How cheap clients create absolute chaos in your accounting firm

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Honestly, it doesn’t matter what kind of business you’re running, if you have clients who pay you low value, it creates chaos both from a mindset perspective, and from an operational perspective … but we’ll get to that in a second.

Why do cheap clients create absolute chaos? There are a couple reasons. In fact, there are a lot of reasons, but I’m going to look at the main ones.

First, let’s define what a cheap client is…

I had a conversation with a firm owner and she had 52 clients. They were paying such low fees, it was incredible. I was shocked. She was intelligent, quick and very entrepreneurial. But she was selling herself short for $100 per hour and less than $1,500 for complex tax returns.

My clients they charge $1,500 MINIMUM. Actually, it’s rare that I speak to my clients and they charge at that level. I won’t allow it.

Usually, for project work they charge $8-$15,000, depending on what they offer, depending on the specific transformation they offer to the client.

I digress.

This lady was offering like $50-$100 per accounting client, 52 clients. Man… managing 52 clients obviously isn’t easy. You can put systems in, but to what extent could you evolve your systems if they’re paying you $50?

Let alone finding, recruiting and training the right people to operate it. To what extent can you get the most quality staff if they’re paying you $50?

There are two types of accounting businesses. One that’s built with a TONNE of clients making X revenue. For example, 52 clients charging $50 per hour. Or – type two – 10 clients or five clients charging $3,000 per month.

Same amount total revenue, different number of clients and therefore different systems. One business is in Absolute Chaos. The other is running smoothly.

  • The Number One Reason Cheap Clients Create Chaos Is Because You Lack The Financial & Time Resources To Put In Good Systems

Systems run businesses, people run systems.

Read that line again…

Without good systems in place, finding good people is impossible The person may be a brilliant employee… but how can the operate without a system to operate by.

So, what happens?

YOU – the owner – end up doing all this work, you’re the owner, you’re supposed to be working on your business, not in your business, and you find yourself doing lots of client work trying to make your staff do client work, and you can’t really invest in the systems you need, right?

Now, you need more staff to take the work off your hands. But, to pay for the staff, you need more clients to bring in more revenue to justify employing new people. So you get more staff, you get more cheap clients.

That just becomes a chaos firm. I call it The Chaos Cycle.

  • The second outcome to having those low-quality staff is the mindset.

When I was talking to this lady, she had 52 clients, all paying around $50 – $100.

She didn’t understand that there are other types of clients.

I remember five years ago where I started my finance advisory firm, and I was charging 8K minimum because the service I was providing warranted me charging that amount. But you see, she was selling accounting, selling bookkeeping, selling tax. These are commodities.

…And as a result, your value is based on the price. Your value is based on the commodity that you provide instead of the transformation that you provide. Focusing on client transformation and results is what increases the value of a client.  Or said differently,

Focusing you accounting package on client transformation and results is what increases YOUR value to the client and thus, your pricing.

So, here’s a mindset issue attached to low value clients.

You forget or you never find out that there are businesses out there that need other types of services from commercially and financially savvy entrepreneurs… and they are willing to pay for it.

Every time I speak to an accountant, and I share that my clients are actively charging $3,000 per month or $5,000 – $25,000 per project I get the same response…

“Wow, people really charge that?”

The lady we are discussing was shocked at the lower end. I didn’t even tell her about the 5K per client.

There are people out there that need this set of skills. And, when you work at this level, you can provide and systemize fairly easily.

  • I lied… there is a MUCH BIGGER ISSUE GOING ON HERE…

All you accountants, you clever, clever, beautiful accountants out there are probably highly skilled.

You probably been feed the belief that multi-tasking is a good idea. You go out there, you get clients, you get maxed out and then you bring on the staff, they get maxed out.

Then you keep going like that maxed out, maxed out. I’ve got a tonne of clients who were maxed out when I met them.

This is the kicker guys, they sell different things to different people under different processes.

So now, you are not actually running one business, you’re running multiple businesses within your accountancy firm. It’s ludicrous.

It will literally burn you out.

I had a call with an accountant the other day, she works until till 1:00 AM for Standard.

When growing your business hurts you, man that’s a problem.

Let and me tell you something. It’s weird. It’s so weird, it took me couple of years to get this concept right, but when they are low value clients, they want more. When they’re pinching pennies and they’re thinking, “Well, you know that guy down the road is 100 or 90 a month, you’re 200. You’re a bit on the expensive side.”

When they’re pinching pennies like that, they’re trying to extract as many things as possible, not value, things.

When someone hands you $5,000 to transform something, maybe you do tax resolution, maybe to strategize profitable finance systems. Maybe you do financial modelling. Maybe you’re virtual CFO, maybe you do some commercial thinking…

When people hand you 5K for that kind of solution, they want the outcome. They don’t care if you click your finger and it takes two seconds. They just want you to get the result that you promised. Nothing else matters, but the chaos clients, or cheap clients, man they are a nightmare.

So imagine having 52 of them. Imagine having 100 of them. Personally, I would find a low bridge and jump off… (I jest!)

The Solution Is Easier Than You Think

So here’s a solution. Here’s how you change it – positioning.

You do not position yourself as a commodity.

You move to positioning yourself as a transformation provider for one specific thing.

I’ve got a book here called The One Thing and it’s so powerful.

It talks about just doing one thing. Unfortunately, accounting firms are more like supermarkets these days.

Look, I’m an accountant, I’m qualified. I understand accounting very well. It’s been a while since I’ve done it, but I understand it very well and I see accounting firms who have more services than I knew existed.

Focus on ONE thing, ONE transformation. Get good at that one thing and you will be known for that ONE thing.

So where do you start?

You start by designing your core advisory/consulting offer…

I’ll be returning to this subject soon!