Client Attrition

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#1
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My practice is a growing practice. I'm looking to grow beyond where I am at now. I definitely want to see more growth and income.

Until now, I've brought on clients from time to time who are not the best fit. I've fired my fair share of clients over the last two years I've been working for myself.

This week, I've lost two clients. One whom I posted on here decided they want to work with someone who is "aggressive" with a low S Corp Salary and another with a client who told me this afternoon that they will not be utilizing my services for 2022. The second one was a rather strange experience and I'm probably better off without the client anyways.

From what I can see between posts on here and from people calling me, there is a greater demand for CPA/Tax, etc. services than there is a supply of competent, quality tax preparers. Although I have gotten some kick back with my pricing, I've had a good amount of new additions in the last 12 months. I'm not sure if my pricing is too low (I feel that I'm in pair with most CPAs in the area) or if I just need to do a better job vetting clients (its probably a combination of both)

Any help in these areas would be greatly appreciated. I know that no one will ever retain 100% of their clients, but I want to do a better job focusing on bringing on longer-lasting clients.
 

#2
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1) Set some kind of minimum income threshold for onboading. $150k for single filers and $250k for married filers is what I usually look for as a minimum in my market, but you might be lower based on the CoL in your area. There are are limited exceptions, but those income levels are what I like to see so that I'm confident the client can absorb my fees. It's a hard pill to swallow for a $50k earner to pay a CPA $1,000, even if the value proposition has been clearly explained. And, they'll jump ship as soon as they feel the value proposition is no longer there or has been diminished.

2) Make it clear to prospects that you're seeking long term clients. That your ideal client will be with you for 10+ years.

3) Learn to recognize the warning signs that a prospect will only be a one or two year client. A big one is sudden, one-off complexity that they need help with. When the complexity disappears next year, so will they.

4) Look for the good long-term markers. Increasing or stable income. Opportunities for value add on the consulting side like self employment or rentals.
 

#3
JAD  
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5) Of course, watch out for clients who complain about the amount the previous preparer charged.

6) And watch out for clients who change preparers a lot. You want someone who has been with someone else for a long time and is making a change for some specific reason other than billing.
 

#4
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#6 is a good one, and a reliable negative indicator.
 

#5
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I agree with income floors; generally speaking, they have more complicated tax matters and do not wish to deal with them. At same time, they can still be incredibly cheap but are also often afraid of audits.

Nearly all of my clients are 6-7 figure earners, even in retirement. Only a few are below that and I maintain them because they pay without hesitation and/or I have known them a long time.

I fire more clients than choose to leave me. If you don't have attrition, something is wrong in your business model, IMO. Of the clients I lost this year, I didn't really care if I continued working with them--some were a PITA but paid, others had temporary complicated matters lasting 2-3 years, others were just cheap despite paying. I was not surprised by a single one and I also fired two clients that I have known and worked with since mid-2000s.
Last edited by CornerstoneCPA on 3-Apr-2023 1:15pm, edited 1 time in total.
 

#6
Joan TB  
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3) Learn to recognize the warning signs that a prospect will only be a one or two year client. A big one is sudden, one-off complexity that they need help with. When the complexity disappears next year, so will they.


Re: #3 above. When a new client comes to you with a sudden new, complex issue - absolutely resist the temptation to cut your bill in any way. They are not staying with you and will also complain about the bill no matter what so be sure you bill your ENTIRE TIME.
 

#7
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In addition to the above, all of which are great points....Hardly anyone will ever tell you that your billing is too low. If you aren't getting some pushback, you are too low. Unfortunately, that means you'll have some uncomfortable discussions, which you will learn to navigate. With increasing fees, some attrition is impossible to avoid. Your other option is to cut your margin.
 

#8
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Great thread.


Some of my best clients are the ones that paid me $350 for a business tax/s corp consultation.

Perhaps their "prior" preparer wouldn't talk to them or whatever.

But it is the non-clients that have no problem paying for an hour of advice that often turn out to be good ones.

---------------------

A client inquiry that we never take is, "TT (or HRB) shows a $6000 balance, I don't think that's right so I want you to do it"
 

#9
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Had a lady call today. Called her back, her situation was that she's always done her own taxes but she was looking to hire a CPA because she inherited a property that was sold in '22. Kindly informed her that we are not looking to take on this type of work because as those who mentioned above stated, these type of clients will go away once their situation goes back to normal.
 

#10
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Here's a thought.

Let's say a good conversion rate of inquiries to good clients is normally 20%. That is, you might take 1 out of 5 callers as new clients.

(I don't know if that is really a viable number or not, it is just an example).

I would say the ratio for potential new clients who call within 1 week of the deadline likely be about 1% in comparison. Also, I would say that the bad prospects are also much worse in quality during this window.

It might be a good practice to simply say that you are not taking clients during this week.
 

#11
CathysTaxes  
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I tell callers that at this time, I'm not taking on new clients.
Cathy
CathysTaxes
 

#12
Wiles  
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The % doesn’t get much better within 1 month of the deadline.
 

#13
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For non-referrals, I tell them to re-establish contact in mid-May.

If they have the discipline to do that, they're usually alright.

If they finally contact me in September, I do a hard pass.
 


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