3 Ways To Increase Accounting Profitability With Fewer Staff
Author, speaker, and advisory to the “Firm of Now”, Rob Nixon, sees the future of accounting. He’s been in accounting for over 22 years starting in Australia. He knows how to reach maximum firm profitability and, today, is on the show to discuss exact strategies you can use.
In Australia, he saw many innovations on how accounting firms can get better and improve their profits but hasn’t seen those changes translate into the United States.
He’s changing that. You’ll hear inside details on how you can improve your firm’s profitability virtually overnight.
On this episode of Growing Your Firm Podcast, Jetpack Workflow founder David Cristello and Rob Nixon go through:
- The 3 main things to improve to boost profitability.
- A super effective trick to cut down turnaround time.
- Why (and how) each partner should make $1M profit
- Rob’s Company – Panalitix
- Rob’s Workshop – Firm of Now (enter code jetpack to receive $50 Off)
- For Partners – “How to Handle Sales Objections and Close More Sales” [Podcast]
- Value Pricing – Making Value Pricing Work for your Firm [Podcast]
The Start of Changing The CPA Industry
Rob Nixon, founder of Proactive Accountant Network and software application PANALITIX, has worked internationally with dozens of accounting firms on improving their profit. What he’s found is most innovations start in Australia and work their way over to the West.
Right now, Rob is on a major US tour stopping in many cities near you putting on his workshops. These workshops are a full day of diving into the exact steps to profitability and efficiency.
“Accountants work many hours with VERY little return” – Rob Nixon
The 3 Pieces to Optimize to Increase Profitability
Rob’s passion has been to help grow firms. Most get lost in a hamster wheel of billable hours, low profits, and inefficiencies.
Diving right in…
Rob focuses on 3 major things to grow a firm:
- Stronger Profits
- More Efficient Capacity
- Increasing Revenues
“If you want to be a Firm of the Future, you have to do something NOW”
To increase profits, you must focus on key metrics. Most firms still focus on the billable hour. With the focus on just “billing time” most firms will hover around 25-35% profitability. You can bring in more clients, but your profit will stay the same (you’ll have to hire more and more staff).
People X Productive Time = Profit
# of Clients X Retention Rate X Project Value X # of Projects = Stronger Profits
- Price every job UPFRONT
- For special projects — use Value Pricing
- To be efficient with pricing upfront, set up communication with clients very early on (even before signing them as a client)
- KEY — take “billable time” out of the equation as a metric for billing
More Efficient Capacity
The next step, according to Rob, after you master “profit” is work on capacity.
This means working on the turnaround time for projects. One firm went from 30-day turnaround times to 5 days!
Rob believes you must look at the process as a manufacturer with raw materials. Each process has a step that must be done before moving forward.
“To change behavior, change the system”
To increase capacity in your firm
- Move every client onto cloud accounting (it’s proven to be 50-60% more efficient and frees up 4 hours of the day)
- Work under self-imposed deadlines: Accountants work best and most efficiently under pressure. Create internal deadlines. Set deadlines internally for when a project MUST be done and be reviewed. You might even put a deadline on the time. “Complete project in under 10 hours.”
DAVID’S TIP: Tell your team the amount of hours they can spend doing a project, and watch how suddenly they become more efficient!
After the first two steps of profitability and capacity are clear, you can then take the next step in finding new clients. This works because as capacity opens up for team members, new clients can fill in the gaps. This allows you to grow without increasing staff (thus growing profit).
The revenue generating activities of the firm should come from the partner level according to Rob. Partners should spend very little time doing compliance work as the profit just isn’t there because of how high their billable hour is.
Before looking at the partner’s position, Rob recommends first hiring a full-time Marketing Coordinator. He sees in many firms they simply have another CPA doing the marketing part-time. Marketing is a full-time position. Once someone is full-time, they can invest their days in strategies that work:
- Content marketing
- Positioning as expert
- Direct response marketing
- Social proof
- Asking for referrals
“Capacity does not refill ITSELF!”
A Partner’s Breakout of Their Time:
- 30% >>> High-end advisory work (with the top clients only)
- 60% >>> Sales — 20 sales meetings per month per partner
- 10% >>> Leadership within firm and team members
A Partner’s main job should be to get new clients. Again, a partner’s billable hour makes them doing strict compliance work unprofitable.
Partner’s should spend their time also building out profitable advisory services. These could include: cash flow planning, estate planning. Rob recommends focusing on “numbers” coaching. Advising requires too much time and “gray hair.” There is software available to take care of services like this and they can turn into quick profits with new clients.
It can be hard for a firm to hear “Partners should be doing selling more often than compliance work.” It’s out of the comfort zone for most CPAs. If you’re looking to be more profitable, these are the steps to take.
Your Next Steps:
Rob is currently (as of September 2016) on tour going around many large cities helping firms just like yours.
If any of this sounds interesting, you are encouraged to attend as the prices are very reasonable. What many firms do wrong is send 1-2 partners who then try to explain it to the rest of the partners.
This never works.
All partners must come and learn new ideas to then share together later on. The same problem exists if you just send team members.
If you read and listen to this podcast, you are looking to grow your firm. Why not take the time to invest in yourself? Action starts change.