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Discussion:Client Retention

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Rgtaxservice (talk|edits) said:

5 January 2007
I'm new to this site, I've been it checking out for a few weeks. I have a small tax practice that I've had for several years. I have about 175 clients.

I've been keeping details sales records for almost 10 years regarding how I acquire new clients; referals, marketing, advertising, etc.. One stat I've always kept an eye on is client retention. My retention rate is better than 80%. It's probably closer to 85%. I expect to lose 15% of my clients each year. Is that retention rate normal for this industry?

Now my client base has grown in 9 of the last 10 years. I manage to gain more clients than I lose. Is there anything I should be doing to 'recoup' lost clients? I always send them a reminder notice the following tax year, but I never make mention that I didn't see them the year before.

I once thought about sending an 'end of tax season' 'Missed You' survey but I realized there was little I would do with their comments. If you didn't like my fees or hours...too bad...it's not going to change. You decided to use Turbo Tax...nothing I can do.

This is what happens when I add up 10 years of lost clients. What can be done?

Bottom Line (talk|edits) said:

5 January 2007
Don't remember ever seeing stats on retention but I'm sure there are some out there somewhere. It would be interesting to see more detail of the lost clients. How long were they with you? How did they find you? About 1/2 my practice is bookkeeping so I see my clients all year long and there's the "personal touch" in the relationship. Less likely to loose those vs tax only people that you see only once a year. I can only remember a couple that I truly lost. They were tax-only clients that I got through an ad. The next year they went in search of the next ad with a discount coupon. (The ad cost more than I ever made on the few clients I got so I'll never do that again!) There are those clients that close their business, die, move away, outgrow me (need a CPA), or hire a full time bookkeeper. I don't really consider those "lost". They're often good for some referrals. I usually review my client list every end of year and wind up "firing" a few every year - whiners, slow pay, etc. I review my practice success based on gross annual revenue growth as opposed to number of clients. It's been up 9 out of the last 10 years (off year was because bought a new house and moved during tax season).

Rgtaxservice (talk|edits) said:

5 January 2007
I've been able to categorize my lost clients in several ways. I lose some to death, divorce, marriage, relocation, and unknown.

It's the unknown that I can't get a handle on. I know that 1/2 of my lost clients are first year clients from the year before. I can usually get a feel for that when I meet them. They are the 'I usually do I our taxes but wife got this 1099R and.." types. I know I won't see them again.

It's the other 1/2 of lost clients that I don't suspect...clients I've had for a few years.

I also view growth based on annual revenue and it has always gone up. I'm just looking at client growth and wondering if I've reached a plateau. I always gain between 25 - 35+ new clients a year regardless of how or if I advertise. I always manage to get that 25 - 35+ a year. However, with a 85% retention rate, there comes a point where I will lose more than I gain.

- Rick

DZCPA (talk|edits) said:

5 January 2007
Do you raise your fees often? Some leave because they do not want to pay for an increase. I look at the total $ for growth and also the average fee per return prepared. Just a thought....raise your fees 25%....lose 25% of your clients...make the same amount of money with 25% less work!!

WesR (talk|edits) said:

5 January 2007
Hi to lose 15% a year is VERY high. You are definitely not wearing the right tie or something. I would contact some of these client and ask why so that you can improve your services going forward. bye

Death&Taxes (talk|edits) said:

5 January 2007
I agree with Wes....this means your practice turns over every seven years in theory. In 1998-99 I moved 250 miles away from most of my clients, told them they would have to mail their information for I could only come back to my old area for 10 days a season, and my losses were less than 6%, some because I refused them an appointment during the ten days.
 Now maybe you are in a transient area, but one thing is for sure: with 175 clients you are not running a refund factory so I doubt that price is a factor. I think you have to examine how you conduct yourself. "Getting my taxes done is like going to the dentist, but you make me feel comfortable" is a phrase I hear often.  Oddly, my fiancee's dentist is that way also.  He has a sense of humor, remembers things about his clients and tells jokes on himself.  The first time we went there, he looked at me, said 'you look smart' and asked me about a crossword puzzle clue.  Ask yourself, 'do I project to others the love I have for what I am doing?'  Wes, Dennis, Larry, PJL, JR, JDugan, Sandy, Deb and others leave that impression on me, and if I needed my taxes done, I'd hire them in an instant.  BL could do my books and if I needed a technical opinion, I'd call in Riley, while DZ could do my audit and take no prisoners.  What I am saying is more than likely your problems rest in your manner, not your ability.  Think about it.

JR1 (talk|edits) said:

January 5, 2007
And think about your clients constantly, not just at year end. (Thanks for nice compliments D&T..) I send out a newsletter three times a year, that I write myself. Early June after the dust settled and they still remember taxes. Sept so that they remember me, and Dec. with the organizer and their fee noted in advance, with an envelope to stuff papers into. And, when I attend seminars and get tidbits here, I call or email them when it's appropriate. Some of them subscribe to my webpage's newsletter...so I'm in their mind a lot. I lose about 7-8% of my tax clients annually, but really, only a very small number to someone else or Turbotax or some such. I even keep the ones who transfer across the country. D&T is right. Attitude matters, be someone they want to work with and make it easy for them to do so.

Michaelstar (talk|edits) said:

5 January 2007
I too would be a little concerned if I was to loose 15% of my client base in any year. I may have maybe 1 or 2 clients leave in a year and most years I do not loose any clients but most times it is due to fees and that does not concern me much. My philosophy on clients are they are your boss. Every day I wake up I go to work and must answer to each and everyone of those clients and each and everyone is treated like they are a millionare and their questions and problems are VERY important to me and I try (although at times I can be a bit gruff) to let them each know how important they are to me. When one looses site of that, people pick up on that and it ends up in separation - result lost client - even if it is only one due to fees. I have walked away from jobs because my sence of worth was different than the employer. I always ended up being paid what I believed I was worth so that is that is probably why it does not bother me to loose a $250-$300 client due to fees.


D&T and JR1 - you again prove to be a couple of wise and seasoned guys - your posts and your reasons should very much help others who are both new and old to the business on client retention.

Lizzit (talk|edits) said:

5 January 2007
You asked what the industry rates are:

Chop shops (H&R, etc) have an average retention rate (within the office) of 75%, as of the last time I had access to this data (8 years ago). This does not count all the people who stay with said H&R, but in a different region/area.

Expats tend to return to the US within five years of leaving; foreigners tend to sell their US real estate within two years, and folks who give up their greencards or citizenship often need never file again. As such, the stats I've seen for our particular branch of the industry seem to also be 75% retention. I therefore consider we're doing fabulously when we exceed 80%. My current retention rate is 85%.

Some things you can do to increase your retention rate:

1) When a client leaves, make it easy for them. Give them everything they need to start up with a new accountant, such as copies of old returns, and tell them they can always come to see you again. You'll be amazed how many continue to recommend you to others, even though they can't continue to see you themselves.

2) Call clients who don't come back and let them know they can come back whenever they like. Ask if there's anything you can do to help the transition to their new accountant.

3) Whenever you provide pro-bono advice, either to existing or potential clients, explain that the best way to repay you for your time would be a referral.

4) Provide pro-bono advice all year round. A newsletter is one method; there are many ready-printed ones that save you the time for writing them.

Good luck.

Mark Eason (talk|edits) said:

5 January 2007
Before I merged, my practice had less than a 10% loss rate.

I did free fifteen minute phone calls when not working on their account. This kept the lines of communication open and kept the suprises down during tax season(In tax season - "Oh, I forgot to tell you I sold my business last year").

Always have a referral system setup. Only use it on your good clients. Why would you want bad clients referring to you other potential bad clients?

DZCPA said to raise your fees by 25%. I did 20% in one year, I kept almost all of my clients.

Do Pareto Analysis on your client list (do it on net revenue per client not gross). Review the bottom 20%. If terrible clients, fire or sell them. I have fired 2 clients and both came begging back with better records and higher fees.

One timers will kill your practice. When you do the Pareto Analysis see how many one-timers are in your lowest 20%. Also, for all new clients, ask for full amount or a retainer up front. This reduces your collection efforts and will run off one timers.

For your top 20%, you need to expand the work you do for them. Go visit them during off season. Many times you will come back with work to do. I grow roses (some years I grow Japanese Beetles). I take the female clients home grown arrangements. For the males, I cook brownies and chocolate chip cookies. When the non-top 20% clients find out, be prepared. "Why didn't you bring me roses?" "Ms. Client, I would love to bring you roses next year. I bring roses to my best clients. My best clients do x, y, and z. Let's see how we can get you on next years list." If the client improves at all, they get roses.

RG-I am encouraged because you are measuring your retention rate. What you measure; you can manage. How many firms are not measuring retention and don't know they have a problem? If you can increase new clients to 20% and losses to 5%, your practice will double every 5 years.

PJLCPA (talk|edits) said:

5 January 2007
There is a lot of great advice here, and I think it's a good idea to review these points each year. The most important thing to me is if we can find out WHY they left, and see if we shouldn't be changing something. There are a lot of "discount shoppers" out there, and are only looking for the cheapest fee...we don't want to compete for them because they ALWAYS want to pay less this year because "they are so much more organized".(Yeah right).One thing that I didn't see mentioned is to make sure your staff is presenting a professional image. If they're not happy, clients can tell, and it makes them feel that they are interupting your work. (Be careful...they ARE your work). Biggest % of client turnover that I've seen are the "discount fee seekers"(the ones that when they bring in the last 3 years returns all prepared by different preparers). It is so much more fun to be around someone that loves their job, than someone that hates it. If you like your job tell the client.....Biggest compliment I get is when someone says "I love getting my taxes done here, I came in all nervous and affraid, and by the time I leave I don't have a worry in the world". If you make them all feel that way, you will have no problem with retension.

Chautauqua (talk|edits) said:

5 January 2007
My retention rate is about 95%. I suspect that those who have high loss of clients, it is because the clients are chasing the lowest fee. Advertising will invite fee-shoppers.

DZCPA (talk|edits) said:

5 January 2007
Client perception of the value you offer is key. At time of live tax prep interview, I calulate the return before entering in deductions client forgot to give me. I then tell them the "result so far is $$, now lets get to work...what about internet,books,investment expenses, 2106 expenses, donations, etc deductions". I then recalculate the new $$ and point out to clients how it is a lot better now. Your fee will not matter as much to them now. Their excitement as to the change in refund will keep your phone ringing with new clients from these happy clients. It works for me with over 1200 clients. 20% new ones each year. I also lose about 15% (fee increases and the usual reasons).

DZCPA (talk|edits) said:

5 January 2007
If your fees a very low, your loss rate will also be low . You are dealing with the K-Mart shopper crowd.

Rgtaxservice (talk|edits) said:

9 January 2007
I really appreciate the feedback that all of you have given. Thank you.

There were good points that were brought up. That's what makes losing clients is even harder to understand.

As I have mentioned, I have a small practice. I'm not a CPA, and I won't test for EA until mid 2007. I've been preparing taxes for 14+ years. I'm not a year rounder or even a full timer. I work a 40 hour/week job as a draftsman. I work the practice around my regular job. You would never know it though...You may have to leave a message, but I always return a call within an hour or so.

My practice consists almost entirely of individual taxpayers and one partnership. Only a handful of my clients gross over 100K per year. My clientele are mostly people that don't want to pay HRB or HJ prices and feel ripped off. My prices are reasonable. My average return is a little over $100. I charge by the form.

I conduct myself in a very professional manner. I try to put my clients at ease. I use the dentist routine too. (Don't worry; this will only hurt a little :) Since clients don't see me working the long hours in the wee hours of the night it's important to me that when they do have contact with me - during initial consults and final review – my conduct and 'product' ooze professionalism.

I review a client's return with them in-depth (but not enough to bore them or get too technical). I want them to understand why they are getting a refund or owe. Especially then...to explain why, and what can be done to prevent it. My wife tells me that sometimes I explain it so well that people can do them on their own.

Further review of my 15%, shows that about 1/3 to 1/2 at least have explanations: death (At least I get the decedent return), (marriage - two clients become one, or one client becomes none), relocation (I'm batting .500 on keeping them - strangely enough, my out of state clients are keepers, while the next county over client is history). The rest are unknown. I have always suspected they were price weasels.

Any suggestion on a survey format that I could send 'lost clients? I created a questionnaire one year but I never sent it. There is nothing I can do about a price weasel or a one timer that gets stumped with his wife's early distribution 1099R.I think it's just boiling down to knowing what happened.

I would have responded sooner, but the wife was nice enough to steal me away to Poconos for a long weekend before she becomes a tax widow.

- Rick

Bottom Line (talk|edits) said:

9 January 2007
Nice wife. We won't get away until mid-May. Going to an RV show 1/20 for the afternoon - does that count? Anyway - getting back to subject - I spend a little time with each one giving my personal financial advice. IE - pay off your credit cards, spend less money, save for retirement. I give examples using myself or "I have another client that...". This helps them feel that I really care about them and am concerned about their financial future. Seems to help.

PJLCPA (talk|edits) said:

10 January 2007
Just ran into an interesting article on this, Try going to: http://www.accountingweb.com/cgi-bin/item.cgi?id=102996

Rgtaxservice (talk|edits) said:

10 January 2007
Good article. I've often thought if those lost clients felt they were getting value for their money. On the flip side, with an average charge of only $100+, it's a value compared to going to HRB or JH.

I'm going to send out the survey at the end of the season. I'm glad I read the article, it will give me choices to put on the survey. Especially 'percieved value'.

- Rick

HLCPA (talk|edits) said:

10 January 2007
DZ, I find your approach - giving a refund number and then a better one-- interesting. I have about 15% the number of clients you have, so I assume a different clientele. But, I can see your approach working the first year, but after that those expenses are on the organizer. Also, before a new client comes in they will usually ask which expenses should they get for me -- it really slows down things when they are missing alot of expense, and the file sits for 2 weeks. Do you do this with returning clients?

DZCPA (talk|edits) said:

11 January 2007
I do this with new clients who are not as organized. When they express how happy they are, I ask " Do you know of anyone who goes to your old accountant?" Your phone will start ringing. I'm sure my clientele is no different than yours. Yours will grow by asking for the business!!

Rgtaxservice (talk|edits) said:

11 January 2007
I acquire about 2/3 of my new clients thru referrals. The remainder are through advertising and Yellow Pages (YP - too expensive without a first time discount). The big push for the advertising is usually late Jan and Feb. It's the refunders who want their $$$. Problem children appear in late Mar/Apr.

Many of the new clients are pleased with the in-depth interview and service, something they found lacking at HRB & JH.

- Rick

Victor1530 (talk|edits) said:

11 January 2007
I have read this thread twice now. I am a new CPA starting a part-time practice. I have found this site very informative. My approach has been multifaceted to acquire clients, as a Controller for 3 diff companies in the last 26 years, I have found that the CPA firms we dealt with had a minimum for a tax return...if they didnt already do the business. Simply put a 15 person CPA firm will have 3 people "touch" the return, last being the partner and what might be a $350.00 return according to billing rates would be $600.00 "not the market" so these go somewhere. These $350.00 return clients want the same hand holding that the $1000.00 client receives. So on to my point, and since I am new to marketing and obtaining and keeping clients. I found this article very interesting yesterday on Accountants World web site which is free by the way for subscription.

Hope this will give some insight to everyone in keeping clients. http://www.accountingweb.com/cgi-bin/item.cgi?id=102996

Bottom Line (talk|edits) said:

12 January 2007
Flip side - I "fired" a client today. I thought he was going to cry. He begged me to keep him and offered to increase the payment. I was nice but "too bad/so sad". Because of things he's doing, I don't want to sign off on his tax return.

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