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Considerations for culling your tax & accounting client list

Will Hill  Owner / Will Hill Consults LLC

Will Hill  Owner / Will Hill Consults LLC

The decision to cull your accounting firm's client list is a difficult one, but these 8 steps may help make the transition easier for all parties involved

The conversation about culling your list of tax & accounting clients is likely one that you have had or heard in the past six months. With staffing challenges, the growing shift to advisory services, increased client opportunity from shifting business climates, and the ever-changing regulatory environment, it is no surprise that this is a point of common conversation.

However, that does not make the decisions or process of executing such a culling process any simpler. Blindly jumping in is very likely not a great idea! Instead, tax & accounting firm leaders need to consider these eight factors as their firm wrestles with the decision to curtail their relationships with certain clients:

1. Acknowledge emotion

You should accept that throughout this process there will be emotion — one cannot deny or hide the emotion that will be needed to work through this process effectively. Rather, it is best to put the emotion out on the table early. If the emotional components are not part of the conversation from the beginning, they will slip in decisions and adjust rationale. And if this happens, the others involved with the conversation and decisions will see through it and begin to question motivation and hidden agendas.

Instead, call out the emotional components up front, which allows you to keep the transparency element where it needs to be for success. The emotion could be around the relationship to the client, the type of work represented by the client, the length of time that they have been a client, or a variety of other factors. The sources of this emotion is not the focal point here, but rather, it is critical to acknowledge and discuss that these emotions are real and play a role in decisions and how an individual responds to others as these decisions are made.

2. Define the minimum floor of client service

As culling clients is considered, there must be a standard against which each client is measured. Not only will that help guide in this discussion, but it will also help with bringing in the new kind of clients who align with the firm goals going forward. What are the services the firm wants to provide? What is the mix of those services together? Is the firm willing to do tax work without requiring the client to let the firm look at the books at a particular cadence? Are there services with which the firm is inexperienced and inefficient that will no longer be performed? Many clients will exceed the minimum measurement, which comes naturally as a definition of minimum, of course; but having this as a standard will help keep the emotional component from overriding what may be a clear, smart decision.

3. Identify the firm capacity

This is the numerical part of the puzzle, but it can be a challenge to measure; however, the benefits to both the staff (manageable workloads) and the clients (properly sized service delivery and proactive help) are worth the effort to make this measurement. As firm leaders engage in this discussion, it must be in context of either i) the capacity in the way in which the firm serves current clients; or ii) the capacity where all clients are above the minimum service floor going forward. Ultimately, knowing this information may lead to decisions on staffing instead of (or in addition to) culling clients, but it must be key part of the conversation.

4. Determine the Top 3 characteristics of clients the firm is best suited to serve

This could be about the industry of the client (niche); or the service type that is being provided – or could be provided. Perhaps it is the financial size of the client (with boundaries possible for both the lower and upper level); or the temperament (friendliness) of the client; or even the willingness to use the firm’s systems and methods. There are many choices but delineating the Top 3 again will help smooth the decision process.

5. Start with the simple choices

Tax & accounting firm leaders should be asking: What clients make up the bottom 10% of profitability, when the time/resource investment is examined? Of those who fall in that strata, which fail to meet the criteria for floor of services, and do not possess the Top 3 characteristics? These client should be a simple choice to transition out quickly.

Further, leaders should ask each person who deals with clients daily to provide one of two clients who regularly don’t follow process and make those workers’ days miserable. Allow your staff to decide if those clients should be transitioned out and then follow through. While this may feel extreme to some, the confidence the team will gain in leadership is a great benefit — in addition to the possible capacity gains that were thus far unknown because the team was not sharing how much time or emotion these clients were taking.

6. Provide an opportunity to meet the standard

For those clients who fall below the service floor minimum, yet there remains capacity in the firm, offering them a change to reach the standard is a great option. Letting the client know that as the firm has evolved it has identified the service level needed to provide the type of service that is most impactful for the client. Share what that level is, show the client where they fall below the level, and give a timeline for transition or opportunity to increase the service level the client receives from the firm.

7. Find clients a new home

This is generally the least followed element I’ve outlined here. The way in which a firm transitions out a client actually says a lot about that firm. The power of referrals and social media are great and cannot be ignored through this process. Recommending to the client two or three firm alternatives is one route to take. This leaves the client with a sense of choice, especially when the choice to remain was taken from them.

This also keeps the firm from being in a position of just recommending just one place and being concerned about the quality of work or service that results when the client moves. If the firm is wary about providing precise recommendations, offer the outgoing client a list of questions to ask potential other tax & accounting providers or key facts about the client that potential providers should know in order to work towards the right relationship.

8. Give the transition time

In these transitions, give clients enough time to either exit or shift into a client that fits. The transition doesn’t have to be an ultimatum, but rather a window into the next 12 to 18 months. Once a client is aware of the window, many will go quickly, but some will use that window to have conversations about changing into the type of client that fits the firm going forward as well.

Any conversation about culling your client list is difficult, and the decisions are often layered and challenging. While these considerations will not make the process simple, the structure and intentional approach will help the firm drive positive results from the conversations and decisions.

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