Culling the Herd (Clients)

In the ranching industry, culling is the process of removing or setting aside livestock from a herd based on certain “retention criteria.” This is done to remove undesirable cattle from the herd that are absorbing valuable rancher resources, thereby lowering the rancher’s return on investment of time and money, and thus reducing profits.

Similarly, undesirable clients in public accounting firms also absorb valuable resources similar to a rancher’s dilemma. No firm wishes to lose clients, however, undesirable clients can cease to be assets of the firm and become obstacles (using valuable and limited partner and staff resources) to increasing growth and profitability. Now is the time to say good bye to undesirable clients who meet the client culling criteria below:

  • Low levels of profitability (poor realization rates)
  • Resistance to paying for out-of-scope services
  • Little or no potential to sell them additional services
  • Are uncooperative and consistently cause stress to partners and staff that could potentially contribute to staff turnover
  • Will not accept fee increases and don’t perceive value in the firm’s services
  • Chronically slow payers
  • Present high professional liability risks especially those with going concern issues
  • Never refer other clients

Culling clients on annual basis provides the following benefits:

  • Avoids hiring expensive staff to service low profitability work.
  • Allows partners and staff to spend more time with the firm’s best clients to maximize retention and to sell higher value services to them.
  • Provides partners more time to market quality clients and referral sources.
  • Allows staff to work on quality clients to enhance their career growth with less stress.
  • Aids in the retention of staff by decreasing overtime and providing more quality of life.
  • Provides time to develop new and innovative services that are more profitable than low level compliance work.
  • Creates more time for partners and managers to coach and develop staff on a daily basis, supporting succession planning efforts.
  • Freeing up the schedule for partners and managers to spend more time on practice development efforts.

Saying goodbye to undesirable clients and upgrading the client base should be a top priority at this time of the year. Specific criteria should be created in accepting new clients and continuance of existing clients. Clients not meeting the criteria should be considered for termination on an annual basis. If partners are having a difficult time deciding which clients should go, ask the staff for assistance and input, they know.