It looks like we are going to be ina tough economy for the foreseeable future. That doesn't mean that you have to be satisfied with mediocre profits. I want to share some things you can do to help improve your profit picture during the next 12 months.

But before I get into specific tactics, remember that there are some basic operating principles you need to embrace.

* Take strategic planning seriously. Firms that embrace a strategic planning culture are more profitable than those that do not.

* All firms need an effective managing partner who will set the tone and direction and inspire others.

* Pay all your people (and that includes partners) based on performance. Throw out any entitlement elements of your compensation plan (or make them a very small percentage of the overall compensation).

* Strive to develop a strong marketing culture, especially among the owner group.

* Create a culture of accountability for partners and employees.

Now that you have the foundation in place, you can start implementing some or all of the following tactics.

1. Identify core clients. Analyze your client base and place them into one of the following four quadrants: profitable core clients (A), non-profitable core clients (B), profitable non-core clients (C) and non-profitable non-core clients (D).

Focus your time and energy on clients in Quadrant A. Develop a plan to move clients from Quadrant B to Quadrant A. Keep clients in Quadrant C as long as they don't pull you away from Quadrants A and B. Sell or terminate most clients in Quadrant D.

2. Raise fees. Yes, even in this market, raise your fees as much as you can. While you may not be able to raise fees in the compliance area, you should have no trouble raising them in your consulting services. Any consulting service that saves a client additional dollars, or adds value to their business operation or personal wealth, warrants a higher fee. If you do not have multiple billing rates, now is the time to implement them.

3. Invest in business development. If you know your core clients, then go out and get more of them. Focus your business development work - seminars, presentations, networking with core client groups and referral sources. Be careful not to put too many dollars into marketing communication projects. These can turn out to be black holes.

4. Develop competencies. The only way you will obtain higher fees from the work done by your people is to develop their competencies. These may be in areas such as technical, leadership, communications, etc. It stands to reason that the more your people can help their clients achieve goals, the more the clients will be willing to pay.

5. Reduce your delivery costs. The goal is to reduce costs without sacrificing quality. Most work in accounting firms can be done by lower-level (less expensive) personnel. This doesn't mean that you charge the client any less. Fees stay the same or are increased. You can accomplish this by using part-time employees, outsourcing some of the work or by using paraprofessionals.

6. Improve efficiencies. One of the biggest drains on profitability is inefficiencies. Every time you redo work in the office, you are taking money from the bottom line. Develop one way of doing things in the firm and train everyone. Flow-chart and analyze how various work projects flow through your office. If you can eliminate unnecessary steps, you are on the right path.

7. Deal with underperformers. Make sure that people increase, and don't drain, profits from the firm. In the same manner that you want to reduce or eliminate unprofitable clients, you want to do the same with underperformers, whether partners or non-partners.

8. Lower overhead. While you will never grow a business by merely cutting costs, you should still review your space needs and the productivity of your support staff. During good times, expenses increase faster than normal. Now would be a good time to see which line items can be trimmed.

9. Expect more from your people. Set goals a little higher and clearly define your expectations for each individual (including partners) in the firm. Above all, measure progress on a quarterly basis. It's too late at the end of the year to make any changes.

10. Improve realization. Challenge all write-downs. Hold billing meetings either with all the partners for smaller firms and with partners in the same department in larger firms. Learn from those that have the lowest write-downs and then develop best practices.

August Aquila is a consultant to the accounting profession. Reach him at (952) 930-1295 or

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