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How to Increase Profit Margin for Accountants

Let’s talk about profit margin for accountants. So, I know you’re thinking that these clients aren’t going to pay more, right? That they’re not going to go forward.. If you go back to somebody paying $250 a month, there isn’t a way they’re going to pay $750, they’re just not going to do it. They’re all going to leave, right? So, if you go through and you look at your book on a methodical basis, you look at business returns doing $650, you look at monthly clients at $300, you’re not going to be able to go back and renegotiate these people up, otherwise you’re just going to lose your entire business, right? 

When you look at the business, say $550,000 in sales, $125,000 in terms of salary and net profit, you do 20%. You grow now to a million, you’re only going to be doing that same 20-22% right? So that’s million in sales, $200,000 in salary and profit. As you grow, things get tighter when you have these types of deals, so margins will even compress even farther as you continue to grow. Maybe you’ll end up at 15-20% margin.

You got to change the game. You have to change the paradigm. When you look at these clients, yes, some of them will leave. When you say, “Our new minimum is $500, our new minimum is $750”, they’re not going to go along for that ride. Or when you go to somebody that’s paying $650 on a business… “Look, I can save you $13,000 on taxes, but it’s going to cost $3,500 bucks to go through and do a formal tax plan.” They’re going to say, “No, I’m not going to do it.” 

But what you got to understand is there is a methodical way to go through and rinse out this book and you’ve got to figure out what would it look like. What would it look like for me to go from $500,000 in sales, $125,000 net profit and grow the sales…to have an increase in revenue and have an increase in profit margin. Maybe go from $550,000 in sales and $125,000 net profit to a million in sales and $400,000 net profit, 40% margin. What would that look like?

What you’ve got to do is every single time you add a new client, when we talk about a new client or a new deal, for a new prospect, a brand new person coming in, get somebody at $1200 a month, get somebody on a $4,500 tax plan. Or upselling existing clients. So, you’ve got somebody on the tax side, not on the accounting set up, sell them over. Let’s say maybe you repackage somebody, so you say, “Hey, right now you’re on monthly accounting, but we’re going to package you up into something where we’re going to do forward looking statements. We’re also going to do a quarterly tax planning and we can you for you at X amount.” So you upsell, you get a new client, you upsell existing clients or you repackage existing clients. That’s how you create new opportunities. It’s all about profit margin for accountants. 

Now you may not know how to do some of that, but that’s the first way out, is to create an increase in revenue. You can’t increase your profit margin by adding a little 2% of productivity by implementing some tool. You’ve got to change the quality of revenue. It doesn’t matter how much you try to change the delivery and the workflow, it’s not going to change the basic structure of the business.

So, you go through, you get a new client, you upsell, you repackage, then you go back and you renegotiate your prices up with your existing clients. Those clients that didn’t want to get up sold, didn’t want to do a repackage, the time is now. If somebody is on $300 a month, “Hey, new $500 minimum, new $750 minimum. What you’ll see is when you do that, and I know you’re scared to do it. I know you’re worried that these people are going to leave. But I’m telling you, I’ve seen people do this over and over and over again. Some people are going to be mad and leave. Some people are going to come to you and say, “You should have done this a long time ago.”

The people that stay will be the people that appreciate the work that you do. They’ll be the people that appreciate what you’re bringing to the table. There’ll be the ones that are going to be on the new model. When you do that, you’ve got to have some people go. If you think you can just keep these people paying $250 on a monthly or $500 on a business return, the worst thing you can do is outsource. “I’m gonna have somebody else do it.” Somebody else can take care of it. Really, you take a low margin client? So you have a guy, he’s a little more, not high margin, low margin. You’ve got low margin and as soon as you hire somebody to do it for you, as soon as you put a contractor on it, as soon as you outsource it, you know what happens to that low margin, it goes to no margin.

Now you’re left with basically a charity organization where you’re not even doing probably the type of mission-based work you would want to do in your charity. You’re doing 1040s for free. Just so these people can have a low price and you might say, “Well I’m only charging $300 for the 1040, I’m only paying $100 and then I’m getting the other $200.” Well then why is your margin so low? Why is the profit margin so low?

I mean this is the kind of stuff I work on with people and when you face these sort of harsh realities, you have a decision to make. Am I going to keep telling myself it’s something else? Am I going to keep telling myself, “Oh, if I just add another client or if I just get a little bit more efficient. If I just get the right staff, then it’s going to change.” It’s not going to change. It’s not going to change—what changes it is these conversations with clients going out and having a better way to show the value so you can get somebody to pay $9,000 that paid $600 on a tax return last year. If you think that’s not possible, you can turn this video off right now and we can go a separate way.

But if you’ve been watching this video,  we’re six minutes and 18 seconds into this. If you’ve watched to this point, you know that there’s something there that’s possible. Or how you could take somebody on $250 to $750. Or take somebody on $750 to $2,500 a month. Now, it’s not every client, but when you come across the right deal, it’s there. So you’ve got to show the value in a better way. You’ve got to have the courage to set up these meetings and appointments, go through them one by one, and then you got to have the courage to say, once you go through it and you get new deals, you upsell, you repackage it. Then you gotta say new minimums. if you’re ready to go through the process of doing this, I would, myself and my team, would love to help you.

We’ve helped thousands of people do this. We want to help with profit margin for accountants. Thousands of tax, accounting, wealth management firms go through and rinse out their business so they can grow it with the right type of margin. To actually grow it. Where we like to see if somebody is doing $250,000 in sales, 60-70% margin. If you’re doing $500,000 in sales, we like to see 60% margin. If you’re doing a million a year in sales, we want to see 50% margin, 40-50% margin. If you’re not at these levels, you’ve got too many staff, you’ve got clients paying too little, you’ve got too much delivery. 

We’ve got to go through a process of changing the game that involves getting new deals, getting to appointments, getting new clients, pricing in a new way. But it also involves going back to your existing clients at the right time, in the right way, giving them offers to help them more.And if they don’t want to do it, we’ve got new minimums. So, if that’s something you want to do, there’s an application below this video to go ahead and set up time with me and my team to walk through how we do this. 

We’re going to go through and give you a full presentation of every little thing that we do. We’ll talk about tax planning, we’ll talk about CFO services and how you add those, how you price them, how you package them. We’ll actually show you one of the biggest things we’ve made this year, is to start having people do their sales consultations on a deck presentation. So, it’s not just, “Oh, let’s sit down and talk and have a conversation.” Like you’ve got to get people to see the value and to see it visually. So we have for tax planning a 135 slide presentation for CFO, same thing.

Over a hundred slides that we walked through, how to show the client the value that you’re going to get to get them to see what they’re buying and get excited about it. You’ll get all the new client acquisition stuff. You’ll get the decks that we do, you’ll get how we upsell the clients, and then all the practice development stuff that we do for workflow, hiring and so on. If you guys are interested, if you’ve been watching this long and you’re looking at your margin, you’re thinking why did that happen? You want to change that next year, we’d love to talk to you. So go and fill out that application below and I’ll see you on the other side.

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AccountingTax.com by Andrew Argue is now Corvee