How to Build a Profitable Accounting Practice

So your accounting firm is growing. But is it growing in the best way possible?

Most firms have no trouble staying busy and profitable. But too often, what they’re experiencing is actually a relatively unhealthy growth: too many low-revenue, one-time contracts and not enough big ticket, long-term business.

For accounting firms, this usually means too many tax-only clients and not enough high value advisory work or ongoing monthly engagements.

What you’re doing might be “working,” for now, but know that the playing field is changing and your competition is heating up quickly. Automated software and other low-budget accounting tools are creeping up everywhere, making it increasingly important to prioritize high complexity projects–which, as you know, are much harder to land but ultimately far better for your bottom line.

As a strategic advisor to accounting firms, I’m often asked how I would run an accounting firm, if I were in my clients’ shoes. When I talk about the “right” way to build a profitable accounting firm, what exactly do I mean?

Well, I’ve already written a guide to accounting firm growth, so if you’ve read that, you probably have a fairly good idea of how I’d structure my firm for long-term success.

But even more specifically, if I set out to build an accounting firm, from scratch, in today’s uber competitive environment, here’s what I would do:

1. Own a niche

Focus the firm on high-value work for a small, well-defined market niche. Get to know this industry, inside and out, and attach the firm’s name to that niche at every opportunity–especially: all over your website and on every piece of marketing material your team distributes.

Your goal would be to become the go-to resource for that target industry–the first name to pop up in Google when someone types “accounting [my niche].” (Not “accounting [my city]” because, as you know, location-based marketing is as good as dead.)

Potential clients who visit your firm’s website should think, “I had no idea there was an accounting firm just for this.”

This focus will help you stand out against thousands of look-alike full-service accounting firms, launching your firm into the future while simultaneously protecting you from it.

2. Take on a small amount of super ideal clients

Slow growth is key to building a highly profitable firm, but each client relationships would be deeper, longer term, and more profitable. Focusing on building a firm around what your team does best and what brings in the highest revenue, taking on only the clients who are looking for exactly those things.

To prune out low-paying, poor-fit clients along the way, confidently raise your prices and happily refer out clients and prospects to other firms that might serve them better. Turn away business that doesn’t fit your firm’s strategy without fear or regret.

Ultimately, the exclusivity of the firm will boost your desirability, defend your pricing, and provide you with a list of clients who truly value your specific expertise and enjoy working with you (as you do them).

3. Expert level knowledge of the latest technology

Everyone wants to know how to do things better, easier, cheaper–and the solution, of course, is technology.

One of the biggest turn-offs for modern, sophisticated clients is the perception that an accounting firm is still using antiquated “old school” methodologies. Beware of bragging about the longevity of your firm–being in business for decades could mean that you know your stuff, or it could mean you’re complacent, outdated, and set in your ways.

At minimum, your firm should be almost completely cloud-based and paperless, saving you substantial time and money, and having the technology in place to make remote client relationships seamless.

4. Charge a flat monthly fee

What sounds more appealing: 50 clients paying $2500/month or 300 clients paying $5000/year? The net result is identical, but the latter comes with a much greater amount of hustle and overhead, both from a marketing and delivery perspective.

What if your accountants could each focus on just a handful of clients a year, rather than 50-100+? Imagine the depth of trust they could build and the amount of value they could offer–not to mention the amount of time saved by skipping the “who’s this client again?” dance.

I would like to see the billable hour leave the accounting profession for good. I understand the appeal, of course, but I firmly believe that timesheets and billable hours point us in the wrong direction and end up hurting both clients and accountants.

Ideally, firms would charge clients a comfortably high monthly price that would free both parties from ever worrying about the clock again. (Because nothing sabotages careful, high quality, deeply insightful work quite like a ticking clock.)

Breaking free from the billable hour and moving toward fixed monthly retainers gives your team members room to breathe, and to do better work. They’ll have the time to offer thoughtful, strategic insights, highly specific to each client, which will be game-changers for the clients’ businesses (and, ultimately, for the firm itself).

5. Offer different (not just “better”) services

Most firms’ primary marketing message boils down to essentially the same thing: “We do the same stuff as the other guys, only better.”

You probably think this is what you have to do to stay competitive, but what if, instead of just being better (which is completely subjective and hard to defend), you focused on being different? How could you re-imagine your services list to be so unique and specific that other firms couldn’t even claim to do the same thing, much less do it better?

Part of building a profitable firm is deciding what you’re not going to do. Just because you can do most basic tax and audit services doesn’t mean you should. Just because you can work with clients in any industry doesn’t mean you should.

In today’s saturated market, depth of expertise is much more valuable than breadth, so be careful where you’re devoting your energy as a firm. Are you taking on whatever jobs come most easily, or are you strategically choosing the ones that best align with your vision for the future? (And if you don’t think you can “afford” to choose your clients, see the previous 4 points.)

The Best Way to Compete is to Not Compete

If you want to build an accounting firm that stays steadily profitable long-term, your best strategy is not to get more competitive, but to stop competing altogether. That means carving out an uncontested market and going all in, actively differentiating yourself from other traditional CPA and accounting firms rather than spending your career trying to keep up with them.

You probably know that you’re supposed to be different, but in today’s business environment, it’s not enough to say that you’re different. You have to actually be different.

I hope what we’re talking about here resonates with you–building a high-value firm with deep client relationships and less clock-racing is liberating. It may be scary, but you can do this!

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