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A New Approach to Client Filtering


It seems as though every firm we speak to these days has the same problem: capacity.  Yet, when we bring up the idea of client filtering, we get pushback. “We can’t get rid of all our {fill in the blank} clients! That’s $X annual revenue!”  

Aug 9th 2022
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While there are many ways to look at capacity, most firm leaders agree they don’t have enough people to properly serve the number of clients they have.

How about, instead of talking about getting rid of clients to solve our capacity problems, perhaps we need to talk about revenue replacement.

More of Your Target Clients

I’ve yet to meet a firm leader who says they have too many of their ideal clients. On the contrary, most say they have too many clients who aren’t a good fit for the firm. In many cases, these are 1040-only clients who are paying too little and making busy season untenable for the staff.

Yet inevitably, the idea of letting go of all those 1040 clients is scary. Let’s say all your 1040-only clients bring in $160,000 of annual revenue to the firm. Nobody wants to get rid of hundreds of thousands of dollars in revenue. 

But what if we could devise a strategy to replace that revenue? If you knew you could replace 160 individual tax clients, each paying you $1,000 annually, with eight advisory clients paying you $20,000 annually, would you do it? For most firm leaders, the answer is a resounding yes.

Designing Your Revenue Replacement Strategy

Your revenue replacement strategy starts with identifying your ideal clients. Previously, I shared 6 Questions to Ask When Identifying Your Ideal Client, so I won’t go into detail about how to uncover your target clients here. Be sure to check out that article or watch my LinkedIn video on the same topic.

Next, you must decide what mix of services you want to offer your target clients and how you’ll price those services. Your ideal clients likely need more than just a tax return or financial statements.

They may need help with their monthly accounting, tax planning, KPIs, strategic planning, and more. Bundling several of these services together and charging a subscription fee makes the firm’s revenue more predictable and gives your clients peace of mind. Check out my article on Packaging and Pricing Services for more information.

Finally, you need to create a business development process and start having conversations that will get you more of these clients. Again, be sure to read my article on Creating a Process for Business Development to learn how to show clients and prospects the value you provide.

We just went through this process with a client and discovered that they could replace 1,200 non-fit clients with 30 right-fit clients that fell within their target client profile. That freed up a ton of capacity without negatively impacting revenue—even in the short term.

A few years ago, capacity restraints would convince firm leaders to hire more people to handle the non-fit client work. But that option isn’t available anymore. There’s a lack of talent out there to be recruited and hired. Staff and partners are frustrated, and this is forcing firms of all sizes to take another look at client filtering.

Maybe we’ve done our clients a disservice in the past by talking about client filtering rather than showing them how to replace the revenue generated by non-fit clients. In my experience, it’s much easier to have that conversation with partners when you can show them how to replace hundreds of individual tax clients with one or two advisory clients.

Once you do these three things, filtering out non-fit clients becomes much easier to stomach. You’ll soon find yourself working with organizations and individuals who value your work, ultimately leading to growth and increased profitability for your firm.

The original article appeared on the Boomer Consulting website.

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