CPA Firm Succession and Profitability Blueprint | Ira Rosenbloom

It's heaven.

So it's really exciting when you get there.

Yeah, I know I mentioned succession.

We're going to get there because I love this idea of like, what do you want? And then step two, let's get your act together so you can get what you want.

But profitability always struck me as, or at least historically, a lot of our interviews is like, you know, shouting at the rooftops, raise your prices, raise your, or go from hourly to fixed or fixed to value.

It's all, you know, some way of jacking up the price.

You're saying there's more than that than fees.

So I'd love to like, you know, spend a couple minutes or, What are the other variables when everyone else is saying, and I'm sure you're saying, yeah, you've got to increase your prices, or you have these legacy clients that are getting a 50% discount.

Come on, we've got to do something about them.

But what else in your mind are the key components of profitability? And or what are the ones that most people ignore when they're just so consumed with thinking about price increases?

All right, so a couple of things that are just astonishing to the CPA firm when I dig in with them.

I typically start off by asking them to sort through their fees so I can understand what amount of volume and what percentage of their work comes from fees that are within certain tiers depending upon the size of the firm i typically will start with five thousand being the low number and then going up by ten thousand and more often than not in the smaller firm a hundred thousand and above in a larger firm i could ask them do you have for uh clients to pay you two hundred and fifty thousand dollars and what i find is the cpa firm is amazed at how that bandwidth set up.

They have very, very poor grasp on the fact that they're doing too many small accounts.

And they're taking so much of their time and focusing on the low end.

not saying anything about quality.

Some of those $3,500 clients may be outstanding people and wonderful clients, but that's not the best way to use your time.

So the goal is to have them work in a way that they're at their highest and best use.

And how can you elevate the concentration towards meatier clients and therefore potentially keep your volume the same, but certainly preferably grow it, but work on less clients so that the more model clients you have, the more clients you have that you do well with, then the more profitability is going to come out of it, and the happier people are going to be, both clients and staff.

And so the motivation is there, the efficiency and the excitement is there.

So you tend to take that client, and now cross-selling becomes much easier, where if you're a partner and you have to manage clients, 200 clients, it's not as simple to do a cross-sell if you have 100 clients in front of you.

And that really impacts significantly in the profitability side.

I haven't said anything in this conversation about raising the fee.

It's all about using your time wisely.

And then the other area which is a huge trap is scope creep.

where folks are, you know, they state the right kind of hourly rates and they have a sense of value, but the communication is so poor between the staff and the partner that they're not going after and stopping the scope creep.