Client centricity leads to profitability
August 12, 2021
No one would disagree that being client centric is the way to “wow” clients and prospects. So, why is it that many firms struggle to really wow their clients?
As someone who has been on the inside of accounting firms as a partner and marketing director trying to implement concepts such as client centricity, I can honestly say that executing these concepts is easier said than done. When it comes to clients, many partners think they know what their clients want but, in reality, they scarcely do. In short, most client-centric service strategies produce neither the wow factor nor profits.
Proof of client centricity
The proof of being a client-centric firm lies in firm profitability. In every market there are firms that know what their clients want. They deliver their services and products in a cost effective and profitable manner and beat out the competitors.
Take any successful company for example. Have you ever wondered why or how they make money? Apple continues to make money selling a commodity — iPads and iPhones — in an extremely price-sensitive market.
Apple’s success is based on understanding what its customers want and then developing and executing a dominant value proposition. Accounting firms that want to excel in client centricity need to do the same thing. This is where the rubber meets the road.
Most accounting firms — and most businesses in general — talk about being client centric, but when you ask them about their value proposition, they find it hard to describe. Common responses highlight their expertise, people, reputation, quality control process, etc.
Unfortunately, these descriptors mean very little to individual clients. They care much more about what you can do for them, how you can make their lives easier and about how you can provide them with a better future. While your service capabilities (i.e., knowledge, expertise, people, etc.) are part of the equation, they are not the critical part. Clients want to know what you can do for them, not what you do. Unless you can answer the question, “What can you do for me?” you’re not client centric.
This is where most CPAs fail. They fail to identify how ready a client or prospect is to make a change. They fail to understand the possible solutions to the problem at hand and fail to provide alternative solutions. They also fail because they think they know the answer to the problem without understanding the problem.
Clients face problems, threats, emergencies and annoying occurrences. Most clients will live with problems until they become either a threat or a crisis. As their problems move more toward the crisis end of the spectrum, they are more likely to take immediate action. A prospect that is facing bankruptcy has little time to think about what he intends to do. The prospect’s vision of the future can be very bleak — voluntary or involuntary bankruptcy, losing a business, laying off long-term employees and so on.
When the prospect’s vision is bleak, they will select the firm that can provide them with the best possible future. In fact, clients and prospects always select the service provider that demonstrates the ability and credentials to help them create a better future. To accomplish this, service providers need to understand the client’s issues. This is a time to ask questions rather than to give solutions.
Because each client and prospect’s problem is unique, the value proposition also needs to be unique to the individual client or prospect. This takes work, but when you do it you’re more likely to win the client.
Not all prospects are ready to buy. Don’t waste valuable time with prospects that are not ready to use your services. Identify as soon as possible the readiness level of prospects or existing clients. Don’t spend a minute more with those who have no interest or have put the issue at the bottom of their to-do list. Keep your name in front of them by sending articles, newsletters or emails from time to time. They will most likely call you when they are ready to buy.
Client profitability matters
There is one other aspect of being client centric that is seldom discussed. It’s focusing on individual client profitability. Firms that are truly client centric know which of their clients produce the highest economic profit for the firm. And they spend most of their time and energy serving those clients. Firms that are not client centric usually use one of the following reasons for not measuring individual client profitability:
- Some claim they cannot measure the profitability of individual clients. Some even claim that they don’t have any unprofitable clients. Denial is wonderful. It cures, at least temporarily, all problems. My response is that you have no choice but to measure individual client profitability.
- When firms are actively acquiring clients, they tend to get enamored with growth and fail to measure how much it costs them to acquire the new clients. Worse yet, they often have no idea how long the clients are likely to stay with the firm.
- Many firms look at average client profitability. That, too, is an enormous mistake. There’s an old saying about the millionaire and the bum. The millionaire is worth $1 million and the bum is worth $1. Their average net worth is $500,000. Would it make a difference as to which one became your client? The same holds true for average client profitability — it really doesn’t tell you anything.
- Firms need to determine what percent of their total economic profits come from the best 20% of their clients. Do the same thing with the worst 20%. You will be surprised to find out what the latter 20% are costing your firm.
Profitability and client centricity must become the DNA of your firm. Being client centered is not the responsibility of your marketing director or marketing department. While they can certainly help you understand the needs of your clients and analyze client profitability, it is the line partners who are the first line of defense. If they fail or fail to understand what being client centered really means, then they must bear the responsibility and the consequences.
Becoming client centric requires an investment in training and retooling. The return on your investment will be immediate and significant.
August Aquila is CEO of AQUILA Global Advisors, LLC, located in Minnetonka, Minn. He is a well-known professional service firm consultant, speaker and author. He may be reached at 952-930-1295 or at firstname.lastname@example.org. Visit www.AquilaAdvisors.com for more information.