521 What To Do With LEGACY Accounting Firm Clients

You fire them, you cut, you send them all out to pasture. No, no, no, no, no, no, no. Before you do that with all your legacy clients, yes, we need to have a plan. We need to make some time for great clients. And legacy clients may be gobbling up all that free time, yours right now, but there's more nuance to it than just cutting them loose. So before we burn the ships, let's talk about the best way to do this. How to not leave people flapping in the breeze, and how to have a more sustainable process to keeping that client list tidy going forward so we don't find ourselves in the exact same spot. A little bit of a stroke there. Just a small one, though. Okay. If you're new here, we talk a lot about running accounting firm stuff over 500 episodes. Can you believe that? I can't. My mom was proud at, like, episode 40. Now she's like, huh, you're still doing that, huh? Okay, let's talk about your legacy clients. In fact, this whole conversation kicked off because of a courageous commenter who is willing to be vulnerable. Gang, if you got questions, you got stuck. Stuff you are stuck on. The worst thing you can do is hide it under a bushel basket. Put that thing into a comment. Start a conversation. Because Cindy Harrison left a comment that's going to now help us all by us, like, getting out and talking about it. It was a comment on a past podcast episode. She said, my issue is that I've been underpricing my bookkeeping business for so long. Cindy, straight off the top. Literally everybody does this. There's not a single firm where some where. Where, you know, you didn't at one point look back and be like, dang, I got way too many people on this list that are way too cheap. So know that this is something absolutely everybody has had to make a hard decision on once, if not many, many times. Cindy says, I don't even know how to get to three tiered pricing. Three tiered pricing being giving them a bronze, silver, or gold package option. Generally a better way to optimize how. How much someone pays you. She said, I'm bringing in new clients at better rates, but I'm unsure how to handle all of the legacy clients. Oh, such a good question, right? I read this and I'm like, this is an episode. So many people are feeling this right now. Right? Okay, bit of advice. Number one, no matter where you find yourself, no matter how annoyed you are with yourself that you got all these people on the client list that you're not sure what to do with. As paralyzing as all of that is, the most important thing to do is not make the problem worse. So we are not letting another client in the door unless we are stoked about the rates they're paying. Cindy. I think Cindy's already doing this. She said, I'm bringing in new clients at much better rates. And whether it's your pricing, whether it's the systems you use, whether it's the expectations you bake into your clients, there are so many examples of how the way it used to be is the same way we use with new clients, and it just makes the problem worse. We can use it as a justification to say, like, well, that person's only paying that much, so this person that doesn't want to pay our minimum, that's probably fine, right? At least they're paying more than our very worst clients. No, there's. There is always someone worse. That's not a justification for doing anything. This is the beauty of new clients, is they're coming in like little babies into the world with no expectations of how things are supposed to be. I. Look, man, you know, I didn't fully realize just how much our realities are shaped by, like, expectations and the things we've seen until I had kids. Kids will say things that are just like, were you born yesterday? How do you. How do you not know that? I. I have youngins. And they were Covid kids. And after Covid, we took them to a theme park. And to see their faces, to realize that they lived in a universe where a place like Legoland was possible. I mean, this completely opened up what they thought the world could hold. It's like, what do you mean? Theme parks are theme parks. Lots of lines, usually a lot of hot concrete. They weren't thinking about that. They're like, wait a minute. I've been staring at the same four walls and the. The same toys for the last three years. Look, dad, they even have ice cream. Your new clients, when they come in, they are a blank slate. And unfortunately, it is an opportunity that we miss very often. For example, you run a tax firm. You got capacity during tax season. Don't let another client come in the door with the expectation of being filed during tax season. And if you can't justify extending for 1040 clients, don't take any more 1040 clients. It's actually bad advice. The solution there is take better 1040 clients. Let the worst clients go. Now, the counter argument here is using different systems to serve different people and creating this logistical nightmare of how you Manage all these different expectations. But the flip side of that, of everybody being served the exact same way is tremendously risky as well. Because it means one change that I make that I have to roll out across every single client is incredibly high stakes. And it means I don't have the flexibility to learn. Like we got this new client and it's a little bit different, but they seem very happy to pay us a lot of money. And along the way we learn about that person's entrepreneurial journey and what problems we're, we're solving for them that we may not even realize. And so like there's a version of running a firm that is so rigid that it makes everything super risky and high stakes and you never grow and you never test new things. But then yes, there's another version where like you tell every single person a different that's a complete mess. And this is where our systems need to help us in tracking what are these expectations. And we already do a version of this. Every time you finish a month end close, you're going to call the client, going to email the financials, you're going to get on a meeting with them. Every time you start a tax project, are you going to meet the client? Are they going to mail you stuff, are they going to email, are they going to submit it via a portal? What's the expectation? We got to have ways to track these for all sorts of aspects of service delivery. It is just one more thing. Are they an always extension client, yes or no, Are they going to get delivered on the 15th of every month instead of the 10th of every month? We have the opportunity to reset that expectation with every new client that comes in the door. Whatever corner you have backed yourself into, don't make it worse with new clients. Please don't. But if we take this too far, we can miss the opportunity of new better paying clients because we are still living in service of those legacy clients. Right? And so this is, this is the balancing act with any sort of accommodation that we do and is your future, is that next great client, whoever your a client is right now, when their friend comes and joins somebody that's just like them, we can't say I'm sorry, we're not accepting new clients because that's a better future man. And across the average accounting firm there's a huge, just vast spectrum of profitability in projects. Your accounting firm may run at a 30% margin, but if you've got a 10% margin client and then a 50% margin client walks in the door, if we're at capacity right now. If we're doing a lot of work, that more profitable client is an opportunity to cut a bunch of legacy projects. And to be clear, like, this is just part of the entrepreneurial journey. This is growth. This is great news. This is you getting better. You are sitting on a exercise bike right now listening to some guy talk about running accounting firms. You know how many people are not listening to this right now who are not growing and not getting better? Growth is always going to be uncomfortable, but you also need to be willing to reward yourself for that growth, because the reality is you will outgrow clients who were once great for you. The person that you are trying to become is oftentimes blocked by the clients who want you to be the person you used to be. But if that's not you anymore, they are not getting your best. And somewhere out there is another firm who they will be an A client for. And we fool ourselves into thinking nobody's going to serve them as good as we are. But they're literally legacy clients. They're like, begrudgingly on the client. I don't care if they were with you from the beginning. They're either in the direction that your business is going or. Or they aren't. And this is a really key aspect of how to not find yourself in this situation again down the road is to depersonalize this stuff. We're running a business, man. Doesn't mean that we can't make friends. But those relationships can persist outside of a business engagement. Because if somebody changed the law tomorrow and said, you don't have to file a tax return anymore, you don't have to have books anymore, this might break your heart, but there go your clients. If they don't need us anymore, they're not going to come and work with us. And so if our business is going in a different direction to where they're not a fit, that doesn't have to be a personal thing. We're going to come back at the end to how to make this less personal and an easier thing to manage on an annual basis. Let's get more into the weeds, practically, of how we navigate exactly what we're going to do with our legacy clients at the end of this year when we're normally renewing for the following year. If you're going to keep them on the client list, you got to do one of two things. You either got to have a minimum percentage increase across the board, and that can be extreme. I mean, I, I went through a year where we Had a bunch of legacy clients that got 200 to 500% fee increases. It will surprise you how few of them leave, but we got to set a floor for either a minimum percentage increase or we got to have a dollar minimum that everyone gets raised. Up to now, there's probably a subset of clients in here that we can just throw out right away. And these are the clients who are not good people. Maybe they're mean to our teams, maybe we don't enjoy working with them. Maybe they can work with Tina, but not Greg. Like, I mean, the people like that, like, don't waste your time with them. You're in demand. Send them packing. Those people, I wouldn't even refer to another firm. Like, just let them go find somewhere else to be. I don't know, a pain or to be difficult. Now we gotta be so careful about making exceptions here. Well, this person, we're not going to do it for. That person, we're not going to do it for. It is. It is easy to flex this power as like the big boss and being like, this is my business, I can do what I want. The reality is everybody pays the price for that. You do, your team does. You have too many of those exceptions and it is a drain on everything else that's going on. Hey, something super interesting that I recently learned while I was in Australia. You know how when you flush the toilet, it goes the opposite way? The same thing applies to accounting, actually. Our debits in Australia are their credits. Like, it goes the other way. And this kind of blew my mind when I started talking with people because, I don't know, I just, I guess assume, I assumed it was the same everywhere, but it's not. Can you believe that? Do you believe that? No, don't believe that. That is obviously not true. You know why? Because accounting is a universal language. It is like love. It doesn't matter where in the world you are, we all speak it the same way. Which is why incoming sponsor segue, which is why services like cloud accountant staffing are so helpful. Because they can find accountants for you anywhere in the world. And I'm just going to say it, if you are struggling to find us born snowflake accountants to come and work for you. Like, I struggled with finding folks elsewhere in the world that will come and do the work. That that might be the move for you now. Cloud account staffing, it's run by a former accounting firm owner. It's not like a fly by night weirdo dude that's reaching out to you on LinkedIn. They can help you find accountants in the Philippines and Latin America and South Africa, but you could do all three and run a 24. 7 accounting firm. Oh my gosh, she didn't think about that. Got people, like working 24 hours a day. That'd be kind of fun. It's some logistical challenges to that anyways. Cloud Accountant Staffing also has a platform where you can hop in and see self service and see applicants and schedule interviews with them directly. Pretty cool stuff. Very legit group. I actually know a large number of firms that are very happy users. You'll see this squad out at all the accounting conferences this year. If this is something that you're exploring, definitely worth chatting with Cloud Accountant Staffing. If you haven't done it before, you can have a bunch of ignorant questions like, like, I did. Like, that's just how it is. That's also the value of a group like this is they can hold your hand through that. Everything from, like, how does security work? What are the disclosures I need to put in front of my clients? How do I do it with an international team? Like, all very important blockers to work through. But if you want some help, chat with the folks at Cloud Account Staffing. Link down in the show notes. Funny thing happened recently when I was at a conference with one of this episode's sponsors, Makers Hub. So Makers Hub, they're like an AI accounts payable platform. The party trick is they're using like AI vision models to do extraction at a level that was kind of never before possible with OCR technology. But I was doing something at their booth. Some of the customers came by like, it is one of those tools where the customers are kind of raving fans. But a funny thing kept happening. Like people kept throwing out these ridiculous document situations they have where they're like, I got this client, I have X, Y and Z problem. It's a total mess. We spend so much time on it and they just start riffing on it, like with the Makers Hub team. And they're like, oh, yeah, no, I can see. Like, you can do this potentially. Like our product doesn't really do that. But actually if we change this or that, this could potentially work. The team is just like, they're just a bunch of like document processing geeks who are also AI nerds. And the product very much is like the marriage of those two things. And it's what Maker Sub does best right now. Like the biggest, ugliest accounts payable stuff that you got, man. I had some gnarly clients where Makers Hub would have saved us so much time. If you're out doing conferences at all, you'll see Makers Hub a lot add into a connect. I'm going to be there. I think. I'm actually co hosting a thing with Maker's Hub but if you got any ugly bill pay stuff, class tracking projects, inventory manufacturing, stuff like that, definitely worth giving Makers Hub a look. To learn more, check out the link down in the show notes now. I am still a big proponent even for these rock bottom clients who we're doing this minimum fee increase on. I'm still a big proponent of putting three tier proposals in front of them. And this is because oftentimes we have rock bottom clients who we think won't pay anymore, but they happily will. And I would argue actually if we fire them before we even give them the chance to pay more, that's almost unfair to them. We're like projecting this expectation of what they will pay that is simply based on the number that we've assigned to them in the past. I mean this is the opportunity. With three tier proposals, you have no idea what that person is willing to pay. Three tier proposals better capture whatever their willingness to pay is. And so every single engagement where we give somebody a single price, most of the time we will be losing money because you're not guessing for every single person how much they're willing to pay. And so if we are doing this minimum increase on our legacy clients, let's give them three tier proposals to, to just let them self select into what they think makes sense for them. A lot of them are going to pick bronze, they'll pick the minimum and that's fine at that point like they are, they're probably at the top of the list of folks that we will potentially cut down the road. But at least give them the option and you'll actually be surprised how many people will opt into one of the higher tiers. I got to say it every single time. You're sick of hearing it. If you've been hanging around the podcast, quick reminder. Bronze, silver, gold tiers. Gold should not be three times the work of bronze. Gold might be three times the price of bronze, but it should not be three times the work. We are selling everybody the same thing. What we're charging more for is a more premium delivery, faster response times. You work with higher expertise level staff, you get access to the VIP phone line, Amore concierge experience. We're selling to the folks who are the Mercedes drivers who want to feel like they're getting the best option and the truth is, if you got Mercedes drivers on the client, on the client list, and you don't give them a preview, a premium option, they're going to think you're not for them. So do this for new clients, but also do it for the old clients, the legacy clients as well. Now, very important we give these people a price upfront. This is a big problem with, with hourly billing is if all of you have ever done is hourly billing and you got a bunch of these legacy clients, you have kind of backed yourself into a corner here because you don't have a way to give them a price upfront. Cannot recommend enough. Making the switch. Do it at year end to giving people a price upfront so that they can sign off on it before you get to the end of the project. And they're like, I don't want to pay this. A lot of hourly firms, they get stuck in sort of this ethical quandary of like, I have to increase my prices on people, but right now the only time they ever see a price is after I finish the work. Use a proposal tool, even if you just communicate it to them, even if there's no tech involved upfront, give them a price or give them a price range that assumes that scope is more or less the same as last year because they need to sign off on that before you start work, especially if it's a big change in price. And this is where like getting into three tier proposals at the same time represents a great opportunity. Now we super stress over the narrative around our price increase or any sort of changes. People honestly don't care as much as we think they do. They certainly don't care as much as we do. I. We don't have to be apologetic. In fact, being apologetic I think sets you up to be the bad guy. Your business going in a different direction to serve a different type of person. That's not you being a bad guy. That's just the evolution of your business. If a restaurant shuts down a retail location and focuses on catering because that is the best thing for the business, that's just how it is. But a lot of us, we wrap up this like personalization in the relationship, being all tangled up in the business relationship, it's like, no, like you can have a relationship with that person and then there can be. Does it make sense for our businesses to work together? Those are two very separate things. So I wouldn't spend too much effort into communicating the changes. Besides, hey, here's who we're moving forward with. Moving forward to support and who we're building for. And that messaging, it's most attractive to the people that you're building for. And they're like awesome. That's great news. A lot of the playing house of like minimum prices and all that stuff, people just don't care. Like that is an eccentric way of communicating that people care what I'm going to do for them and what I'm going to charge them for. Try to steer clear of, of the sob story and while this isn't required by any means, give them an off ramp. Like this is where the value of having relationships with other firms is huge. When you can find someone else that's in a different place on the journey that those are great clients for, like, that's just, that's the best possible outcome. A lot of people here try to figure out how to sell those clients. I don't think selling the clients makes sense unless it's like an entire sort of segment of the business. Like if you run a bookkeeping and tax business and you want to sell all the tax work, fine, but like carve off everything there. I don't think selling the bottom of your client list makes a lot of sense. There's not much of a market for it. And that's not the same as making sure they're a great firm and will do right by those people. If you found yourself in a place where you've got awesome new clients coming in and you can no longer serve those clients, you're, that's a very, very fortunate place to be. I'm going to be more concerned with doing right by the people that I'm going to let go than I am getting paid for effectively firing them. Also, just like in the bigger ecosystem of accounting firms, like this is a great way to pay it forward to another firm who is now at a stage that, that you were once at right. If you don't have people to refer work to. Number one, I run an online community. Almost 600 firms, folks that listen to the podcast, like such cool collaborative people. Literally any question you have about running a firm, you pull up the app on your phone, you chuck it in, choose this software or that software client just said this. What should I say back? Like people are so helpful on there and so like positive. But also number two, if you're serving local clients, build that local network, man. I'm trying to help with this too. We've got like almost 20 in person events we'll be running between now and the end of the year. Go to jasononfirms.com events, meet a whole bunch of cool people who also listen to the podcast in town. Would you believe that there's other people that listen to this stuff too? And getting them all in the same room, man, that is a, that is a vibe. Okay, last. How do I not end up in this situation again? And how do I not make like firing clients? This like big heavy personal thing. First is just recognizing that you will probably never stop growing. Like that's a great thing for your business, that you're growing and evolving and solving more specific, more expensive pains for people. That is exactly what you want, man. That's a path to, to, to freedom, to more money and less time, to being able to pay your team better. All those things we aspire to do, they start with some hard decisions. But recognize that that evolution of you, that that will come with some discomfort for sure. But this gets much easier in how we communicate the way we engage clients every single year. The wrong way to do this is to approach that relationship as if you are going to be business partners for life. That's just not realistic on, on so many levels. And so if we instead communicate what we do as every year, we do renewals every year, you got to decide if we're going to make sense for you in the next year. And we got to make, we got to decide if you're going to make sense for us. It's a two way street. It's the whole purpose of doing annual renewals. And the funny thing happens when you frame it this way. You might, you might be afraid that this feels like cold or like you're keeping people at arm's length. It's actually when communicated well, flattering, they're like, oh, we're excited to be on the list. When we did this insane price increase in my firm where some people, they got their price increased 4x and we would say we're really sorry we're having to cut a bunch of clients. We're just having to sort of rebuild the business in a different direction. But if you're getting this message, we want you to keep coming forward with us. We want you on the bus. And by and large people's reaction to this. The whole experience was we're so happy we're still on the list. Which was not at all what we expected. And there's for sure ways you could abuse that, that would be problematic. But if you're afraid of, if you're afraid of folks feeling like that's cold, you just being very clear about like, hey man, our business is going in one direction and we're going to work with you as long as you're also going in that direction. In my experience, when you communicate that people have been appreciative, they've been like, yes, cool, we're doing that too. So we're still on the same side. But then ultimately if it no longer makes sense, you also then haven't built it up to be this default expectation of we're going to work together forever. So if you don't start the deal with we're going to work together forever, then when it ends, it's not a surprise. It's not this big like rug pull, right. And so doing this right means probably doing renewals earlier. Don't do your renewals in January and you leave them flapping in the breeze. Do them, you know, probably in November. And then if, if you are going to go in a different direction, ideally you have somewhere for them to land. So you're, you're not going to leave them hard done by GR is everybody's grown ups. You fire them, they can go find somebody else. There are other providers we don't have to take, we don't have to take really too much control over that. It is just a nice thing to be able to do and it, it helps out another firm as well. So to summarize all this, you got a bunch of legacy clients. Don't make things worse by letting new clients in under kind of the old methodology. Give yourself some grace because it means you're growing. Good job. This is what you wanted, but it's going to come with some friction. Third, still put three tier proposals in front of these people and let them self select into something more premium if they want something more premium. But then fourth, remember, it's a business thing. Ultimately we are identifying the clients where there is alignment with where we're going and where it looks like they're going. And if that's not aligned, that, that is no fault of your own. It's not something we gotta feel bad about or ever be apologetic about. That's life, that's business. You've got people in your life that are very important relationships. Those people are the priority. Those people are the reason why we need to make hard decisions in our business to make ourselves available to to them. Business relationships are business relationships and you can still have personal relationships from business relationships. But more often we build a business on the backs of our personal relationships. They're the ones that pay the price for us putting on the cape for all of the people we're serving in our business every day. When isn't that just completely backwards? Shouldn't we be building a business that is in service of us and in service of the relationships that are most precious to us, rather than us assuming this personal responsibility for everyone we do business with? That ultimately just comes down on me and on my family and on the folks that would love to be spending more time with you, but I'm too Busy doing that $80 tax return or what, you know, whatever that legacy client is. Hey, before you leave, drop a thanks Cindy in the comments. Cindy's the reason we're here talking about this spam. Some thanks Cindy down there. And you may have something that you are now thinking about, too. Drop that in the comments. That's something that may be tremendously valuable for other people to hear, to think about. I mean, there's so much crossover in the things we are all doing and we're all struggling with right now. The more we talk about them, the more we help everybody out. All right, gang, thanks for being here. Let's do this again soon, huh? See ya.