Building a Better CPA Firm Business Model...Before and After Metric Before After Revenue $436,812 $420,367 Clients 418 251 Average Tax Return $230 $469 Client Happiness Low Better

Building a Better

CPA Firm Business Model

1 © 2015

© 2015

Sole Practitioner in Idaho

1

The Conflict

© 2015

2

Defining Moment

© 2015

3

Before and After

Metric Before After

Revenue $436,812 $420,367

Clients 418 251

Average Tax Return $230 $469

Client Happiness Low Better and Getting Better

Hours Worked A lot Fewer

Stress Levels High Lower

© 2015

Agenda

© 2015

• Mindset/Old Ways of Thinking

• Profit Drivers

• People and Team Alignment

• Service Model and Pricing

*reference material

4

Photo by Leo Reynolds - Creative Commons Attribution-NonCommercial-ShareAlike License http://www.flickr.com/photos/49968232@N00 Created with Haiku Deck

Pareto Analysis

© 2015

© 2015

5

Pareto Analysis

© 2015

• Revenue

• Average Charge Rate

• Gross Profit

• Firm Specific Factors

• Intangibles

Pareto Analysis

© 2015

• You can not correctly Price the Wrong

Customer

6

Business Model

© 2015

Business Model

© 2015

All Rights Reserved 25 © 2015

Your Firm and Blockbuster CPA Firms & Blockbuster

Brick and Mortar Thinking

Denial of the Future

Real Estate/Location Drives Strategy

Not Leveraging Technology

No Scale (People and Real Estate)

Lack of Alignment

Customer Empathy (late fees, unlimited DVDs, Pricing Model)


Some Amazing Facts • Blockbuster could have purchased Netflix for

$50 Million

• Netflix Market Cap. $37 Billion

• Will enter 200 countries by 2016

• Stock up 83% this Year

• 3 Billion People on the internet today

• 360 Million in 2000

• None when you developed your business

model


Relevant • Dairy Focus (www.genskemulder) 3 offices,

30 states, 600 farms

• McDonalds (www.concannonmiller), 200

owner/operators, 1000 restaurants

• International Tax (www.gtn.com), mobility tax

services, 1st employee

http://www.genskemulder

http://www.concannonmiller

http://www.gtn.com

Commodity

• Cloud Accounting Systems will ultimately

provide tax information (or ADP will).

• QuickBooks (Self Employed)

• TurboTax (handpicked experts)

© 2015

Small Firm Tipping Points • Mindset.

• Director of Operations.

• Senior Person.

All Rights Reserved 29 © 2015 6a

“Most People Aim at

Nothing and Hit it with

Amazing Accuracy.”


Your Strategy and Business Model will

Drive your People Strategy

31 © 2014

Photo by Leo Reynolds - Creative Commons Attribution-NonCommercial-ShareAlike License http://www.flickr.com/photos/49968232@N00 Created with Haiku Deck

• Big 4 Stopped Hiring

• Culture Fit is Biggest Success Factor

• Referrals are the most successful strategy

• Developing Pipeline is a Best Practice

• Knowing your next 2 hires

• Purpose, Purpose, Purpose

What in the World is Happening?

33 © 2015

Generational Shifts in Attitude

© 2015

Yesterday Today

Desire Pension/Security Purpose/Meaning

Need Good Boss Great Culture/Connected

Hours 9-5, Mandatory Saturdays Whenever

Workplace Office Wherever I can get a connection

Duration Partner Whatever

Focus Work/Survival Life/Enlightenment

Personal Car, House Zip Car, Portability

Generational Values

A Word on Hiring

and Firing

36 © 2015

37 © 2014

ReNew Best Practices • Pipeline Development (next 2 hires)

• Your firm as a Product

• Competency Model and Job Descriptions

• Personal Development Plans

• Coaching

• 3 lunches a Year

• Engaged Partners

Performance Appraisals

All Rights Reserved

• What do you think?

• How can I help?

Crucial Conversations: Patterson

8 words to change your

firm

Connecting To Your Team

© 2015

• What are the projects/days you obtain the most satisfaction (Heymann)from your job?

• What are the project/days you find the least satisfactory?

• What can we do to create more satisfaction days for you?

• Can you please explain how feel connected (or not) to the Vision of the firm?

• What else do you need from me to be more productive?

Connecting To Your Team

© 2015

• How do you feel our Culture is aligned with our

Vision?

• What things do we need to work on from an

infrastructure perspective?

• What systems do we need to change related to

clients?

• Is there anything you think we should do in terms of

marketing and sales?

Personal Development Plans

© 2015

• What do you need from me to be more satisfied?

• What are your goals for the remainder of the year

(or insert appropriate timeframe) in the following

categories?

• Projects/Work Completed?

• Client Service?

• Business Development?

• Technical Development?

• Personal?

7

Client Service Model & Pricing

44 © 2015

“A sacred cow is something

that is considered immune from

question or criticism.”

Sacred Cows

Old Ways of Thinking • Clients Buy Time.

• Time Equals Value.

• Client wants to know how much

time it took to complete their

project.

All Rights Reserved

Picasso


Perils of Time Based

Billing and Billing in

Arrears • Firm and Client Interest is Not Aligned.

• Client Bears the Risk and thus the Profit.

• WIP and A/R Matters.

• Write Offs.

• Communication Breakdown

(Scope/Timing).

All Rights Reserved

All Rights Reserved

Old Ways of Thinking

© 2014 ReNew Group, LLC All Rights Reserved 50 © 2014

Laws of Pricing

• Value is Subjective.

• Price the Customer (not the service)

• Value Must Exceed Price.

Ron Baker

What Business Are You In?

Client Thank You Notes

Driving Client Value Increase Reduce Improve Create

Revenue Cost/Waste Productivity Strategy

Profit Time/Effort Process Systems

Market Share Risk Tracking Processes

Retention Turnover Morale Products

ROI/ROA Conflict Image Services

Efficiency Administration Reputation Brand

Cash Flow Complaints Skills KPIs

Viability Overhead Quality Legacy

Control Anxiety Loyalty Retirement Plan

Predictability Uncertainty Quality of Life Future

Security Stress Marriage Wealth © 2015 ReNew Group, LLC

Driving Client Value Increase Reduce Improve Create

Profitability Drama

Focus Financial Surprises

Peace of Mind Volatility

Impact Taxes

Fun

Clarity

© 2015 ReNew Group, LLC

Emotional Utility

• Don’t sell me clothes. Sell me a sharp appearance and attractiveness.

• Don’t sell me insurance. Sell me peace of mind and a great future for my family and me.

• Don’t sell me a house. Sell me comfort, contentment, a good investment and pride of ownership.

• Don’t sell me books. Sell me pleasant hours and the profits of knowledge.

© 2015

ReNew Best Practice

Opening: “Mr. Prospect (or Client). We

will partner with you if we can agree to

our mutual satisfaction, that the value we

are creating is greater than the price. Is

that acceptable?”


Price Theory

All Rights Reserved

• Reduce the Pain of Paying.

• Pricing is Contextual.

• Anchor Your Pricing.

Pricing Process • Diagnosis - complete understanding of the prospects

concerns, expectations and where they see value

• Alignment with Client/Prospect in Writing

• Develop Pricing/Plan Options (Internal), Price the

Client

• Present Options in an Engagement Letter

• Project Management Including Budgeting/Scope

Creep/WIP and A/R Management

• Pricing Analysis/Project Review including Gross Profit

and Average Charge Rate Analysis

© 2015 ReNew Group, LLC 7a

8

Eliminating Accounts

Receivable

© 2013 ReNew Group, LLC All Rights Reserved 62 © 2014

ReNew’s Law Bad Clients Drive Out

Good Team Members.

All Rights Reserved © 2015 ReNew Group, LLC

ReNew Firm Of Today

65 © 2014

Metric Determines

Firm Not the #1 Client Team

Personal Development Plans Partners/Team

Monthly Reoccurring Revenue Partners

#A’s, B’s, C’s Partners

Source: HSD: New Level Group

Nietzsche

© 2015

“Many are stubborn in pursuit of

the path they have chosen, few in

pursuit of the goal.”

• Read our White Paper

(www.renewgroup.com)

• Pareto Analysis

• The first 10 firms that email me at

[email protected] will receive

a complimentary 25 minute

consultation.

Next Steps

© 2015 ReNew Group, LLC All Rights Reserved

http://www.renewgroup.com

mailto:[email protected]

Thank You!

My Private Library

© 2014

• Only Consideration is Price.

• Does not ask about Price.

• Client says Price is no object.

• Asks too many questions.

• Complains about former CPA (has had

several).

Warning Signs


Positioning Matters •So that we don’t waste your time and put you with the best person to

help you in our firm is it okay if I ask you a few questions? Also,

please note our minimum price for individuals is $500 and

businesses is $1000. Have your DOO pause….i.e. if they hang up on

you know they aren’t a great fit for your firm.

•How did you hear about us?

•Are you an individual or business?

•If a business…. ask how long have you been in business?

•Who currently is your CPA? If they aren’t currently using a CPA the

likely next step is not a Partner.


• Alignment in Writing.

• Price the Customer (typically a range

they will accept).

• No such thing as a perfect price.

• Sooner you price the lower it will be.

• Other Terms.

• Not set by your Competitor or bad pricer.

Pricing/Service Options


• Double Thumbs Up (A)

• Single Thumbs Up (B)

• Indifferent (C)

• Single Thumbs Down (D)

• Double Thumbs Down (F)

Firm’s Internal Pricing


Best Practice: Let Your Team Vote on Firing a Client!

Monthly Work

In order for us to help you achieve your objectives

and provide you timely service you will provide us

all of your information by the 10th of every

month. We will provide you a monthly financial by

the 25th.

If you do not provide us all of your information by

the 10th of the month we will provide you a monthly

financial within 3 weeks of receiving all of the

information. This will include an additional price of

15%.


“What is my budget for

that project.”

Take The Pressure Off


Price Options – Building Fences

• Maslow’s Hierarchy.

• Tax

Appointment/Meetings.

• Turn Around Time.

• Communication Turn

Around.

• Goals/Objectives/Alignm

ent.

• Technology


• Terms.

• Talent.

• Access to Advisors.

• Tax Liability

Guarantees.

• 8821.

• Training.

• Customization

• Metrics: ACR, GP, On Time.

• Scope Review.

• Did we add value?

• Did we leave money on the table?

• What would we have done differently?

• Any knowledge/IP we can leverage?

• Team Communication?

Price/Project Review

All Rights Reserved


• How could we have enhanced the Perception

of Value?

• What did we teach the client?

• Are we addressing all of the client’s needs?

If so, why not?

• Did this project enhance the relationship?

• Did we impact our role as the Trusted

Advisor?



• How has our view on the price changed?

• Did we have the right team on the

project?

• How were the costs?

• How can we thank the client?


All Rights Reserved


• Clear Purpose, Strategy and Positioning

• Pricing is a Core Competency

• Disciplined Project Management

• Sell Outcomes, not Time

• Adhere to Client Selection Guidelines

• Routinely Prune Clients

• Don’t Treat All Customers Equally (do treat

everyone fairly)

• Have a Value Council

ReNew Pricing Best Practices


• True Value Can Only be Discovered in

Engaging the Client

• Do Not Price Alone

• Client Selection continues to be crucial

• Need more focus on duration

• Options get the client to compare us to us

rather than other firms

• Pick A Few Items and Work on Them

• Stop Being Afraid of Changing My Life for the

Better” CPA in Florida

Firm Feedback


ReNew Best Practices • Articulate the high-definition vision of where the firm is

going.

• Encourage employees to communicate openly and help

shape the vision.

• Be present with each individual employee and nurture a

“human” relationship.

• Connect the dots for employees showing how their work is

making a difference.

• Empower employees to feel and to be valued contributors.

• HHH Sandwich with Scott/Town Halls.

• Client/Community/Team Impact.

Common Failures • We do not adequately plan

• We do not consider other’s perspectives

• We do not adequately communicate

• We do not have systems & processes in place

• We have the wrong Mental environment (negative

values, judgments, beliefs about ourselves or

others)

• We do not take responsibility

• We do not embrace accountability

• High performing CPA’s want to know

how they will contribute.

• Describe the job and ask

accomplishment question.

• One of the major objectives of this

position is to (describe specific task).

Tell me about your most significant

comparable accomplishment?

Key Questions

• Part of this position involves dealing with a broad range of

people in different functions and management levels. Some

of these people include (describe types of people involved)

the interaction involves working on (describe tasks). Tell me

about a major accomplishment that best represents

working with this type of group.

• A typical problem you’d be expected to handle in this

position is (describe a common, but significant problem).

Tell me about something you’ve handled that best

compares with this type of issue.

• A specific challenge we’re addressing with a certain client

is (describe challenge). Tell me about something you’ve

done that is similar to this.

Key Questions – More Specifically

Documents

Building a Better CPA Firm Business Model...Before and After Metric Before After Revenue $436,812 $420,367 Clients 418 251 Average Tax Return $230 $469 Client Happiness Low Better