Expand your CPA firm’s capacity to accelerate growth: Breaking down the 5 levels

If there’s one thing that accounting firm leaders can agree on, it’s that constraints on capacity are a major challenge. The Great Resignation left an already staff-strained profession more depleted than ever.

For many firms, turning to outsourcing has offered some relief, but it’s only one small part of the solution. Bob Lewis, President of The Visionary Group and his Director, Doug Lewis, know all too well that outsourcing isn’t a cure-all for capacity restrictions. 

Redirection of professionals, client culling, value pricing, and enhancing service offerings with advisory options are also critical to solving the profession’s long-standing capacity issue. Combined, these methods provide firms with a proven and tested formula to combat staffing challenges and fuel business growth.

Read on as these experts break down five actionable levels of change that firms can implement to help with capacity constraints and succeed in an ever-evolving landscape.

Level 1: Outsourcing

Outsourcing is a sound method for addressing the capacity issue. And the value runs deeper than simply freeing firm staff from time-consuming technical, compliance-based work. Because you are able to remove the burden of compliance tasks, outsourcing also serves to elevate staff to higher-value work—like advisory services.

For firm leaders and staff who may have avoided outsourcing based on an underlying fear of “giving away jobs,” it’s time to change that mindset. Outsourcing does not eliminate; it elevates.

When employees are free from mundane tasks, they can turn their focus to value-added, career-path-driving work like advisory services. This enables staff to work more closely and frequently with clients, build stronger client relationships (which helps grow the business), and perform work that is far more fulfilling.

“It’s easier to outsource routine, easy tasks so you can then train your staff on more complex, higher-value work where they can apply their skills and certifications.”

— Bob Lewis

For clients who fear having work performed overseas, firms should be direct about the logic and the value. By outsourcing less complex preparation work, the firm can focus on providing deeper financial insights via advisory services. Outsourcing is also a primary element in automating services and boosting service efficiency.

Level 2: Redirection

Redirection is a simple concept. This involves redirecting work to vetted partner firms that possess the expertise to handle specific types of work (e.g., state and local tax, better known as SALT).

One of the biggest barriers to embracing the redirection method is a fear that partner firms will steal work/clients. This is highly unlikely according to Bob Lewis.

He stated: “The partner is usually an expert in the work being redirected to them, not an expert on the firm’s other services, so they don’t want and can’t deliver that work. It’s also bad practice; these partners know if they steal clients that word will get out and no one will want to use them.”

The hardest part of redirection is identifying what partners to use. Bob Lewis advises firms to do the proper research and talk to others beyond the partner’s salesperson. For example, contact references and get more insight into the value of their work.

Level 3: Client culling

Client culling is focused on weeding out clients that are not an ideal fit for your firm. These clients can include those in verticals you don’t support, aren’t profitable, or those you simply don’t enjoy supporting. 

Once you’ve cleaned up your client list, it opens up space to bring on new, vetted, and higher-value service clients. It also allows you to reduce your client roster to a smaller and more profitable base. For example, advisory clients who contribute monthly recurring revenue.

“It doesn’t make sense to keep serving clients that don’t fit your model and are not profitable. You already have a staffing shortage, so culling your client base down is a good move. ”

— Doug Lewis

Lewis also provides an easy roadmap to begin the process:

  • Take an inventory of current clients: Once you’ve compiled your list, identify clients who are not profitable (those you either lose money on or just break even), don’t fit your overall model, or you just don’t enjoy serving.

  • Communicate to those clients: Let clients know that your firm is moving in a different direction (think year-round advisory services) and that your services no longer support their needs. Be ready to recommend other vetted firms so your clients have options they feel good about.

  • Take it in phases: Don’t try to take on the client culling process all at once. Start with a subset of your non-ideal clients. Evaluate and enhance the process where needed, and then move on to the next group.

Level 4: Value pricing

In many firms, despite size or years in business, pricing is all over the map. This model is simply not sustainable, nor does it support pricing based on value. And according to both Bob and Doug Lewis, value pricing is the model required for growth.

Value pricing allows firms to set a fixed cost for a defined set of services. These services can then be standardized across clients, which helps with capacity issues. Value pricing also offers recurring revenue and fuels growth far faster than billable hours. Billable hours have a limit (hours in a day); value pricing does not.

Despite the value of this pricing model, however, some firms are still fearful that a higher price tag means that clients will leave. This is not what our experts are seeing.

“There are firms that have raised fees 40-50% without any fallout. Staffing shortages have also limited clients’ options because many firms aren’t taking new clients. So even with price increases, clients aren’t leaving,” said Doug Lewis. “There is no pricing ceiling across services right now or for the foreseeable future.”

Level 5: Client advisory services (CAS)

Advisory services are a high-impact offering, providing clients with year-round support, deeper insight into their financial health, and a trusted partner they can count on to help them accelerate growth. Even better, you can grow your CAS practice without using CPAs.

“You can find many people with the skills needed to provide advisory services without the CPA credential.”

— Doug Lewis

For firms, CAS provides high-dollar, premium billing. It also ensures recurring revenue throughout the year. And beyond the impact of revenue, the very nature of CAS promotes strong, long-term client relationships. And that’s the kind of high impact you want.

“Clients will forget about tax or audit work, but they’ll always remember advisory services,” explained Bob Lewis. “You may have helped them sell their business, solve a succession problem, or identify new opportunities for growth. Clients remember support at this level and that carries forward for a decade or more.”

Our experts provided a concise list of advice to help build your advisory services:

  • Map out the needs you think clients have.

  • Identify the services your firm does well.

  • Identify the advisory partners to work with (if you don’t have the full skill set in house).

  • Get revenue agreements in place.

  • Educate your team on how to provide advisory services.

  • Start marketing to both prospective and existing clients.

Leveling up

Creating capacity is a process. It takes time, intention, and a deep understanding of your firm’s and clients’ needs. It also requires you to evaluate which levels you’re ready to implement and those that will require more research and planning.

Doug Lewis cautioned, “It’s not easy, but the worst thing you can do is nothing. Firms that aren’t solving for capacity in creative ways are falling behind and seeing their value drop significantly.”

Start with the level you are most comfortable with and commit 100%. From there, it will be easier to move to other levels. Whether you choose to start with outsourcing, redirection, client culling, value pricing, or advisory services, you’ll find that once you dig in, the capacity constraint issue will start to ease and you’ll position your firm for healthy growth.

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