Skip to content

How Accounting Firms Can Offload Bad Clients

by |
Blog Business Model Know Your Client

Today I’m here at Butterfly Gardens in Brentwood Bay, BC. I wanted to chat with you today about how accounting firms can offload bad clients. Before I get to that, here’s an interesting fact I just learned while at Butterfly Gardens. There’s a sign that says that there are at least 150 different species of moths and over 15,000 different species of butterflies. That’s a lot!

This got me thinking…about accounting of course but about how many people on the planet you could be serving. There are over 7 billion people on the planet. If we use that as a frame of reference then why are we spending time working with bad clients? 

One of the first things I get all of my accounting firm clients to do is to create an inventory of the clients they’re dealing with. We start off by making a list of their ideal clients. Then we look at the rest of the clients on their list. Inevitably every accounting firm has a number of bad, low-paying, slow-paying, highly price-sensitive, and just crappy clients. So if there are 7 billion people on the planet, why do we continue to deal with these bad clients? Especially after the accounting firms start understanding how these bad clients are eroding their profits and making you work harder for less money. 

It doesn’t make any sense. Why are we keeping these clients who take some much while we gain so little? 

Fear of Loss

If I’m being honest, when I had my accounting practice, I was afraid of losing revenue by offloading bad clients. It was about fear of loss. One thing that I’ve learned over my life is that anytime I make a decision based on fear, it’s always the wrong decision

I find that many accounting firms also hold on to their clients out of fear. I can show you a way out of that fear. Once you onboard ideal clients at a price point that really makes sense, you won’t be chasing your tail in circles anymore. I’ll show you how to actually get the ideal clients while offloading the crappy clients.

Forced Churn

There’s something that I learned from my mentor and still the grandfather of value pricing, Ron Baker, that’s the concept of forced churn. The term “forced churn” was coined during a conversation between Ron and his colleague Dan Morris. They were driving around Lake Tahoe and noticing the old motels and hotels being bulldozed to make room for new high-end hotels, time-shares, and condominiums. The developers were shifting up the value curve. This led Dan to say “why shouldn’t a firm remove somewhere between one and four customers for every new one added?” They labeled the process “forced churn.” You can read more about what Dan has to say about terminating toxic customers in this great article here.

If you find that you’re stressed out about getting rid of bad clients, there’s an easy solution to this. Start by bringing a high price ideal client in first. For example, there are two methodologies that I like to use with my coaching firms. One method you can use is the dollar-for-dollar method. This means that if you bring in a new client at $5,000, you can offload $5,000 worth of bad work (bad clients). Or you could use the other method, the one-to-one model. This means that every time you bring in one good client, you can offload one bad client. Personally, I prefer this revenue model because that way once you get one really good price client high price client, you can offload a number of subpar clients. This starts to free up your time and ultimately means fewer headaches.

So now that we know we can do something about it, why bother with trying to serve everybody. We should just be serving our ideal clients. If you take this approach, you’ll start cleaning out your inventory and have better work and better clients. 

If you follow this model in your accounting firm, you’ll have a much better life. The Accountant Success Formula will show you how to do all that. So if you’re interested, reach out, and let’s have a conversation.

I’m Erik Solbakken, reminding you that when you take back control of your business model, you can take back control of your life. Stay tuned for more success tips.

Leave a Comment