Common Problems that Stop Tax Firm Growth, Even for Those with $1M+ Revenue

If you had a million dollar tax firm, all your problems would be gone, right? Well—not exactly. Firms doing over seven figures still have some issues, although they aren’t always the same issues smaller firms have. We recently did an exclusive roundtable discussion with firm owners all doing over $1M in sales. This blog summarizes a few of their tax firm problems, which are likely the biggest issues that stop your tax firm growth as well.

Onboarding Capacity Struggles

Many smaller-sized firm owners feel they can’t take on more clients because they are already so busy, but they need to hire help. Well, this is true of larger firms as well. 7 Figure Firms coaching member Jonathan in Arkansas felt he couldn’t onboard more clients without hiring more staff. The problem for him is that he felt he couldn’t increase his team’s size without sacrificing training. 

He already had automated training, videos and very defined processes, but in the back of his mind, he felt more training needed to happen or the quality of service delivery would go down. That would be unacceptable to Jonathan because quality service delivery is vital for a good customer experience.

We recommended Jonathan consider three things when considering increasing the amount of monthly clients onboarding to the firm: 

#1 The Success of Your Clients—If your clients are up from the previous month or up from the same month from the year prior, then your clients are doing well. Aggregate all your clients’ numbers and if they are more profitable, you can continue onboarding new clients.

#2 Churn—Are clients leaving? If not, keep onboarding. As long as your churn is under 3%, you are in a good spot. 

#3 High Margin—Are you making good profit? So long as your profit margin doesn’t fall, you can keep adding. 

Think of it like your speedometer. You have three things to watch for and if all three are aligned, then you can keep your foot on the gas and keep onboarding new clients. If one or more of these are off, you may want to consider addressing them before continuing onward with your tax firm growth plan.

Tax Firm Staff Issues

No matter how big or small your business is, tax firm growth problems often start with employees. Either you have bad ones, or they are good but need training, or you need to hire more, or you are overstaffed…the issues are ongoing. 

Marty, a $1M+ firm owner in Texas, is trying to solve how to get all staff fully on board and excited to learn more, do more and help more. The team at Corvee advised the following:

Picture your company as a boat. You’ve got a crew, but what does it mean for someone to be on board your ship? As the owner, are you rowing right next to them? Are some people rowing hard but others are sitting back just along for the ride? Are some of the crew actually acting as an anchor and preventing forward movement, perhaps even poking holes in the boat? Are people quitting their journey with you by jumping overboard?

“If you are an accounting firm owner, you are the captain of the ship, and only you can steer it where it needs to go.”

– Andrew Argue, CPA

These are the types of questions you have to ask because you need to have a full understanding of what’s happening. If you’ve got a high staff turnover ratio, maybe it’s not them, it’s you or your firm’s procedures, compensation or policies. If you have most people staying long term but the firm isn’t growing, maybe the problem isn’t so much with staff, but with your pricing and packaging of services, or you need to train them on more services. 

Unfortunately, there is no cookie cutter answer when it comes to staffing because each situation is so unique. However, there are ways to grade your staff, put specific metrics and performance standards in place, and have workflow management systems in place to know exactly who is doing what, so you can monitor how much each individual is doing each day. 

No matter how big your firm is, your goal should be to have one full time employee for every $250,000 in revenue, and to get rid of low-performing or unmotivated employees by replacing them with highly-motivated, more productive employees. 

How Big Should You Grow Your Tax Firm?

The question of how big your tax firm growth goals should be may seem like a silly question to smaller firms who are simply looking to grow at all, but once you reach more than $1M in sales, you’ve already proven you can grow a tax firm. Then, the question simply becomes: how big do you want to grow it? This is what Nuno, an accountant in New Jersey, has struggled with. 

The fact is, a $1M firm brings different issues than a $250,000 firm, and a $5M firm brings a whole set of issues that a $1M firm doesn't have. So, should you keep growing the firm and make it bigger and bigger for as long as you are able to?

Our advice to Nuno was that just because you settle at a certain level, whether that’s $1M or $3M or $10M, that doesn’t mean you will feel successful. Stopping growth does not necessarily mean more happiness. Secondly, just because you’re not growing doesn’t mean you’re not going to have stress. 

In other words, accounting firm growth and stress are not always correlated, and neither is tax firm growth and your personal happiness. In life, there will always be a certain amount of suffering, pain or dissatisfaction. The key for entrepreneurs is that most of the time, you get to choose your pain. Practically speaking, what that means is you’re going to have problems in your firm whether you stay at your current level of sales or whether you double, triple or quadruple the revenue. 

In fact, staying at “current levels” is a dangerous game. Each year, your P&L goes up or down, it doesn’t stay the same. If you start coasting, thinking you no longer want to grow, what that will translate into is a decrease. Coasting means you are not intentional, and if you aren’t intentional with your business, that will lead to danger sooner or later.  

So, a question to consider: Are you a driven person that is happy just to reach a goal, or are you more energized in the pursuit of goals, so that once you hit a goal you’re already looking to the next goal? Remember that in life, you are likely to get whatever you aim for. 

Other Common Tax Firm Problems with Those Doing Over $1M in Revenue

• Marketing: Building a sales pipeline via Linkedin and Facebook and the need to delegate to a team member, but being afraid to allow them to take it over since it’s vital for the business.

• Service Delivery: How do I provide exceptional service delivery for my clients so that they can’t imagine going somewhere else?

• Managing a Team: How do I build a successful remote team?

When it comes to $1M+ tax firms, you can see they struggle with many of the same things that you might be struggling with. That is good news, because if they were able to get to seven figures without being able to solve some of these common issues, that only means it’s possible for you to still have explosive growth without having to “figure everything out.”

Of course, you want to overcome as many problems as you can in your business, that’s why coaching programs such as 7 Figure Firms are available—to give you tools, resources and advice on how to handle whatever your most pressing concerns are. 

The better and quicker you’re able to handle issues, the more likely your firm will grow, right? So, look at your accounting firm growth this past year and pinpoint the top three biggest problems you see happening in the year to come. Seek to solve them, and if you can’t, we are here to help you get over the hump!