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Accountants undergo post-Covid client culling

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In the wake of the pandemic, an increasing number of firms are re-establishing their client base. We spoke to expert accountants to explore the best ways to tackle a client culling.

27th Jul 2021
Community Assistant AccountingWEB
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After a year of fear, furlough support and free advice, there has never been a better time to reflect on your client base.

As we emerge from the pandemic, accountants have been seizing the opportunity to filter out the client relationships that are no longer serving either party.

Whether you’re wanting to up your fees or just clear out those people you dread calling, refining your client base can be a great way to re-establish your focus as a firm.

Step 1: Diagnosis and selection

Figuring out which clients are the ones to go is the first step.

Founder of CRC Accountancy Calvin Cooper recommends focusing on the people who understand your value: “What we found was that the bigger clients who needed more support had the budget to get more support. They were really grateful for all the extra work we were doing during Covid.”

Cooper compared having 1000 £1,000 clients to having 100 £10,000 clients. Rather than having 1000 people fighting for your attention, focusing on 100 people allows you to better manage the level of support they receive, for the same value.

“I have had a big clear out of people who don’t tow the line and have had chance after chance to sort themselves out,” commented owner and CEO of Avery Martin, Glen Martin. “I cut about 30% of my client base in April/May. When I was doing the clearance requests I was a little concerned at how many we had cut, but the time I got back instantly was huge.”

For the Director of Smooth Accounting Jeri Williams, the culling process served as a financial boost: “We reduced our client numbers from 600 to 400. This was a strategic move, despite signing up lots of new business during the past 12 months. Our average fee per client has gone from £1600 pa to £2600 pa in the past year. We are now focused on having the right clients, paying us the right amount.”

Refining your ideal clients can also benefit your staff. Managing director of Kinder Pocock Sharon Pocock felt this needed addressing after a client recently pushed a team member to tears: “We've got really strong values, and one of them is to act with happiness and love. One of the things that stands for is not doing any work that doesn't make you happy. My team deserves respect and to be valued, and that wasn't happening.”

Pocock has found that a lot of accountants are in this tricky position after spoon-feeding their clients throughout the pandemic, often giving away services for free.

“We did so much for free last year from March onwards, because it was the right thing to do,” she said. “But obviously, we didn't have any foresight as to how long it would go on. Financially it's had an impact, and we've got a backlog because a lot of our other work didn't get done.”

Addressing which clients have left you drained throughout the past year and which have expressed gratitude for your support is a positive way of signalling which relationships are the ones you’d like to keep long term.

Step 2: The culling process

Once you’ve established which clients you’d rather leave behind, the next step is to disengage.

“My approach is to write a letter spelling out exactly what someone needs to do to remain a client, and by when. This puts the ball firmly in their court. 80% of the time nothing changes and I resign with a happy heart. 20% of the time it transforms behaviour and some have gone on to become really good, long-term clients,” commented AccountingWEB member mr.mischief.

For Cooper, the process was based on value: “We’ve been repricing the ones that we felt were on too low a fee, and they’ve actually seen the value we’re bringing to their business. They’re happy to pay that extra money. The little guys that didn’t appreciate it just see that as an extra cost for no deal returned, so we’re left with profitable clients.

“For some clients we’ve said we’re looking at our own business model and what we're trying to deliver – we say we’re probably getting to a point where we can't see that we can add that much value to your business, and maybe you're better placed with another firm that can tick all the boxes that you need ticked.”

He has found that people appreciate the honesty and are happy to seek services elsewhere – it allows clients to align with a firm that gets what they need.

Cooper also advised positioning the prospect in advance to give them time to adjust: “We always tried to place them with other firms, because I think it’s important that you don't just boot them out the door. They might grow and want to come back, and then they'll have a need for everything that we do down the line, so you want to leave it on good terms.”

“We’ve done a client matrix before and graded all our clients,” explained Pocock. “How much do we like working with them? Is the fee right? Do they pay on time? The last 18 months has felt like the wrong time to let go of people, but now we are undergoing a grading again and there are going to be people that we’re going to politely disengage from.”

Previously, Pocock disengaged from all her paper-based clients through a letter that explained they were going completely online. At the same time, they provided an accountant who liked dealing with paper that would be perfect for them.

This time around, the reasons are more fee-based: “We didn’t do any service reviews for the whole of 2020. They involve questions like, what are we providing? What can we provide? What should we be providing? And how much should it cost? Then we can say this is what we could be doing for you, but it means this is what the fees are going to be.”

Step 3: Maintaining a secure client base

Undergoing a client culling is also useful in paving the way forward for future prospects.

For Cooper, it’s allowed him to understand the kind of client he’s looking for: “We'll work with a business once they've had half a million turnover and five employees. They have enough equity and variables within their business and there's enough stuff that we can go in and help them with – definitely in terms of the finance department services, but more of the strategic stuff such as growth and culture development.

“What we’ve found is they've been through the struggles themselves a bit, so they get it. They've obviously got a good enough business head on them to have gotten to that size.”

Establishing a clear picture of prospective clients has also given his team more competence in pricing their own services to existing clients too.

“We don't want to upset clients or get a reputation that we're letting people go, and we're not looking after them. But at the same time, we've got to be looking after people that we enjoy working with and that we've got a mutually respectful relationship with,” said Pocock. “It's your business and you make the decisions, and you should be happy.”

To hear more about refining your client base in the post-Covid era, catch up with this episode of AnyAnswersLive on demand. 

Replies (21)

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By Mr J Andrews
27th Jul 2021 10:21

Not quite a mercenary article. But there will be those other ''culled''clients for no other reason than being unable to afford the additional time costs imposed by MTD.

If these poor buggers thought Covid was a nightmare , the final straw is yet to come. So much for Sunak's help to small businesses.

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Jennifer Adams
By Jennifer Adams
27th Jul 2021 11:00

Clearing out is something that many accountancy firms do and indeed should do in the first week of Feb after the stress of Jan is over but it needs to be handled with sensitivity.

We all know the 20: 80 split - 20% of clients bring in 80% of income. When you begin the process you need to start with that and then Sharon's matrix is a good idea. But you cant be too clinical.

As Tallula mentioned - my criteria is that if the client's name comes up on my mobile or calls the office and I think 'oh no' .. then they are on the list to go. However, some of those clients have recommended me to friends and colleagues and those clients have turned out to be very worthwhile. So what do you do.. dump the client who recommended you? What will they tell their friend who you really want to keep?

Cooper recommends focusing on the people who understand your value. How do you know which have valued your help during the pandemic? Do you ask them before they are dumped? I received a bunch of flowers last week from someone whom I didn’t think I'd given any more help than others. In fact, I hadn’t spoken to him. The card just said 'Thanks for just being there'.

I know we are in business to make money but many clients have been and are still going through a rough time and then to have their accountant dump them just at this moment when the government grants havent even finished is harsh and cruel. Especially if they have been with you for years.

And something that hasn’t been mentioned in the article is reputation. To a small town accountant reputation is key to attract the 'right' client. Will potentially 'good' clients want to come to an accountant who is known to get rid of you if you dont come up to scratch turnover-wise?

More than ever 'dumping' clients needs to be dealt with carefully and with sensitivity if you intend to do a clear out before Christmas.

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Replying to Jennifer Adams:
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By Geoff56
27th Jul 2021 12:12

There is another 20: 80 split. 20% of your clients cause 80% of your problems.

Having said that, I do find it very difficult to sack a client who causes me headaches, if they appreciate what I do for them. I usually need some concrete reason e.g. conflict of interest.

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FirstTab
By FirstTab
27th Jul 2021 11:10

Please refer the clients you dump to me. I will sort them out.

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Replying to FirstTab:
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By DavidAWilks
27th Jul 2021 11:47

And me!!!

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Red Leader
By Red Leader
27th Jul 2021 12:00

In the context of a pandemic, "culling" might be an unfortunate way of describing de-selecting clients.

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By cjsanghavi
27th Jul 2021 12:13

We want to serve the clients so please remember our name.

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7om
By Tom 7000
27th Jul 2021 12:35

100 x 10k clients. Mostly audits and complicated tax questions and the risk is Very high. Any errors could be disastrous.

1000 1k clients. Easy bread and butter stuff no hard questions. Very low risk. Any errors are less than trivial

Same time to deal with it same number of staff

But much harder to build a client base at the 10k level as client profiles are a giant pyramid ... more at the bottom

Just my thoughts

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Replying to Tom 7000:
Red Leader
By Red Leader
27th Jul 2021 16:46

Absolutely spot on.

Thanks (1)
Replying to Tom 7000:
FirstTab
By FirstTab
27th Jul 2021 18:35

You have described Tax Assist's approach. Keep it simple. Even they are appearing to be changing now since the current environment demands it.

The competition is fierce to get the bread and butter stuff. This is combined with more clients going the DIY route.

Further, with the world getting smaller. More and more clients want above the simple stuff. It starts off as simple and then moves on to other tax areas such as residency and domicile issues.

I am not certain, going forward, simple work will be sufficient for a practice.

My view is to build a solid tax understanding and knowledge (ATT level) to know what needs to be outsourced./get outside advice. Less about fluffy stuff, staff motivation etc. Besides these areas are so simple as compared to technical tax knowledge.

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By Ian McTernan CTA
27th Jul 2021 12:45

If you have to do this sort of culling then there is something wrong with your system of acquisition in the first place- taking on way too many clients and then trying to cherry pick what you consider the most profitable ones.

Luckily I'm not in that situation as I don't take on too many in the first place and know all my clients personally - they are not just another fruit to be picked for maximum short term gain. I have shared the pain with many of my clients over the years when they hit hard times, and that has been rewarded many times when they come good and stay with me.

But I guess if you are just in it for the maximum amount of money then all this culling and short term maximising profits makes sense to your model.

I won't retire rich but neither do I have to lie awake at night stressed out by too much work.

And my golf seems to be improving this year too.

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By LemonJelly
27th Jul 2021 17:13

It's 'toe the line' not 'tow the line'....

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A Putey FACA
By Arthur Putey
27th Jul 2021 18:48

Mine seem to sort themselves out via natural selection.

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ALISK
By atleastisoundknowledgable...
27th Jul 2021 19:31

Who are all these practices that can afford to dump semi-significant fee blocks?

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Replying to atleastisoundknowledgable...:
A Putey FACA
By Arthur Putey
27th Jul 2021 20:55

Small practices that have a choice, who care more about working with clients they like or don't actively dislike and if they had known at the beginning what they were like wouldn't have taken them on?

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By K81
30th Jul 2021 09:05

we have just taken a new client who has purchased a buy to let - she approached 3 other local accountants before us (I don't know whether to be offended at this!) and all three told her they are not taking new clients at the moment.

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By AnnWilliams
19th Aug 2021 12:11

Related to this, we cannot continue as we have so much work coming in and cannot recruit anyone despite offering higher and higher salaries. As I am not in good health and getting old I have decided to sell around a third of clients. I think there was a facility on year many years ago but would welcome any suggestions as to the best way to sell. Failing that I will just have to write to those people and request them to find alternative services.

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Replying to AnnWilliams:
7om
By Tom 7000
19th Aug 2021 12:44

Call the 3 firms who are closest to you in distance.... It saves writing a heap of prof clearance letters and providing handover info.

I am sure some one on here will make you an offer too, we would

[email protected]

If you want to discuss it

Tom

www.ttca.co.uk

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Replying to Tom 7000:
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By AnnWilliams
19th Aug 2021 14:55

Thank you, I have already spoken to one who I am seeing next week. I know them well. I was going to try others but I am concerned they may put out the word that I am selling some clients.

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Replying to AnnWilliams:
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By AnnWilliams
19th Aug 2021 12:45

I am having people PM me. I should have added this is a traditional practice that most clients like to visit and most are not cloud based. In reality most would want something similar and also something near North Portmouth. Does accountingweb still have the selling facility?

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Replying to AnnWilliams:
7om
By Tom 7000
19th Aug 2021 16:47

call Jerri williams at Smooth accounting, shes in your neck of the woods... and would be interested I bet

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