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How Can You Tell if a Potential Client Will Be a Good Fit?

Every accounting professional wants to grow their practice. But to do so, you need the right clients, and you shouldn't accept just anyone. Bryce Sanders discusses some surprising signs you should actually turn someone away.

Jul 20th 2020
President Perceptive Business Solutions Inc.
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Everyone wants to grow their practice. It’s common sense. Over time, clients will move away or even die. You want to operate at full capacity. And if you intend to sell your practice someday, you want a substantial base of revenue-producing clients

But to be successful, first you need to be able evaluate who will be a good fit and who won't. That way, you won't spend valuable time working with clients who simply aren't going to last or who will be more trouble than they're worth.

Signs this Person Will be a Good Fit

“Birds of a feather flock together.” When a client refers their neighbor, it’s likely they are in the same economic bracket. Taking it a step further, if your client is ethical, honest and plays by the rules, the odds are excellent their neighbor shares the same traits. They would be a good fit.

Executives fit into a slightly different category. Because relocations occur often, they might likely send along “the new guy,” their peer in the C-suite. Let’s go in the other direction. Executives often mentor junior executives. As they climb the corporate ladder, their financial lives become more complicated. The senior executive may step away from advising them in the corporate world to share advice of a personal nature. They are sending you someone who might not be a big client now, yet has potential.

Many financial professionals seek to develop a niche practice. This doesn’t mean you turn away clients, yet the goal is to establish a practice focusing on dentists. You understand the unique challenges faced by their profession.

They have specialized insurance needs. They need retirement planning for themselves and a company plan for their office staff. Do they rent or buy their office location? How do they finance the equipment needed for a dental practice? If they go to another accountant, they need to be brought up to speed, get to know their business. With you, it’s: “Helping dentists is all we do.” Word spreads, people come to you and they make ideal clients.

Another ideal fit is the Center of Influence. We initially think of public figures, lawyers and people who advise others what services to buy and places to buy them. Today, this includes social media influencers with massive numbers of followers. Although it’s unlikely anyone asks, “Who does your taxes?” the concept is the same. If they are a happy client, they have the potential to refer other people.

Signs People Won’t be a Good Fit

Look for warning signs and trust your gut. If something doesn't feel right, don't proceed anyway. Understand it’s okay to turn away business.

The person who doesn’t pay their bills is an obvious example. They owe creditors and get late payment charges on credit cards. They owe money to the IRS. The problem is obvious. They may not pay you promptly, either.

Then there's the person parting ways with another accountant. Assuming their previous CPA hasn’t retired or passed away, this is happening because there was an issue. If their accountant is a reasonable person like yourself, this client’s attitude or behavior was enough of a problem that the other accountant was willing to give up a stream of income.

The person who won’t take advice or follow instructions is another poor fit. Their business has requirements to submit signed documentation to the state. You can only take it so far. You can prepare the forms, mail them to the client, indicate where they should sign and provide an envelope. They need to sign, stamp and mail it. This type of client is a problem in the making.

The client who might be engaged in illegal activity is an obvious one. Closely related is the client who you sense isn’t telling you the whole story. There are big risks. Also beware the client who challenges fees and tried to get them reduced. Your time has value. You should not need to justify it constantly.

A final example is the opposite of the client fitting neatly into your chosen niche. For instance, let's say you specialize in dental practices. They own a construction company primarily doing work overseas. Unfortunately, these are different tax jurisdictions. There could be good billable business, but you would need to apply lots of time and effort getting up to speed.

Generally speaking, if the referral is from a current client and is like them or they fit into the niche where you specialize, they should be a good fit.

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By SkinnVinny
Jul 22nd 2020 03:23

Nice article, lots of good advice. One of the things I look for when reviewing a new client's records is the bank statements. If I see lots of overdraft charges, consistently low balances, lots of LOC advances, lots of credit card debt, etc. the business is on shaky ground. I avoid low-quality clients like dive bars, greasy spoon diners and so on as they are not worth pursuing. If I know a client was previously with a competent accountant, I inquire as to why they departed. If they hem and haw, that's a red flag. Did they quit with unpaid fees? Generic statements like "He had me paying too much in taxes" are warnings as well. Will the new client pressure you to take fraudulent deductions? I avoid non-profit clients in general as they tend to forget that I'm for-profit and I'm not interested in working pro bono.

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Bryce Sanders
By Bryce Sanders
Jul 24th 2020 14:14

SkinnVinny, thanks for commenting. You point out lots of red flags. Good point about "They left a competent accountant...there must be a reason." Like the part about overdraft charges, etc. Generally speaking, you don't want to take on another accountant's headache.

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