An accounting firm owner says he can't afford to hire mid-level staff. After reviewing his numbers, a consultant tells him he's undercharging: he's generating $200,000 gross revenue per accountant when he should be at $400,000. The fix is to double or triple his fees.
That's a clear prescriptive, no question in my sleep, double, triple in price.
Hey Alex, how's it going? What's up, Alex? How do you kind of acquire mid-level staff? I'm having a really hard time with it. What kind of business do you have? It's an accounting business.
What is your gross profit per accountant per year right now?
I'd say about $120,000.
And what's gross revenue for an accountant? $200,000-ish. I'm actually going to bet that right now you have a two-pronged issue. Thing one is you're probably undercharging and as a result of undercharging, you're not able to pay above market so that you can attract the talent that you need. That sounds pretty accurate. What are your close rates for customers right now?
My close rates are around 80%.
Yeah, dude, 80% means you've got a, you've got a for sure double, maybe a triple in pricing that's sitting right there. Right now you're running on 60% gross margins. For me, my rule of thumb with services is 80% or higher, right? And so if 80 is the base, then we need to make $400,000 a year per accountant. So you're supply constrained and in a supply constrained setup and with high close rates, that's a clear prescriptive, no question in my sleep, double, triple in price. And then that unlocks an extra $200,000 a year. And all of a sudden you can go to those accountants and offer them 150 and then you will get them.
