Is tax saving the only way to increase client profit?
Well, it doesn’t, does it? Because that’s after-tax cash.
Yet many businesses consider that the only role of an accountant is to work out ways to minimise and preferably eliminate their tax bills rather than show them how to increase profits. I have sat in meetings where the practice owner has taken calls asking for the lowest price that guarantees the lowest tax bill. And winced as I hear a price quoted followed by an argument as to why it isn’t less.
What I wanted to hear was more like this:
“Let me start by telling you about the clients we work with:
Ambitious business owners who take all the help we give them to keep moving their business forward.
Comfortable business owners who seek help from us whenever they have problems to overcome and stay steady.
Hard working small business owners intent on building something of value but struggling to afford the advice they need
Lifestyling business owners shopping around for the lowest price to do the minimum amount of compliance work to pay no tax yet stay out of trouble.
Which one of these four are you?”
The accountants we have partnered with have learned to do this and it pays.
Let’s unpick it:
Client 1
We all love these guys. They are open minded, determined to succeed, soak up knowledge and advice and pay handsomely because they implement your advice, see the effects, and ask for more.
Client 2
The bedrock of practice income. They are solid, dependable, not too ambitious but quick to seek and act on advice to keep things steady. And they pay well and reliably.
Client 3
This folk work terribly hard and not always well, leading a hand to mouth existence. Yet some have potential and with nurturing can improve, the turning into a winner and paying you back for the below cost fees you charged when things were tough
Client 4
Lifestylers. They have a basic business that makes ends meet and is predicated on not spending anything that doesn’t give an instant return. They want your services for next to nothing and have no loyalty or appreciation for your value.
So, look at your client list and allocate one of the 4 categories to each and then calculate the revenue from each group and the time / resource input for each. I’ll bet all your ROI is from 1) and 2) whilst 3) is your investment for the future and 4) is losing you money for no return and always will.
You don’t need category 4), they are a burden to your practice even though they produce revenue.
Now, back to the aggressive phone call my practice owner has just taken. He now describes his 4 client categories and asks the enquirer to choose one. If he hears 1) 2) 3) he will book a compulsory meeting to discuss exactly how the practice will help them to achieve all their business and personal goals. He will say pricing is impossible until it is agreed what needs to be done, and with what outcome in mind.
If he hears 4) he politely explains that the practice doesn’t provide that service because it only works with motivated business owners to whom it can add value.
When s/he meets the prospect s/he will carry out a full business assessment, check the owner’s ambitions and present him / her with a full array of integrated services that touch on every part of the business and the owner personally.
S/he will portray the practice as a long-term business partner working together to get results from as many or as few of the services as they decide to buy.
Which is all a great stuff but needs some courage, because a section of clients will now disappear as unwilling to pay the increased fees that give a worthwhile ROI and 80% of the enquirers will now leave empty handed.
But think of the quality of what is left behind, the revenue it will generate and the time available to spend with clients who share your values.
So, what next?