TFYW#045 Four Key Adjustments To Increase Firm Owner’s Pay

Jul 21, 2023

This week I am going to detail with numbers how growth has to occur for a solo firm from $160K to $250K in net income.

But first –


Today’s Tactic

Don’t underestimate your LinkedIn headline.

This week’s newsletter is a direct result of a conversation about my LinkedIn headline.

Many headlines are either super general or ambiguous. Neither of these does you any favors when trying to connect with prospects.

Whenever you post OR comment on LinkedIn, people see your name and your headline. It is powerful eyeball real estate to start conversations with your ideal clients.

Steer clear of:

  •  Stating your credentials and what you do. There are 10,000s of CPAs, Accountants, and Bookkeepers on LinkedIn – that doesn’t make you unique. What you do, is the process, and people are less interested in that.
  •  Wordy pseudo platitudes. Example → “By having a dedicated accountant maintain your books, you can unlock the path to financial success” (this is a real headline of someone who viewed my profile the day before I wrote this draft)
  •  Stating your role at your firm. I know LinkedIn is like a resume, and you take pride in being the Founder of your firm, but prospects don’t care.

Try to call out who you want to work with and their results in as few words as possible. The results should solve a unique problem for them and their niche.

Protip: I’ve received more comments on my headline since I included a number in it. Numbers and figures act as clear qualifiers AND goals for business owners.

Here is a suggestion for a person’s headline who viewed my profile in the last 24 hours:

Actual: “Bookkeeping made simple for therapists + consultants who have outgrown their current systems”

Better: Helping Therapists upgrade their financial systems to get past $150,000 in revenue.

The new headline addresses:

  • Problem: Broken/inefficient systems
  • Solution: System upgrade
  • Who: Therapist making about $150K

Every social channel offers profile headlines, but LinkedIn is the only one that allows people to see your headline so readily.

Work on your LinkedIn elevator pitch.


Plan to $250K

I received a LinkedIn question about how to reach $250K from a starting point of $160K. (Note: my LinkedIn headline mentions how accountants can take home $250K+)

I shared a few items with the individual, let’s call her Sally, but said I would flesh out my response in a newsletter.

Assumptions

Full disclosure – I did not spend any time with Sally learning about her firm. I am making a few assumptions based on:

One: The contact’s LinkedIn headline

Two: General ideas about the firm:

  • Solo practitioner
  • Seasoned professional (given the LinkedIn picture)
  • Firm established in 2020
  • Home office

This newsletter’s example calculations are for $250K after taxes.

One of my past newsletters detailed what a tax prep vs. bookkeeping vs. advisory firm would need to generate in revenue so the firm owner can generate net profit of $250K. Check it out if you’re interested.

Core Services

Based on her LinkedIn headline, Sally offers many services. Given the longer list of experience, she is duly qualified to offer all of those services.

However, not all of her services deliver offer similar value to the market.

Remove all of the low-value services that you offer. Focus your efforts on one or two core service offerings where you leverage your most valuable skillset.

“But I am going to lose revenue if I do that”. Yes, that is true. At first.

You’ll have to take a step back to be able to move forward.

 

Assumed Break Down of Services

Assumed General Profit + Loss

If 47% of your work is tax prep, you’re similar to many firms. Tax pays the bills, but you probably love the due diligence and advisory work more.

Let’s imagine now:

This is an approach you could take. Stop the random

  • Bookkeeping and QB clean up
  • Sec Reg A
  • Business Debt workout

Heavy emphasis on the random: All of this work is one-and-done work, non-recurring work, and you are most definitely undercharging for it.

In this example,

  • Remove 30% of your revenue (See ‘Reduce Work’ column)
  • Increase prices by 15% for all your other services (See ‘Increased Prices’ Column).

You will lose 15% of revenue but gain back 30%+ of your time.

And let’s say within your tax prep work, you have a moderate size group of real estate investment individuals and entities.

You could leverage your high value skills, from due diligence to tax expertise to become a firm for real estate investing and holding. Having an advisor who calculates cap rates and understands RE due diligence is a powerful combination. Bookkeeping could easily be part of the package as well.

The firm could focus on one vertical (industry/niche) with an integrated suite of services.

 

If you don’t remember anything else from this week’s newsletter, remember this:

 

You can either be useful to many clients or valuable to a few. There is no in between.

 

Focus your effort on the services where you leverage and maximize your skill and interest, and where you can find an ample supply of prospects.

Marketing

I’ve seen many firms write off marketing and say they only grow by referrals.

Firms offer hard-to-scale services because they’ve grown by waiting on referrals and word of mouth. While referrals generate revenue, they DO NOT create focused, sustainable growth.

Referred clients show up with varying values of work, problems and demands. It is impossible to optimize your firm and team if you only accept referrals.

‘But Mark, I don’t have time to do any marketing.’

Well, with the reduced client roster, you will have time and capacity to market. Don’t fill that new free time with billable work.

Your ability to grow is proportionate to how much capacity you have.

As soon as you know who your ideal client is and what you will do, start marketing. Don’t wait until your new processes are in place. Start talking to prospects for your core integrated services immediately.

There are only four forms of marketing:

  1. Cold outreach – Sending messages and chatting with new prospects
  2. Warm outreach – Talking to existing clients or connections who fit or will connect you with your ideal customer.
  3. Paid Ads – Outbound marketing with a lead magnet and sales funnel
  4. Content – Inbound marketing via social media, podcasts, newsletters etc.

  • Bump up in Op Cost for marketing
  • Capacity decreases by 10% due to time involved in marketing

Processes + Workflows

Once you’ve decided to focus your efforts, now is the time to layer on your automation and process improvements.

If your services are split, deciding what to automate first will be challenging. The cost and effort to automate one of five services will not deliver the ROI that you need from automation.

For example, if you were to automate Bookkeeping and increase profits by 25% for that service, but it comprised only 14% of your total business, the benefit would be much lower than getting that 25% profit bump for 50 or 60% of your business and team.

A set of core services will help you amplify your return on investment for automation.

By investing in a better Practice Management tool and integrated cloud tools, you could increase your capacity by another 10%.

  • Bump up in the Cost of sales.

Protip: Automations that include managing clients, their documents, and communications can yield some of the highest returns on tech investment. Reducing the friction of working with clients is a win for everyone.

With the extra capacity, your marketing will add ideal clients to your firm.

Team Members

Delivering various services may be easy for you. You may have been in the accounting game for decades.

Trying to find team members that can do the same will be impossible. Too many service offerings for a small firm lead to endlessly untrained team members.

As part of your process improvements, break engagements into their tasks and cost structure so you can delegate and manage effectively.

How and who will deliver on the engagement tasks is needed before hiring anyone.

Your first hire does not have to be full-time equivalent hire. There are many fractional team member options: onshore, nearshore and offshore.

You should be able to increase revenue by 2 – 4X the cost of your employee. Not only are you making margin on their work, but they’re also freeing you up to do higher-value work.

  • Add an employee at $90,000+ (2.5X for increased Rev of $225,000)
  • Add an employee at $60,000+ (2.0X for increased Rev of $120,000)
  • Increase in Cost of Sales for software, hardware, infrastructure ($10,000)
  • Increase in Op Costs ($20,000)

Final Thoughts

The example here is precisely that – an example.

Tax rates might be off, the full cost of employees + benefits is high for overseas hires, or Op costs might be low.

Regardless of the details, the principles in this newsletter are what modern firms are doing to grow.

Quick recap:

  1. Core services – everything hinges on this. Focus is required to maximize revenue AND profit per client.
  2. Marketing – Don’t wait on unpredictable referrals. Create a proactive marketing system as soon as possible.
  3. Process and workflows – Build automations around a few services to maximize tech investments.
  4. Teams – A team will be essential to take home $250K without being personally reasonable for delivering high-value services.

The numbers may not be perfect, but it is better than staring at a goal of $250,000 with no plan.

Build The Firm You Want.

Mark

P.S. Email Mark@FirmNexus.com with something that you want me to talk about. I’ll add it to the list. 

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