don’t let clients outgrow you

it might not be too late to keep something going.

by ed mendlowitz
202 questions and answers: managing an accounting practice

question: i just suddenly lost my biggest client. they said they outgrew me. what could i have done to keep them?

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response: maybe nothing. and at this point it may not matter, but there are some things you can do to maybe get them back in the future and stop it from happening with another client.

losing any client is not pleasant, and losing a large client hurts. and when it is sudden it hurts even more.

i will answer this in three parts.

1. how to try to salvage something from the loss.
2. how to stop this from happening in the future.
3. how to avoid being “suddenly” surprised.

1. salvaging something

a. just because you lost the client doesn’t mean you can’t get them back. the loss was to a larger firm with higher fees. unless a fixed fee was set, it is likely their time billing will result in sticker shock and an upset client. further, the client might not be used to low-level or entry-level staff working on their books, further highlighting the close partner contact they had with you. also, my experience is that the partner from the larger firm will oversee service the first few months and then back off, preferring their staff to do most of the hand holding. most lower-level and many higher-level staff are not able to grasp the importance of the touchy-feely aspect of dealing with a client, and the client will become disillusioned with that too.

b. be a gentleman about the loss. tell the client you will cooperate fully with the transition, and then do so.

c. tell the client, in a nice way, that you are not happy about losing them; that you were always fully aware of their needs and growth and figured that when they were ready for a larger firm, you would guide them to one that would be the right fit, but that you do not believe they are at this stage yet.

d. let the client understand that there will be increased costs – not only with the accounting fees, but with additional work the accountants would want done in house by them, and that they might not have the internal staff to get it all done and will need to hire a consultant or outside accountant, like you, to get some of the work done.

e. tell them you are available to help with additional services should they need them and can actually do the individual and business tax returns if they want, and that your fees will be lower than the new accountants for this work.

f. larger firms have less of a dedication to getting tax returns done on time. if you never filed extensions or had last-minute rushes for this client, make them aware of that and tell the client to make sure they convey this to the new accountant.

g. keep in touch. even if they don’t ever again use you, they can still be a referral source for you.

2. how to stop this type of loss from recurring

a. you need to not only be aware of changing circumstances and the client’s possible outgrowing you, but you need to speak to the client about it and let them know you have a plan to deal with it when the time comes.

b. let the client know your plan. explain the growing needs of the client but that it will occur in stages – not all at once. maybe even prepare a listing of the trigger points. include a transition to a larger firm you have a relationship with where you can possibly continue in some capacity. they will work that out with you because you’ve brought them the client.

c. nothing is forever, but the client needs to know that you are keeping up with them with the knowledge and added services, but when their size precludes you from issuing a report or providing a comfort level to the bank, then reality sets in and a larger firm is needed. tell them you will manage that situation.

d. i see this as a “marketing” activity. just because they are a client and you have a solid long-term relationship doesn’t mean the client shouldn’t be reminded of it, and the benefits inuring to the client. also if your infrastructure is growing or improving so you can provide the needed future services, let the client know. it also doesn’t hurt if you are active in the state cpa society and are a presence in the profession, and communicate that too.

e. writing articles, posting a blog or presenting a speech also establishes you as an expert and as a more established “firm” rather than as a sole practitioner or an owner of a local practice.

f. if you have partners, let the client get to know them also. if no partners, then let them know who your backup is or who they can contact in an emergency if you are not available. note: we are accountants – a client’s emergency rarely results in a death, or disabling action. an irs agent wanting to close the business or a pair of special agents knocking on the door can be an emergency, but these usually occur during normal business hours and not in the middle of the night.

g. the point here is for you to be in control and to make the client know and feel it.

3. how to avoid being surprised

a. do not take the relationship for granted.

b. be involved and accessible to the client.

c. not only return phone calls and emails quickly, but initiate them, trying to anticipate what is on the client’s mind.

d. never lose sight that you are your client’s vendor, and while they might give you their undivided attention and share their innermost secrets with you when you are with them, they are always evaluating the value in the relationship. do not give them reason to doubt the benefits of you being their accountant and trusted advisor.

e. i have a method to suggest:

i. assume you receive a letter from the client dropping you.

ii. what are the first things that will run through your mind that you feel you should have done, or should have done better?

iii. do them, or make sure you do them better from now on – that should be your standard in any event, but sometimes standards get relaxed or taken for granted. that is your fault and you shouldn’t let it happen.

posted on november 4, 2024