Properly Classifying Your Firm's Client List for Survival and Recovery


Firms are now faced with assessing the impact COVID-19 is having on their clients. It is therefor important every firm carefully analyze their client list and update financial projections and cash flow planning for the year.

Mar 25th 2020
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Known as one of the earliest adopters of remote working in the CPA profession, Jennifer Katrulya has also become adept at client assessment. At this time, more than ever firms need to properly catagorize where their clients stand in relation to your firm's needs and ability to offer time and attention, as well as the clients' own requirements.

The President of a respected national CPA firm recently said, “Wow, the world certainly turned upside down in a hurry!” Within a matter of days, faced with the unbelievable impact of the COVID-19 health crisis, many firms have had to figure out how to shift to working remotely and make many other sudden adjustments.

Firms are also faced with assessing the impact COVID-19 is having on their clients. It is important for every firm to carefully analyze their client list, update their financial projections and cash flow planning for the year, and take steps to put the firm in the best position for survival and ideally, for continued growth and success. 

Most firm leaders are likely familiar with the concept of ranking clients into A-D groups, to assess the client’s contribution to the growth and success of the firm in the past, and gather data across similar clients, to help guide the firm’s business development efforts. For those who may be unfamiliar, this involves running a list of all clients, showing total revenues and margins for the last 3-5 years.

The next step is to run a lifetime value calculation for each client. With the clients listed in order of their lifetime contribution to the firm, the firm can look for common demographic points across the top percentage of clients. This information can be used to structure marketing and sales efforts around the retention of those top-level clients, and targeting more prospects like them.

In many firms, this analysis will tend show that 10-15 percent of a firm’s clients make up 50-65 percent of the firm’s sales. These are the “A” clients.

The next 20 percent or so will be the firm’s “B” clients, and ultimately the remaining percent, often up to 65%, can make up a firm’s “C” and “D” client lists. This quickly shows that 30-45 percent of the clients, in many firms, make up as much as 85 percent of the firm’s business.

As firms deal with the impact of COVID-19, this assessment process takes on new meaning. Firms must suddenly analyze their client lists to try to rank clients based on not only their historical contribution to firm revenue and profits, but instead by projecting their future business potential and ability to pay.

The following is a summary of the client ranking levels and meaning, as well as how this assessment might be altered when something shocks the economy and has created rapid change and uncertainty, as we are seeing in response to fighting COVID-19.

The A to D Client Breakdown

1. “A” Clients – are the clients who will not only survive, but that are likely to actually benefit and grow, as a result of the changes in the market. The difference between the assessment process now vs. a “standard” ranking process, is that the traditional approach of using past financial performance and lifetime value to rank the clients, may not be a reliable indicator of the future. Depending on the industry the client is in and how their business will be impacted by the response to COVID-19, the future ranking of even an “A” client, may change overnight.

2. “B” Clients – Your “B” Client list will continue to include clients who are profitable or are able to continue to break even during the economic downturn and be positioned for growth when the economy rebounds. As with your “A” list however, the recent U.S. and world health and economic events may have just shaken up this list, depending on the industries your firm serves. Some of the clients you have historically considered your consistent sources of reliable opportunities and payment, may now be facing unprecedented challenges.

3. “C” Clients – This list, your “C” level clients, in this “COVID-19” period, will take more careful assessment and decision-making than you might normally spend on this group. Typically, we consider C-based clients to be those who are slow-paying, unhappy clients, who are demanding and unpleasant to work with.

At the same time, you may have some of your A-and B-based clients, suddenly end up on this list. Their revenues may have plummeted, or they may even be temporarily closed for business. Now is a time when you and your firm will need to determine whether you will make temporary fee adjustments or other arrangements to continue to support the relationship. Your firm will need to decide how deep it will cut, and for how long, and whether you feel the short-term adjustment will likely someday get this client back up the ranking list.

4. “D” Clients – These clients are the “loss” list. And as with the “C” list, this can unfortunately fall in to two groups.

The first group will include the unprofitable, unhappy clients who somehow got through your client vetting procedures and you accepted them, and already needed to receive resignation letters from your firm. If you have been hesitant to send these letters in the past, or if there have been other priorities, now is the time to terminate these relationships.

The second group on this “D” list, WILL require some time, care, and compassion. These will be the clients on your list that simply cannot weather the COVID-19 storm. It is important to have a plan in place that provides for a transition out of these relationships. Again however, these may be clients that helped you start and grow the firm, and some may have been among your higher-ranking clients, before the COVID-19 disaster began.


Taking the time to review and rank your firm’s clients and use the information to update your strategy and financial projections in the face of the current economic uncertainty, will give your firm the best opportunity to tackle the current challenges head-on. This will also position the firm to provide the leadership, partnership, and support clients need and expect of their trusted advisors.

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