Not all of my clients want to discuss profitability issues with me. So I don’t always know how profitable they are. If it doesn’t come up during our conversations then I assume they are happy enough with their current level of profitability. Or perhaps they are embarrassed because they are less profitable than they would like to be. Sometimes it’s a topic that emerges as an issue to discuss, explore and resolve down the line.
When we do discuss profitability and it is less than ideal I find this is invariably due to a combination of two or more of the following factors:
- Wrong clients – Too many legacy clients with simple needs and low fees
- Wrong fees – The accountant has been resisting discussing fee increases and also still quotes low to get the work
- Not planning properly – This leads to extra work, late nights and overtime rates
- Not working the right plan – Taking whatever work comes along even though it’s not as profitable as the work they want to be doing
- Escalating overhead costs – Taking on more and more software subscriptions and failing to cancel the ones not being used
- Inefficient staff – Failing to monitor and motivate staff to be more efficient (and to report extra work that could be billed)
- Unclear expectations – Allowing clients to take the accountant for a ride or to misbehave generally
- Unrealistic expectations – Hoping that clients will ask when they need advice
- Not working hard enough – too relaxed and laid back for too much of the time
- Not working smart enough – failing to plan out the work, to talk with clients and to attract the right prospects
- Wrong service offerings – wishing they could attract better quality work without promoting their expertise adequately
- Doing too much themselves – limiting the time available to spend on advisory and higher value work as they are bogged down in dealing with all aspects of each client’s affairs.
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