I started coaching John from Florida 2 months ago. When I met him, he was a typical sole practitioner running a traditional CPA practice.

Before we get to his new plan, here is a snapshot of how he previously operated.

  1. He has 481 business clients at an average of $2,615 per client
  2. He has 1,005 personal clients at an average of $417 per client
  3. Most of his revenue (87%) was in compliance / write up services
  4. Most of his clients did not know the price and scope of work before he started the work – mostly hourly billing in arrears
  5. Because of no. 4 (and some other reasons) he had 12% write offs (88% realization) or $231,782 was written off last year – ouch!
  6. He carried $272,285 in work in progress or 52 days of revenue
  7. He carried $216,750 in accounts receivable or 47 days of revenue
  8. He was very ‘chargeable’ at around 2,000 hours per year personally or 96% of standard hours
  9. He was measuring the wrong KPI’s and not implementing projects to improve them
  10. His average hourly rate for client work was $72 and for all hours worked it was $50
  11. He was very reactive and very busy.

He had revenue of $1,677,065 and was making a reasonable profit of $327,565 before working capital and taxation. As I said, a traditional practice model.  

The first thing we did together was create a new financial model with a new action plan to achieve it. At a high level, this is what we agreed he would do to make a difference to his business and that of his clients:

  1. Re-package all business clients onto a monthly fixed fee for the known work – paid monthly on the 1st of every month in advance
  2. Add value to the current work and as a result increase the price current work by 30% – it’s different for every firm
  3. Visit every business client to establish their goals and determine additional projects for the clients to buy – 40% to buy something @ $4,000 each
  4. Turn on the marketing machine that I recommend and target 20 new clients @ $25K each
  5. All client work is now priced in advance and revenue target is now $3,449,785
  6. Implement my efficiency strategies and get 30% more efficient – average hourly rate popped out the end at $133 per hour
  7. Learn my value based fees model and target $350 per hour (not really value based fees but it’s a start) for additional work
  8. Also target $350 per hour for new clients
  9. As a result of the above, he now needs 20,002 human hours to deliver the total revenue – he previously needed 23,392 to deliver $1.7M
  10. We set Accountants productivity at 79% and John’s at 50% – still too high but it’s year 1
  11. As a result of the above we eliminated write offs, had WIP at 5 days and receivables at 5 days – cash-flow problem sorted
  12. We added 2 administration people – client excellence coordinators and we could afford to lose 1.5 accountants but we elected to keep them
  13. We added $100K in new costs – my fees plus marketing and general office overhead

As a result of the above, John is working to a detailed plan to reduce his personal time, get more efficient and bring on quality clients. His revenue target is now $3.4M and his profit target is $1.9M. Much better numbers than he was achieving.

He’s off to a flying start in August with (as he put on my community site) “We have added 10 new clients in August for new annual revenue of 92k!  We are going to make a push to eclipse $100k in September”.

His previous and new financial targets are below in the table:

Previous Benchmark Target
Partners 1 1
Accountants 13 11.54
Administration 2 4
Utilization / Productivity – Accountants 79% 75% 79%
Utilization / Productivity – Partners 96% <30% 50%
Write offs -12% > +% 0%
Average Hourly Rate recovered – client hours $72 >$500 $172
Average Hourly Rate recovered – all hours worked $50 >$250 $124
Work in progress days 52 <5 5
Accounts Receivable days 47 <10 5
Salaries – excluding Partners $809,500 $909,500
Office overhead $540,000 $640,000
Revenue $1,677,065 $3,449,745
Gross Profit $867,565 $2,540,285
Gross Profit % 52% >75% 74%
Profit before Partner benefits $327,565 $1,900,285
Profit before Partner benefits 20% >60% 55%
Profit per Partner $327,565 >$1,000,000 $1,900,285

With my guidance on exactly how to implement the plan, John will have a vastly different business with vastly different results. I got asked yesterday “how do you actually ramp up profits while you reduce time”? You just saw a snap shot of the answer in this article.