{"id":81700,"date":"2021-02-09t12:00:42","date_gmt":"2021-02-09t17:00:42","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=81700"},"modified":"2024-06-19t10:05:57","modified_gmt":"2024-06-19t14:05:57","slug":"happier-saner-and-richer-want-in","status":"publish","type":"post","link":"\/\/www.g005e.com\/2021\/02\/09\/happier-saner-and-richer-want-in\/","title":{"rendered":"the happier, saner, richer tax firm"},"content":{"rendered":"
<\/a>it’s not easy, but it is possible.<\/strong><\/p>\n by frank stitely<\/i> i\u2019m back. since writing the \u201crelentless cpa \u2013 the new 21st<\/sup> century system for driving success at tax and accounting firms,\u201d i have spoken to dozens of cpas and accountants, been called a dozen names (some of them deserved), and received a few death threats.<\/p>\n more:<\/b> \u2018quick questions\u2019 and other client sins<\/a> | how to train clients<\/a> | how to reduce tax return errors<\/a> | why your firm needs to attract more millenials<\/a> | the fool in the room<\/a> | the 3 biggest tech failures of accounting firms<\/a> | 7 steps to effective project management<\/a> actually, the death threats came from my wife, who said she\u2019d kill me if i said \u201cyes\u201d to any new projects. she watches lots of crime shows, so the fbi regarded her threats as serious. i am writing this to buy a bulletproof vest for when she gets out of jail. thank you for your contribution to saving my life. i am writing this for the latter two groups.<\/p>\n since publishing the book and launching the clarity practice management workflow and collaboration application, i have talked to practitioners from firms of all types and sizes. my cpa firm pursued a few acquisition opportunities.<\/p>\n i learned that there are a lot of practitioners who are either incapable of adapting to our profession\u2019s 21st <\/sup>century changes or unwilling to adapt. that\u2019s ok, if you are making an informed choice to retire and don\u2019t care about realizing much in value by selling your firm.<\/p>\n however, i see firms that haven\u2019t evolved, that believe their firms still have significant value. their clients are old and dying. their practices are hemorrhaging revenue or just barely treading water. as anyone who is involved in m&a knows, a desperate seller is, well \u2026 a desperate seller.<\/p>\n we looked at buying one firm that lost 15 percent of their clients in a year. they wanted us to pay them a fixed price for their dying firm at an asking price of 1.2 times collections. while they became educated about the multiples firms with primarily 1040 clients are getting, they never did get the concept that we weren\u2019t going to pay them for resurrecting their client base.<\/p>\n our effort, our profits. buyers pay for what is, not what might be.<\/p>\n another firm owner told me that he hadn\u2019t accepted referrals for five years, but he was certain he could just turn on the spigot from his referral sources. after five years, don\u2019t you think his referral sources had moved on?<\/p>\n i am reminded of a line from elton john\u2019s song, \u201cempty garden.\u201d<\/p>\n \u201csome say he farmed his best in younger years. but he\u2019d have said that roots grow stronger, if only he could hear \u2026\u201d<\/p>\n these firms aren\u2019t hearing. their practices are becoming empty gardens. a couple of small practices in our area just folded up and sent their clients to us. great for us, but sad.<\/p>\n let\u2019s analyze why a practice full of 65-year-old clients isn\u2019t very valuable. is a practice full of 55-year-old clients more valuable than a practice full of 65-year-old clients? of course, the practice with 55-year-old clients is more valuable. you just know this almost by instinct. but why?<\/p>\n practice acquisitions mostly work as follows:<\/p>\n will a 65-year-old client likely be around until age 75 for the next buyer in line? even if yes, will a then-75-year-old client have any value to the next buyer? the chain of selling these clients ends somewhere, hopefully not with you.<\/p>\n if a 75-year-old client has little value, the same client at 65 has diminished value. why would you pay full value for a 65-year-old client you won\u2019t be able to realize full value from when you sell? it\u2019s like buying a bond that doesn\u2019t repay your principal.<\/p>\n financially, you can rate all clients very simply \u2013 by the cash flow each produces over the life of the relationship.\u00a0 that cash flow is produced by two factors:<\/p>\n this is also called lifetime value of a client. if you follow tech companies, they live and die on this metric.<\/p>\n obviously, 55-year-old clients are more valuable than 65-year-old clients just on that math alone. they have more potential years to produce profits for your firm.<\/p>\n of course, you\u2019re thinking, \u201coh relentless one, you get a bump in revenue when the client dies.\u201d<\/p>\n you are unlikely to get that bump. sometime before your elderly client dies, the next generation is likely to take over the financial affairs. the next generation is likely between 40 and 55 years old. if you don\u2019t have them as clients before the transfer of financial affairs happens, they likely already have a relationship with another firm. you\u2019ll never get that death bump, and you\u2019ll likely lose your client five years or more before your client dies.<\/p>\n guess who gets that death bump? the firm with the relationship with the 40- to 55-year-old next generation. that firm wins twice. the younger clients are even more valuable than they would at first appear. they control more than one relationship.<\/p>\n how do i know this is how it works? over 30 years, i have been on both sides of this. having the next generation is the more pleasurable financial experience. if you\u2019re on the wrong side of this enough, your practice is in decline.<\/p>\n but you say again, \u201coh relentless one, what about all of the referrals the elderly client will provide before buying the farm?\u201d<\/p>\n whom do elderly clients likely refer? other elderly clients. whom do younger clients likely refer? more younger clients. and \u2013 they have more years to refer clients. this is like compound interest.<\/p>\n i can see that you\u2019re buying that older personal tax clients aren\u2019t as valuable as younger ones. but what about business clients?<\/p>\n the math works exactly the same way for business clients only worse \u2013 for the cpa with the older clients. there are only three possible exits for business owners at retirement.<\/p>\n behind door number one, the business just closes and you lose the client. this is far and away the most likely outcome.\u00a0 most businesses never see a second generation of owner. there are lots of businesses, like real estate agents, which never sell, because they are so personal in nature.<\/p>\n this is also mostly true of very small cpa firms and sole proprietors. clients are loyal to the proprietor and not the firm. when a sole proprietor retires, the clients are changing relationships one way or the other. they might as well control the process.<\/p>\n behind door number two, we have a transition to a younger generation within the family. doesn\u2019t this sound a lot like what we already saw with personal tax clients? if you don\u2019t have a relationship with the younger generation, you lose the client.<\/p>\n finally, behind door number three, we have a sale to a third party. that third party likely has a relationship with another cpa firm coming into the transaction. not always, but mostly. again, you likely lose the client.<\/p>\n if your client base is old, your garden is emptying.<\/p>\n enough of the depressing stuff.<\/p>\n if you\u2019re reading this, you\u2019re probably not looking forward to tending an empty garden. you understand that major changes are necessary, but you may not know exactly where to start. that\u2019s the purpose of this manifesto.<\/p>\n let\u2019s start with where not to start \u2013 practice management consultants, who spent a few years in the profession and then decided that they knew everything there is to know about running a firm. most of these idiots never even made it through a full business cycle. after 30+ years, i still don\u2019t know much, and most of the things that i know won\u2019t be true in another five years. at least i know what i don\u2019t know, which puts me miles ahead of these consultants.<\/p>\n i called out one of these organizations in \u201cthe relentless cpa.\u201d now there\u2019s another one that has accounting firms all running the exact same ad on facebook down to the exact amount of promised tax savings. am i trolling them? of course. that\u2019s what i get paid for. actually, the pay isn\u2019t that good.<\/p>\n i see four or five of these exact same ads every day as do thousands of other facebook users. when your desired client sees your ad and four others from other firms exactly like it, what\u2018s left except the laughing? there\u2019s differentiation for you.<\/p>\n what i wrote in \u201cthe relentless cpa\u201d is still true. stay away from the people with easy answers. nothing about our business is easy, from marketing to serving clients to practice management.<\/p>\n but we can do this \u2013 together. we can make more money, have happier clients and lead saner lives. i promise that it won\u2019t be easy, but we\u2019ll get there.<\/p>\n the purpose of this manifesto is to show you how and where to spend your time and money to make the most profitable changes to your firm. there are an infinite number of changes you could make. we\u2019ll cut them down to the ones that give you the biggest bang for your money and effort.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" <\/a>
\nthe relentless cpa<\/i><\/a><\/p>\n
\nexclusively for pro members. <\/span><\/strong>log in here<\/a> or 2022世界杯足球排名 today<\/a>.<\/span><\/p><\/blockquote>\n
\n
\nin talking to firms from around the country, i realized there are three types of firms out there:<\/p>\n\n
\n
\n
\nit’s not easy, but it is possible.<\/strong>
\nby frank stitely<\/i>
\nthe relentless cpa<\/i><\/a><\/p>\n","protected":false},"author":1362,"featured_media":56466,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":""},"categories":[1363,3120,3002,1906,2246],"tags":[],"class_list":["post-81700","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-pro-member-exclusive","category-special","category-tax-practice","category-busy-season"],"acf":[],"yoast_head":"\n