rates. That source is the group comprised of tens of thousands of sales people who sell goods to America’s businesses. The underlying challenge facing an accounting practice and the owner of a manufacturer of swimming pool sweepers, is exactly the same. Neither has a client/customer base wishing to pay more; both will encounter resistance, both want to reduce the number of lost clients/customers to the absolute minimum, and both want to implement the increase with a minimum of disruption. These “best practices” have been hard won, because poor technique offers up the potential for lost business, unhappy clients/customers and a very negative experience.

A) Understand the reason(s). First of all, ensure you really clarify to yourself why you need the price increase. What’s the rationale? What factors are relevant? This sounds self-evident, but you may be challenged by a client, e.g. “Maria, you say you wouldn’t do this unless you had to, but what does that really mean? Why do you have to?” In this instance you should be prepared to respond without stumbling around, sounding unsure and lacking conviction. As a general statement, you want to avoid talking specifics, i.e. “Our pretax profit percentage is down to only 17% and all the partners have had to reduce their annual bonus.” That’s too much information and doesn’t help anything.

B) Leverage your status as an owner and/or partner. You are a professional accountant and your client is well aware you understand numbers. Take the position that the increase is necessary (why else would you do it in today’s troubled economic times?) and is a final decision reached after much deliberation and analysis. Convey that it is final; the decision won’t be rescinded.

C) Discuss and offer suggestions how the blow can be softened. In industrial sales it is common to tell a client, “Arthur, the price of 24” rolled .060” steel is going up 9% in July. That gives you three months to place an order at the present price.” The idea is that it both generates an immediate sale and gives the customer a means to soften the impact and defer the increase’s effect. In an accounting world this may come out something like, “Victoria, for reasons I’ll explain in detail if you wish, we’ve concluded we have to increase our rates. Now, this won’t occur until July 1st. We have a couple of ways we can soften the impact of this. The first is that we can get your next quarterly filing accomplished at the lower rate. I’ll make sure that happens. Also, you also talked about doing a cost study analyzing the feasibility of opening the new sales office. If we can get going on that before July I can freeze that at today’s lower rate.”

D) Don’t surprise your best clients. It is overly impersonal and just bad form to send out invoices with previously unannounced higher rates. While a letter sent to all clients is OK as far as it goes, you will get far better results if you personally contact at least the top 20% - 25% of your clients. Face-to-face is best. If you have been proactive about maintaining contact with your “A” level clients (meetings, lunch, conversation when you see each other at the Elks, etc.) and there is an actual relationship, they expect this from you and will react much more positively.

E) Be empathetic. If your client gets angry or annoyed, let them do so. Don’t debate or argue (if you do, it may carry the suggestion that the increase is rescindable or negotiable). And, don’t, in effect, tell them they are wrong for being upset. After all, you’re telling them you’re your services are going to cost them more. When things settle down and you can continue your discussion, an effective approach is to talk about how you and your partners agonized for months about this; that it is necessary to maintain services, acquire key resources, etc. In other words, it was unavoidable. The idea is to give the client a plausible, believable rationale. That it makes business sense and gives them confidence that your decision was considered, sound and not capricious.

F) You might offer a delayed date of effectiveness. In addition to the techniques described above designed to soften the impact of the price increase, you also have the option of simply delaying the effective date in some instances. For example, you might compromise with a good client by agreeing to do their compliance work at the old price for the rest of the year, but the projections and P&L/balance sheet work will have to be at the higher rate.

G) Finally, your staff should know about the increase(s), when they become effective and how you would like them to react should a client broach the subject to them.

The foregoing best practices won’t guarantee your clients will openly embrace your upwardly revised fee structure, but will go a long way to ensuring the angst and potential loss of clients is kept to a minimum.

You Have A Website; Why Not Make It Add Value?

As professional service firms move through the current recession with an eye to better days, each is making decisions about how they can best allocate their resources. Upgrading the computer system and/or software to improve productivity? Investing in more marketing? Culling the workforce of marginal performers and/or seeking upgraded skills among the accounting professionals who have been downsized? Taking advantage of low lease rates and relocating to upgraded offices?

Any of these may be the right choice for your practice, but one thing you can do that is inexpensive and has real upside potential value is taking another look at your web presence.

The reality is that the vast majority of accounting firms have what I call “placeholder” web sites. In other words, everyone has a site, so it was determined your practice should have one too. The money was spent on a web designer, some system was (hopefully) implemented to maintain it at reasonable intervals, and except for writing a check every now and then, you don’t ever think about it. So, is it actually doing anything for you?

My challenge to you is to reflect for a minute or two upon this state of affairs. You’ve already put the effort and money into creating a web presence. Unless you are the exception, your site is more or less just “there;” contributing essentially nothing to your marketing efforts. But, the hard work has already been done, so why not take another, considerably smaller step, and make it an effective component of your efforts to not only attract new clients to your practice, but to stay in contact with your existing clients?

The bar isn’t really set all that high. You aren’t competing against Amazon or the other really skilled online marketers. Instead, you are being compared to other accounting websites that are, in the main, ineffective. This is an opportunity to elevate your game and qualitatively differentiate your practice/firm from your competition.

There are specialists available who are highly skilled at optimizing your site. In fact, I’ll tell you about a couple in a moment. Both have worked with enough clients to establish track records of success and make it their business to be right on top of the latest internet marketing trends.

Yes, you have to write a check for their services, but you don’t have to invest much of your time at all. (And, their charge rates are a lot less than yours.) Even during the crush of tax season, you probably have the time to consult with these firms and have your enhanced presence up and running shortly after April 15th. Just in time for that summertime marketing push you’ve been promising to initiate, right?

The first outfit I’ll tell you about is Alesco Marketing. They’ve created hundreds of web sites for both professional service providers and other businesses. They are proven experts in effectively tying together the site’s design with how the web is really used. In other words, they design sites so they are a) easily found by prospective clients and search engines and, b) they are very user-friendly and contain the features visitors actually place value upon.

I think one of their most important strengths is that they have the experience and insight to stay on top of how marketing on the web is evolving and then adopting strategies to maintain their client’s advantage. Check out www.alescomarketing.com. If you contact them ask for the owners, Tim or Doug Williams.

By the way, if you would like a quick read that offers a sophisticated look at web marketing best practices, I recommend you order a copy of Doug’s latest book, “Website Marketing Mastery,” published in 2010. It is available through their website.

Another proven source for web expertise is E. Mochila. I believe they are unique in that their only business is creating and maintaining accounting web sites. Currently, they manage over 1800 CPA websites. They have a business model that operates somewhat like a subscription: for a low monthly fee they provide ongoing support, upgrades, client portals, newsletters, calculators, etc. You can check them out at www.emochila.com. If you would like more information, ask for Cameron Hendrick. He is intimately familiar with everything they offer.

In terms of marketing your services, your website presence will never be as important as consistently getting out and talking with people who are desirable prospects. But, it is an important part of the whole package that is you, your firm, its image and presence and, ultimately, how your are perceived in your marketplace.

Bottom line: it’s more than worth a couple of hours of your time to investigate how you can upgrade your online visibility.

Can You Help Me (or Us)?

I am experiencing an increasing number of inquiries about what it takes to get my personal help in learning, implementing and/or managing an upgraded marketing and sales effort at your practice or firm.

Since the idea of this blog isn’t to sell stuff, I’ll make the answer succinct. If any readers want more info, you are welcome to contact me directly.

I prefer to conduct teaching sessions or facilitations on Mondays or Fridays. Southwest/coach and the Holiday Inn are fine. I eat everyday whether I work or not, so I don’t expect you to pay a per diem for meals and incidentals. My daily rate is $1500, whether working with an individual or group. Groups of more than about ten are generally too cumbersome to do much more than teach generalities. The smaller the group, the more individual instruction there can be.

Thanks. I appreciate the interest you have shown in CPA Practice Builder and the underlying process. Keep sending in your success stories. By the way, the blog topic ideas have slowed down … if you want me to write about any particular aspect of accounting practice business development, please let me know.

To your success and wishing you all a speedy recovery from tax season!
Craig

Cell 510-915-0529
Email craig.cpabizdevel@gmail.com

A (Really) Big Client Can Be Risky

Over the years I’ve had two client firms that lost large clients with little, if any, warning. By “large clients” I mean a single large client that comprised at least a quarter to a third of the firm’s revenue. The resultant disruption to these firms presented a nightmarish challenge to firm management. Severe and rapid downsizing of personnel, the need to somehow reduce the costs associated with excessive office space, loss of skills as staff departed, the necessity for partners to contribute capital to the firm, staying within bank line covenants, etc., etc. occupied the partners almost 24/7. And, needless to say, all the other clients continued to expect high quality, timely accounting services.

The prospect of acquiring a (relatively) very large, prosperous client is incredibly seductive. For many firms this becomes a crowning achievement, allowing the partners to feel they have finally “arrived.” One partner told me about his human, gut-level reaction: that it was good to be playing on the same field as the bigger firms; that he no longer felt like a small timer. And the financial benefits can be considerable – a significant percentage of the revenue surge falls to the bottom line; cash flow improves, staff is fully utilized, profits blossom, bonuses increase and life becomes good.

That was exactly the experience of the owners of the two firms I noted above. And then the party ended. Suddenly and badly. I wanted to talk with them both about their experiences, but waited until the dust settled and the wounds had at least stopped bleeding. When the opportunity arose I asked, “What would you do differently if faced with the same situation today?”

First, let’s be clear. As a general statement, neither would turn down the client. However, they both would take steps to ameliorate the potential downside should a sudden, similar withdrawal occur. A number of possible actions were mentioned, including temporary and/or part time staff, client-specific staff, temporary extra office space that is available on short term lease or even month-to-month, farming out certain parts of the job to others (one specific suggestion was to outsource any and all personal returns associated with the client), etc.

The bottom line was that they would avoid undertaking an expansion that had the consequences of permanency and/or increased financial commitment (e.g. long term lease of much bigger facility, etc.) until such time as the rest of the firm’s business – excluding the big client – could support it. They would also refuse to take on a large client whose business was not very similar to their current focus and capabilities. It is much easier to upsize or downsize if the skill sets of the staff overlap. For example, a mainstream 1040 and small business practice might think twice about taking on a disproportionately large non-profit.

I’ve encouraged you to expand your business development efforts during this recession because I am aware so many of your competitors are not being aggressive seeking business, instead looking inward and focusing upon cost containment. This represents opportunity for readers of this blog, who clearly are interested in seeking new business. And never doubt for a minute that the process described and taught in the CPA Practice Manual (and the version for ProfitCents subscribers) that most of your have purchased is more than capable of securing these premium prospects as clients for your firm.

So, please, set your sights upward. If there is that guy you see every now and then who owns the industrial crane company at the edge of town with what looks like a hundred cars in his parking lot every weekday, target him for some personal marketing. We’ve talked about it here in the blog and the process is explained in your manual. Trust me, it is worth your time. There is no downside. And, who knows, you may just get the opportunity to take him on as a client.

But if he is suddenly going to be a huge fish in your pond, how are you going to expand your capability to service his needs? How can you do it so if it all turns upside down it won’t destroy your practice?

Well, one way is to get another big client. Or two. Or three. Spread the risk that way. Remember, big clients tend to give you big referrals, so it can happen. So, the point of this post is twofold: a) don’t bet the farm on one big client; instead hedge your permanent commitment(s) and, b) you can land these big prospects, and now’s a good time to go for it.

Can Business Development Help Me Maintain My Fee Level In Today’s Business Climate?

There’s a lot of talk about fees in the blogosphere, with the primary questions being, “Can I raise fees? Keep fees where they are? Reduce my fees?”

Most accountants are experiencing significant downward fee pressure from clients. This pressure can be quite direct, e.g. “Brenda, my business is down and cash is tight. I can’t pay these fees. We’ve got to work something out,” or it can be indirect, i.e. the client either slow pays, doesn’t pay, or sends partial payments. In the latter instance the ball is typically in your court to contact the client and see what can be done. When that conversation occurs, the odds are they will ask for some form of relief.

Or, you may simply take the initiative and write down the invoice before you send it. Here’s a strategy you might consider when considering a write down: As noted in a post last year, I had been told by some accountants that they obtained the best results when making a write down if they clearly showed on the invoice that they were doing so. It is appropriate for the client to see what the amount should have been because from a service provider standpoint you always want the client to understand the reality of how much effort it takes to do their work. Several clients use the phrase, “professional courtesy” as a way to label the amount written down, e.g. the invoice gross billing is $6,500, then subtracts ($1,500) as a professional courtesy, and nets the amount due as $5,000.

By doing this you retain the ability to defend a future “increase” in fees by pulling out the prior invoice and showing the client that you discounted the amount due because you were, for example, aware of the client’s cash and margin problems and you value their business and elected to give them some relief. If necessary, you explain that this clearly implies that you were not offering a permanent, go-forward reduced fee structure.

No one I’m talking with has raised fees across the board for 2010. From that I would state the obvious and recommend you stand pat. I wouldn’t reduce fees because it is so difficult to raise them when the business climate recovers. Using the write down process retains your fee structure while at the same time provides you the opportunity to give selective relief to individual clients.

Now, because this is a business development blog, I want to pitch a way you CAN raise fees. To explain, if you are doing “regular” 1040 and small to medium business returns and compliance work, you are to some extent engaged in a commodity activity. Most of your competitors also provide these services. Your clients know this and everyone is aware there is a community standard range of how much you can charge for that work.

However, when you provide consulting, advice or engage in project work the standard is considerably grayer. If you don’t already do so, please consider scheduling look-ahead planning meetings with (at least) your important clients. And don’t limit your discussion to just the business stuff. Instead, ALWAYS ask about life issues the client may have. For example, if the client is in their 50s or 60s you inquire about their desires about retirement timing, or their thoughts about disposition of their business, etc.

All manner of opportunities can arise from these discussions. Project work such as cash projections, what-if scenarios, coordinating with attorneys re estate planning, etc. are all possibilities. Or, the client may inquire, “Victoria, I’d like to explore how I can acquire one of my competitors. Obviously, there’s the price, but what’s the best way to structure payment of the price? How do we allocate value of, say, good will, inventory and so forth? Does the transaction’s timing have any effect upon my tax exposure?” Obviously, this discussion can result in both project work and consulting/advice. To my way of thinking, these are premium services. This is you operating at your highest professional level. My belief is that by developing these options and solutions you are providing maximum value to your client. You should charge accordingly.

In fact, every accountant I presently work with charges a higher hourly rate (when compared to everyday work) for consulting, advice and project work. Take a look at the hourly rates of local attorneys. While you probably won’t be able to get the same level, their rates do provide a reference point. Specific locations will vary, but as one example, in San Francisco, my clients employ a two-tier structure that pegs their rates $50 - $100 more per hour more for these premium services.

I believe that even in today’s recession you will find clients who not only value the expertise you bring to the table, but will pay your invoice and consider it money well spent.

Note: there are two relevant earlier blogs that address fees: See Pressure To Lower Fees, Parts 1 and 2, dated 7/30/09 and 8/09/09 respectively.