- Key insight: Find out how measuring clients per million in revenue changes accounting firm growth strategies.
- What's at stake: Firms that fail to transition to mid-market clients risk falling into low-performance categories.
- Expert quote: "You can't have the right practice... with the wrong clients." — Joe Woodard
Successfully growing an accounting firm doesn't necessarily require more clients, according to industry thought leader Joe Woodard — just the right ones.
"You can't have the right practice with the right people and the right service mix and the right technology with the wrong clients," he said in his keynote address to attendees of Accounting Today's Firm Growth Forum East, held last week in Washington, D.C.
Finding the right clients involves intentionally identifying those who can benefit most from your firm's services and are able to pay for them, suggested Woodard, who advises thousands of accounting firms across the country, publishes the Woodard Report and hosts industry-leading technology conference Scaling New Heights.
That doesn't mean more clients, he was quick to note; in fact, in many cases it will mean fewer.
"This is the metric that matters: your number of clients per million in annual revenue," he said.
In the early days of a practice, it's common for accounting firms to take anyone who can sign a check, which often leads to books of business that include large numbers of clients who contribute relatively little in the way of fees.
"Aim to move to having no more than 25 clients per million in revenue," Woodard advised. "That's $3,333 per month per client."
He said that wasn't too high for a CAS practice, though it would represent a very strong tax client.
Paired with the number of clients per million in revenue, Woodard recommended keeping an eye on revenue per professional at the firm, with $250,000 per professional being a good benchmark.
Looking ahead, he said artificial intelligence might increase that ratio, as individuals are able to do more work in less time.
"But don't let it lower your clients per million," he warned; rather than serving more low-value clients, the goal should be to offer more and more valuable services to the same number of high-quality clients.
One place that firms should look for those clients? The middle market.
Drawing on data from Accounting Today's Blueprint for Growth Survey, Woodard noted that low-performing firms (those with revenue growth of less than 10% a year) had practically no middle-market businesses on their rosters, whereas high-performing practices tended to have high numbers of them.
"Mid-market clients have more resources and larger budgets for professional services," he explained. "They have less pressure to bring their finance team in-house — and as your clients grow, there may be opportunities for fractional CFO, or even to help them build their finance team, and then advise that team."
While some might worry they'll end up helping their clients outgrow their services, Woodard said that's better than having them stagnate.
"If you're going to have churn," he said, "I'd rather have it because my clients are successful than because of my failure."
Introductory bullet points created by AI with editorial review.
