Becoming a multiplying force
Most CPAs tell me they’d like to grow their firms. They also tell me they’d like to work fewer hours, raise their fees and increase their take-home pay. The question is not: “How can I raise my fees?” The question you need to ask yourself is: “How can I become more valuable to my best clients?”
Hint: You may have to sacrifice some billable hours short-term to get to the next level of growth.
Suppose you add a new service that increases your perceived value to a client by 40 percent. Even if that service only raises your fees by 10 percent, your client is getting more value from your relationship. Guess who they’re most likely to retain and refer? The trick is creating this value multiplier efficiently. If you’re only reaching one client at a time, one market at a time and have only one or two core services, then you’re not going to grow fast enough to be competitive. You’ll have a hard time convincing most clients that you are their most trusted advisor.
Multiplying force can help
Multiplying force is about developing higher margin skill sets—when used in combined—that make you a unique expert in your client’s issues. You can spend time becoming more efficient at prepping tax returns and financial statements. But you can’t increase your unique ability around doing that kind of work. Instead, focus on becoming more proficient at higher margin services such as advisory and consulting. These will make you more valuable to clients than simply being a financial historian or tax prep guy (or gal). The problem with staying in your lane here is that there are lots of really fast, inexpensive tools clogging the tax prep highway today. It’s hard to deliver more value in that kind of environment.
If you’re like most firms, less than 20 percent of your clients account for at least 80 percent of your revenue. Why not do whatever it takes to keep your best clients very, very happy? “Great,” you say. But, you’re thinking to yourself: “I don’t have time to learn more. I’m already swamped and the time that I’m learning those new capabilities is time that I’m not billing.”
Here’s the problem with that mindset.
You’re assuming things will remain constant and that you’ll be able to bill the same amount for the same services you’ve always provided. Not so! Things are changing constantly. In five years, you’re going to have to provide more value if you’re going to continue to bill your clients. Your competitors and potential competitors are already learning these skills. Can you afford not to?
We just had the biggest tax overhaul in 30 years. Look at your three to five clients. Be brutally honest and ask yourself:
1. What are the unique industry issues they’re facing?
2. What are unique challenges that each client is facing?
3. What do I bring to the table that’s truly unique and that no one else can provide better?
Do your best clients need help with their entity structure (C corp vs. S corp vs. pass through)? How have new real estate rules impacted them? What can you really drill into and tell clients and prospective clients with confidence, “I’ve spent more time on these specific issues than anyone else.” The great thing about tax reform is that everyone is starting from zero. This is your best chance to truly stand out.
Just remember that not all learning is created equal. Focus on what your best clients really need. From that list, focus on the areas that will give you the best ROI on your time.
For example, suppose you’re a CPA whose target is midsize businesses in your area? Learning about horticulture is not a multiplying force unless the horticulture industry is a niche you really want to focus on. Instead, teach your clients about technology solutions, productivity tools and business planning systems for midsize businesses. That’s a multiplying force for you! Think Slack for internal communication, Trello for project management and Traction for business planning. Get really good at using these systems and then teach your best clients how to use them. Helping your clients run their businesses more efficiently makes you a lot more valuable than simply being their financial historian.
Overcoming the single-track CPA mindset
My two and a half year-old daughter loves to run around the house, head down, full steam ahead, yelling, “Daddy look how fast I am!”—until she crashes into something. It’s terrifying to watch, but she won’t change her M.O. She’s so focused on running faster, that (a) she can’t see the hazards ahead of her, and (b) she’s not sure she’s going in the right direction.
Same goes for us. I understand it can be difficult to “change lanes.” Why? They think clients are happy just because they’re not complaining. Here’s the deal: Your clients are only happy until something (or someone) better, faster, less expensive comes along.
Getting started on the path to multiplying force
Understand that learning is an ongoing process; it’s not a one-off exercise you do at your annual retreat. I believe so strongly in this that one of our firm’s three core values is “commitment to continuous learning.” As I explained in my earlier article The Power of the Red Chair, think long and hard about which questions they would ask. What expectations would they have?
Don’t take advantage of your clients’ trust. They trust you because they assume you’re staying on top of tax reform, estate planning, entity structure, depreciation, IT, operations, logistics or anything else that could impact their financial decisions.
Ask yourself: “What do I want to be good at 12 months from now that I’m not good at now?” Then ask if your best clients will pay you for that expertise. If so, you have to commit X hours per week to learning that skill. Think of it as an investment in your future—not as lost billable hours. You have to start thinking about exponential returns on your time—not linear returns. As Abe Lincoln famously said: “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” Some CPAs find it helpful to have an “accountability partner” with whom they can have a 10-minute check-in call every week to make sure they’re staying on track. Find a colleague you respect and hold each other to the fire.
The Pareto Principle for CPAs
Remember earlier when I said 80 percent of your revenue probably comes from 20 percent of your clients? I’ll bet 80 percent of your results come from 20 percent of your effort. That means you’re spending the other 80 percent of your time on relatively unproductive activities.
Be relentless about providing more value for your best client and taking really good care of them. What combination of expertise—i.e., multiplying force—can put that together to uniquely serve them better than anyone else? You may not have it all today, but with the right game plan in place, you’ll get there before you know it.
Being the “expert” in your client’s financial life and understanding all the moving parts is where you add tremendous value as a trusted advisor. Change is tough, but you can’t have true growth without being uncomfortable from time to time. Multiplying force is a great concept for breaking through that single lane mindset.