When clients leave. (The CPA Manager)by Filip, Christine
"But I thought we had settled our differences," you respond.
"No, I disagree. Things are still the same, and for too long now." Click.
Does this scenario wake you up at night? Have you mused lately that you are not sure what clients want anymore? Losing clients, especially profitable ones, wil gut the profitability of a practice, causing high operating costs from turnover expenses. More shocking is the fact that clients don't leave because of fees, o other seemingly concrete issues. Clients leave due to perceived indifference exhibited by someone at your firm. Indifference leads to dissent and defection.
Indifference has as many faces as the exceptions to the rule against hearsay. Indifference may be the slow response on your part to a client's question. What's slow? Ask a client about response time; often it differs from your notio of speed. Indifference may be not explaining the steps you have taken on your client's behalf. Your hours of labor may be transparent to the client. The phon call returned two days later, not today, may prove indifference. Indifference may be perceived rudeness on the part of staff, such as questioning incoming callers as though they have to prove their worthiness to speak with you. With four or five of these "negative" incidents, you and your staff have proved your indifference. The client leaves, fails to give you a referral, or speaks negatively about your firm. You'll need three new clients to replace this lost profit stream.
Managing Retention Rates Means Measurement
On a positive note, client dissent flows from highly remediable behaviors and miscues in your relationship. At the same time, the financial motivation to manage loyalty factors is clear. Boosting your client retention rate has seriou implications for profitability; a 5% improvement in retention rates can boost profits 15% to 50%. The most profitable firms have a retention rate of 93-95%; whereas the average firm has a 78-85% retention rate. Managing the process take planning and behavioral change for both partners and staff. Measurement, settin goals, and review is the starting point.
If retention rates drive profitability, managing the process of loyalty has three key issues:
1. Pay keen attention to your most profitable clients. If you think about your client base in three levels (very profitable, sort of, and not so profitable), spend the most time and expense with the your most profitable, the level one clients. This means that both you and your staff need clear cut procedures to know when to delegate client questions and issues upstream and down. Client dissent (even if you think it's piffling) should trigger strict nonconfrontational negotiation with the client. Should we be slaves to overreaching client demands? Clearly, no. Every dissent does not require concessions. Mere acknowledgment and explanation serves to dissolve many portentous bubbles of conflict.
2. Stay in touch and listen actively. Like any important relationship in your life, building loyalty requires that you integrate communication and feedback systems between clients, staff (your staff is your early warning system), and you. Phone calls, surveys, newsletters, client functions, thank you notes, and focus groups all serve this.
3. Find out why clients defect. They will tell you, and usually in easy to gras terms. Understanding the specifics of causation can directly shape better retention behaviors. It's uncomfortable, but anytime a client defects, or even complains, the accountant in charge of the matter should inquire immediately fo specifics. Any possibility of a negotiated solution must occur quickly if it is to work. Any person in the office should be able to launch a "problem alert" form for immediate attention. The problem alert should have specific facts, statements, and questions listed. It ought to be a bright color to provoke notice, and it should be answered to the client's satisfaction within 24 hours. Being in court, at an audit, on a trip, or in conference are not roadblocks to resolution. If the contact partner can't get to the phone directly, have an associate immediately schedule a phone appointment between you and the client.
Retention and Rainmaking Are Linked
Managing retention, and expanding your practice through rainmaking are two side of the same coin: growth strategies. Retention is the requisite, though, becaus the cost of finding new clients is so high: five to six times the expense of servicing a present client. A focus on new client acquisition alone will just increase operational costs.
Good clients are partners in profit margin production. Loyal clients are the best source of new fee revenues from cross selling, and they provide the highes quality, loyal referrals. A referral from a loyal client has a 92% retention rate versus 68% from advertising. On the other hand, defecting clients will tel eight to ten people and one in five will tell twenty. These may be conservative numbers. The result is clear: the grapevine is mightier that any advertising or marketing campaign.
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