AA 005 | Setting Boundaries

 

Is your accounting firm FULL of less than ideal clients? Clients that just want you to file their tax returns, but aren’t looking for the higher value services you really want to offer?

If you answered YES, this week’s guest on The Abundant Accountant Podcast, Heath Walters, might be able to offer some insight into fixing this problem.

When Heath began his firm, he took on anyone that was interested in his services. Three years later and he was up to 400 clients.

He and his staff were stressed out and working until midnight or later during tax season. Heath knew he had to put a stop to this. He knew he wanted to work with fewer clients and give those clients more of the attention they deserved.

Over a three year span of time, Heath reduced the number of clients his firm serviced from 400 to 40.

How did he do that? By setting FIRM boundaries when a new prospect comes his way. Heath now knows that if a prospect doesn’t fit into those boundaries, it’s a NO to working together.

By implementing these boundaries, Heath and his firm are now able to give their clients the attention they deserve and grow their revenue by offering higher-quality services and servicing higher-quality clients.

If you’re ready to create solid boundaries that will help build up an accounting firm you love, then this episode of The Abundant Accountant Podcast is a MUST LISTEN!

Do you continue letting in less than ideal accounting clients into your firm, leaving yourself stressed out and unable to efficiently handle the workload? Then THIS BLOG POST is a MUST READ!

 

Here are a few key secrets we talked about in this episode:

  • Michelle introduces Heath Walters.
  • Heath shares who he is, where he’s located and a little bit about his accounting firm.
  • In order to set a boundary, Heath shares that you must know who you are and who you want to serve.
  • Heath prefers working with businesses in the construction and financial planning niche, and he shares why in this episode.
  • For Heath to communicate better with his clients, he likes to understand the inner-workings of their business.
  • Heath shared that when he started placing boundaries around who he and his company would work with, they were able to better serve their clients and the clients loved that.
  • Three or four years ago, Heath was overwhelmed with the number of clients they had and did not have enough time to meet personally with those clients.
  • Today, Heath’s firm has 40 clients versus having 400 just a few years ago.
  • The easy first step for Heath and his firm was to take about 100 people that were just having their tax returns done and sell them to another firm that was interested in that kind of work.
  • Selling off these clients helped increase the time he had for his other clients and it didn’t really affect his bottom line financially.
  • Over the following two years, Heath and his team continued to let the less than ideal clients go.
  • When a prospect comes in for help on something that Heath’s firm does not handle, Heath will build up his “sales karma” and refer that individual out to someone who wants that type of work.
  • Another one of the boundaries that Heath instituted was to not take on businesses with 4 or more partners because you struggle to get everyone to agree to the actions that are needed.
  • A very lucrative opportunity presented itself to Heath. This opportunity would have brought in a regular monthly retainer as well as a large amount of money at tax time, but because Heath could see the problem with four partners Heath’s firm turned the prospect away. He shares the full story in this episode!
  • No matter what, Heath will always work with people he likes. If he feels as though he doesn’t jive well with a prospect, he will refer them to one of his peers.
  • Heath’s firm also has a minimum revenue that a prospect must be making in order to work with him. He will share ways that the prospect can hit that amount of revenue, and then refer them out to a peer in hopes that once they are making more revenue they’ll come back.
  • The cons of having boundaries and knowing you will only take on a specific type of client are similar to the pros: By letting a client go you make more time for your current clients, but if someone new comes along how do you not take them when you have payroll to worry about? Financially making decisions for your firm is always in flux.
  • Heath still has clients in his book of business that have been around for awhile and do not meet his firm’s new boundaries. It’s hard to keep those boundaries tight around your long-term existing clients.
  • Heath shares his last words of wisdom — You’ll have to listen to this episode to hear them!

 

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P.S. Is your accounting firm BURSTING at the seams? Are you ready to set some boundaries and only work with those ideal clients you’ve been dreaming of? Then THIS BLOG POST is a must read!

P.P.S. Do you feel like you give away too much information for free? Or you’re tired of inconsistent income after tax season is over? Or, you feel like you’re not being paid what you’re worth?

If you’re like many accountants you may feel like you’re on the cashflow rollercoaster!

There is a solution – a proven, time-tested way to get off that cashflow rollercoaster once and for all.

You’ll be able to connect with high-level clients & business owners that you want; communicate your value, have a proven process that you can follow, collect higher fees with confidence and be paid what you’re worth so you can work less and make more money! Join our Abundant Accountants Masterclass today!

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Setting Boundaries For Accountants: Knowing Where To Draw The Line With Clients With Heath Walters

In this episode, we have a very special guest, Heath Walters, CPA, who’s also the Managing Partner of Walters CPA Group. Heath is also certified as a North Carolina CPA since 2000. He is here to help all accountants, CPAs and EAs to learn how to set boundaries with their clients. He shares how setting boundaries has escalated his business and firm to where he wants it to be with not only the quality and abundance of clients that he loves to work with and the revenue that’s flowing into his business. Let’s welcome Heath to the show.

Michelle, it’s great to be here.

Thank you much for being here with us on the show. I’m very excited to talk to you about a very important topic. We hear this question probably almost every month about setting boundaries when you have an accounting firm or you’re a CPA, enrolled agent, accountant or whatever you want to call yourself and understanding knowing where to draw the line with clients. We get it a lot. It’s a serious concern because we are going to talk about the pros and cons of why should you have boundaries with your clients.

You’ve tightened up your boundaries a lot in 2021. I’d love to have that dialogue and help other accounting professionals understand, A) Why it’s important and, B) Why do you need to decide which boundaries are good for you to set and which clients you want to let in your doors. Before we get started, can you introduce yourself like where you live, what kind of firm you have, what it is that you specialize in and how long have you been around?

I’m a CPA in Charlotte, North Carolina. Like most accountants, I had a practice with 400 clients in it. Over the last years, we have sold or terminated about 90% of those clients. We’re down to about 40. Our practice runs very holistic planning with clients in terms of strategic tax planning. We do books and tax returns but everything we do with every client is consistent and big. In that time that we have transitioned from a whole lot of clients to not very many of them, we’ve quadrupled the size of our practice.

That’s very impressive. I’m sure every single person reading is like, “How did you do that? That’s what I want to do.” We’re going to talk about that because I’ve seen you do a great job setting boundaries. From your point of view, what does setting boundaries look like? What does that mean to you?

First, before you set a boundary, you need to figure out who you are and who your clients are. Once you know whom you want to serve and work with, then your boundaries are set to only work with those people. For instance, we don’t do just tax returns. If somebody calls in and says, “How much do you charge for tax returns,” we say, “You’re going to need to find a different accountant because that’s not what we do. We do tax planning. We will do a tax return but that’s a side business.” We are very strong and solid within those boundaries. We run about $500,000 for minimum income.

That’s a one-year boundary. Not just doing tax returns is one boundary. Another one is it has to be a business with a $500,000 revenue minimum.

We do not specialize in terms of industry. My specialty areas would be construction and financial planning, the two areas that I like the most. We don’t limit ourselves to specific industries. I know a lot of accountants like to go after dentists and the medical professions but we’re not focused on those areas. That is not a boundary for us.

Why do you like the construction industry and financial planning? What was the process of figuring out whom you enjoyed working with? Did you work with 10 to 15 different industries to start and then narrowed it down? How did you pick the two that you like the most?

They happen to be the areas that I enjoy doing. I enjoy financial planning and the whole financial picture. I love construction. I worked in retail for a while. I like building homes. I like all the construction methods of accounting and how those work because I understand them well and it makes me comfortable. When I’m working with clients in an area where I enjoy the line of work, I can communicate with the client better. I understand their interworkings of the business. I understand how cash works in the business. It’s a lot better than I do in say a radiology practice. It’s not my specialty. I don’t work on it every day.

That’s important that you enjoy what you do every day. We want to live a life of abundance and have a firm or accounting practice of abundant clients we love to work with. Even if it’s 40 people, at least they’re awesome.

That’s one of the best parts about this. When I look back at where I was many years ago, I talked to all these different people and they loved what we did but they didn’t value our work and the effort we put in and what we were able to do for them because they didn’t understand it. Once we started putting boundaries around the clients that we wanted to work with and we could truly deliver the best service to those clients, the clients who loved working with us don’t say, “I got to go see my accountant. This is terrible.” They’re excited to come in and see. Whoever says, “I’m excited to go see my accountant?”

AA 005 | Setting Boundaries

Setting Boundaries: Once you start putting boundaries around the clients you want to work with, you will be able to truly deliver the best services to them.

 

Me.

You get to save a bunch of money too.

I’m glad I have all these friends that save me a lot of money. You’re truly able to deliver a better service once you set those boundaries. Can you share with us and take us back to years ago? What was life like for Heath and the firm? Can you explain what’s shifted? What was it like before? What are the main three things that shifted?

Life would be like most accountants’ experience. We’ve got the daily grind. We have people sending us emails and deadlines that are hard and all this workload is condensed into a short period. We feel very stressed and we don’t know how we’re going to get through the day. We’re working until midnight through tax season. That is life when you run a practice with 400 clients. I don’t even know how many returns it was, maybe 700 or 800 tax returns. There is so much stuff coming at you that you couldn’t think and focus. You felt beat down every day. You’re going to work just to get work done but you couldn’t spend time with clients because you were stuck doing work.

Fast forward a couple of years later, it’s very different because we only have 40 clients. Every client does have 5 to 7 tax returns. It’s quite a few there but we have enough time to spend with each family because we don’t have the volume. In tax time, when you only have 40 families to do. It’s a lot different than doing 400. We look at it and say, “We have time to think, plan, reach out, call a client and find out how their birthday went.” We can do that kind of stuff before we were on the daily grind.

Let’s go through the process of how you did that. Part of it is by setting boundaries. How did you even know like, “I couldn’t deal with this anymore. I had to stop the grind. I couldn’t work until midnight anymore. I had to stop the stress. These deadlines were killing me?” You couldn’t think or focus and you felt beat down. A lot of your other counterparts are probably feeling a little bit the same way but making that transition is scary, hard and they’re thinking, “How did you do that?” What’s the first thing that you did to make this transition?

The first thing that we did was break out a group of about 100 clients and sold them to another CPA firm. What we sold was a client list. They were clients that it was just tax returns. There were 10 or 40 clients there. They’ll never own a business so we don’t do any investments. There was no other value we could bring to them other than doing a tax return. We sold it off. We didn’t make very much money on it.

The other accountant was happy because they got more volume. I don’t understand why they thought I was crazy and I thought they were crazy for taking it but it solved 1/3 of my revenue. What that did in that first year was freed up 25% of our workload. We only took away 10% of our income. We could start to focus on the clients that ran a business and how we deliver more value and charge more for that.

As we transitioned those clients out and freed up some time, we brought in higher-paying clients to make up for the difference in the price we lost. We didn’t feel a revenue shift at all because we got a little bit of money for the sale and then we had more time. We could focus on, “Is it a better client? It was great.” That was the first thing. We did that. We sold the portion in the first year and then the next two years, we’re terminating the relationship to a 1/3 each of the next 2 years. That’s how we managed the transition and the shift for our clients.

It went smoothly. It didn’t all happen all at once. For each person reading, it’s not like you have to cut and go.

My whole staff would’ve quit had I done that. That would’ve not been a great idea.

You don’t want to lose your whole team overnight. Otherwise, you don’t have any support even with your 40 clients.

That doesn’t work well either. It does take some time. It takes an understanding of what we’re going to do and where we want to go, what are our boundaries and what we want our firm to look like. We strategically planned that over a couple of years. At the same time that we were letting those clients go, I was spending a lot more time focusing on the clients we wanted to have. I was saying no to people that came in like, “I want to do a tax return.” It was, “I’m sorry but we don’t have the manpower to do that.” That was hard because people came in that were friends of the family. It’s like, “I’m getting ready to tell you no because I feel like I’m a helper. If I said yes, I’m going to put myself right back in the same boat and I can’t move anywhere.”

When you let go of people you do not really want to work with, you can spend more time focusing on those you truly want to have. Share on X

I started creating some relationships with other CPAs locally that wanted that type of work. I had one of them in the North and South part of town. I would say, “Client, I’m sorry this is not what I do but I think that this person will be a whole lot cheaper for you than what we would end up charging. I’ve seen their work. I’ve worked with them before. You’ll like them.” I send them over. I send an email to them and introduce them to that other CPA. The CPAs were happy as could be. I didn’t feel like I was letting somebody down.

Always having that referral source to let the clients that don’t fit your boundaries have a happy place to go. Also letting those people know what you do so you can start receiving clients back to you who meet your boundaries and also know where to draw the line. I’d love to go back in time because you’re like this boundary superstar and you only take on clients that are businesses with $500,000 or more in revenue but it wasn’t always this way.

Can you share with us a time when you had to turn away a client because you don’t take on everybody? Share the process and take us to that exact client, what happened and how did the meeting go and how did you turn that person down? Maybe also how much revenue you didn’t bring into the business to free up for other clients that do meet your standards and understanding that’s where we draw the line in the sand.

That’s a very difficult thing, especially when you think someone is a good client or if there is a lot of revenue there to be done, how do you turn someone down, not give them the help that they need and not break your firm but understanding where a client is good and not where they fit your ideal target. One of the boundaries I forgot to mention is having a business that has less than four partners in it. We found that once you have 4 partners, it’s very difficult to get a consensus amongst all 4 of them for implementing the strategies that we recommend.

AA 005 | Setting Boundaries

Setting Boundaries: When you have four business partners, it is difficult to get a consensus among them when implementing strategies.

 

A couple of years ago, a great business came in that was making good money and they had 3 or 4 partners inside of it, which was on the borderline but as we were going through, I knew how much money I could save them.

It was in the hundreds of thousands of dollars for doing tax planning. The problem was trying to work through the partners, they couldn’t seem to connect well. They operated in a business more like, “Eat what you kill.” If one guy made a bunch of money, another guy didn’t make any money, they didn’t care. I could sense that as we were going through the conversations and I knew if I made a recommendation for something, one guy was much older and retirement was important.

One guy was much younger and he didn’t care at all about retirement. He wanted his toys, starting to save money for college and how we would try to implement a plan. I would’ve been frustrated trying to get it done. We walked away from a very significant tax planning fee and a good monthly maintenance client because I was terrified of the amount of effort we would have to put in trying to convince one person versus another to get synergy when that’s not how they operated.

How much revenue did you probably turn away?

It would’ve been about a $1,500 a month client on your set maintenance. You’re $18,000 a year and between $25,000 and $40,000 tax planning fee. It’s a lot.

Did you turn away from that person because that would’ve caused you to stress not the time and allow you to focus on and get you a little beat down? Would that have driven you a little crazy?

Those are big numbers because my firm did not do that when I started with this transition. I knew that the amount of time I would spend for that $25,000 would’ve been quadruple if not 10 times what I would’ve spent on another client that I’m sure I was going to meet of a very similar revenue stream. It made much more sense to say, “If I’m going to have to spend 30, 40 or 50 hours trying to do this plan and then long-term I’m going to have to do 4 different meetings with people because they can’t get together, I would lose money on that client. I wouldn’t make money.” It didn’t make sense even though the dollars looked awesome.

When the dollars are awesome and it’s hard because you can see it but sometimes when we’re in it, you have payroll and overhead expenses and you see an $18,000 a year revenue on the monthly and a $25,000 to $40,000 one-time annual fee, it’s very difficult to turn away. What are the strict things that you talk and say to yourself, “I cannot do this because,” keeping strict to your boundaries and not giving in on yourself? There are pros and cons to this like letting people go, taking them in, risking a domino effect of your time and stress and getting bogged down in the future. I know we did talk about a few of the things that you do but for readers, what are those three things that no matter what he sticks to at all times?

I’m going to work with clients I like. If it’s someone that I feel our personalities don’t jive well and they are an ideal client, I will send them to one of my peers that does tax planning, make that referral for them and tell the client very nicely and politely. I don’t tell them all the details about our business but I say that their business model doesn’t fit with ours but it’ll fit better with this other type of this other person. That seems hard but it’s long-term relationships with the clients and having to work with someone I don’t like. I have to answer the phone because they’re going to call me once a week takes away some of my time from doing other items. I’m not productive.

AA 005 | Setting Boundaries

Setting Boundaries: Maintaining long-term relationships with clients you don’t like is hard. You have to answer the phone when they call, which only takes time away from doing more productive things.

 

That’s done work with people that I like. We have minimums for how much clients have to be able to afford to pay on the monthly maintenance. I’m very clear and upfront with clients. If their business is too small to handle what we do, I give them about 5 or 6 tax planning strategies to lower their tax bill and say, “As your business grows, when you hit this $300,000 or $500,000 mark, why don’t you call me at that point because these strategies I gave you, you can execute those with your current accountant and it’ll work out well.”

It’s creating a referral source for me but also a future client if they were to fit into our model down the road. The thing that is so neat about that response is it’s about 1 out of every 2 or 3 clients that I say no to send me a referral of someone that becomes a client because they understand whom we work with and it happens often. It’s crazy but you turn one down and all of a sudden, you have the next person coming back in.

Don’t you think a lot of that is because you can have the time to let them in? That would be one of the pros to setting up your boundaries and sticking to them but a lot of times people don’t stick to them.

We allow every new client that comes in between 1 and 1.5 hours of get-to-know-you time. Every single client has got that budget and that’s the investment we put in every client to make sure that the fit is reciprocal on both sides. I don’t have anything else scheduled. I don’t worry about anything else that I do other than that one-and-a-half hour of relationship-building time. We have the time to do that because once you block that time out to work with the people, the rest of the workload you’re doing, you’re able to delegate to the rest of your staff and you don’t feel blocked out.

You can provide this quality time with people. I’ve been a client of a lot of CPAs in the past and I feel like everyone doesn’t have any time. When you can provide a 180 difference and you’re sitting and getting to know somebody and building that relationship and rapport with your clients, you’re going to start attracting a different type of client. In addition to that, you get to learn the first thing you shared, which is do you like them or do you not like them?

Honestly, that is such a freeing position to have to walk into a meeting and say, “I’m only going to take on people that I want to work with.” You fast forward your practice, even a couple of months and think about all the times that people call you. Every time they call you and you like to talk to them, it’s amazing how happy you are at work. They are willing to pay you more money because they like you. It’s a great business model once we can figure out how to get out of the gate and open up a little bit of time to provide a better service.

What do you feel are the cons to keeping your boundaries or drawing a line in the sand? There are pros and cons to everything. We’ve talked a lot about the pros but what about the cons? Do you have any?

The cons are the money. It’s funny because it’s a pro and a con. It’s both. When we accept somebody that we don’t want to work with, we bring in money but we lose our time because it ends up costing us time down the road. On the flip side of that con is the pro of you having more time to work with the people you do better with and you’re more efficient with, which makes you more productive per hour on the people that are coming in. How do you not take a client on when you have payroll to meet?

Working with the people you do better with and making you more efficient will make you more productive per hour. Share on X

That is the most challenging piece to doing this. That’s why you have to be strategic and proactive about how many people you let go. You don’t want to let people go in the month of January, which is your lowest revenue time. It would hurt a CPA firm. You can do that in April when your cashflow is at its highest because you came out of tax season. Being smart about when you declined some of that revenue and then refocus your efforts to bring in your ideal client. That’s the worst one. The other one I mentioned is feeling like you’re letting somebody down. That’s why you’ve got to have that referral source.

They feel like they’re in good hands. Can you share with us a specific example on the con side like when you accepted somebody into the firm as a new client and it costs you more than the revenue you brought in so everyone can learn from your experience and not have to make that mistake?

I still do have some clients that are in my book of business that has been around for a long period and are not within those boundaries because it’s very difficult to shift that firm within a three-year period. When I look at the correlation of how we operate, we have a standard way of doing things. If you pay us $100,000 a year or $20,000, we’re going to operate the same. If you look inside the client base that we have and I will have to do this transition again but looking at the clients on an old revenue model who was paying us a couple of hundred dollars a month is nowhere close to what we do but yet my entire team spends as much time on those clients.

I truly lose money on maintaining clients at the level that we as a firm have. I still see that challenge. Every CPA is probably going to see that somewhat because it’s hard to get those boundaries tightened around existing clients, family and friends. How do you do that? That is hard and I’m not there on that one but the majority of our clients are probably less than 10% that we’re not making money on for what we have.

That’s your pro bono and non-profit work that you will soon eliminate in this fourth year.

Granted, those clients that are in that still send me great referrals. That’s why I’ve left them on the books. We are going to have to make transitions and move them to another person. We will do that as hard as that is.

Thank you so much for being here with us on the show. Is there anything else that you’d love to share with the CPAs, EAs and accounting professionals reading, last words of wisdom as it relates to setting boundaries and knowing where to draw the line in the sand with your clients?

As hard as it is to draw a line in the sand and stick with that plan, it is a direct correlation that when you let go of a client or you don’t take on a client that is not your ideal client and you do it most respectfully and give them good value for the time you spent with them and send them off to someone else that they are a good fit for, it is an almost direct correlation to your referrals that come in after that, within a relatively short period, a week or a month of the ideal client you do want. It takes the courage to say no to the wrong person whom you don’t want to work with. The people that you want to work with happen to show up. It’s weird but that is the reality. I’ve trained about 7 or 10 other people to do this and they have all experienced the same thing.

It takes courage to say no to the wrong person you don’t want to work with. Eventually, the right people will just happen to show up. Share on X

How can people find you? Can you share whom you’re looking for in case another CPA, EA or accounting professional reading and say, “I want to send Heath some business?”

We are rolling out Advanced Tax Partners or ATP. That organization is set up and designed to train and coach CPAs on how to do this, make the transition of their practice, start charging better rates and delivering better value to clients and learn how to let go of people so that you can take on more productive clients to be coached through that process. That’s our training company. All of these years of experience and this torture that I went through to learn how to do this, we get to pass it over and you get to be coached on how to do it by someone that’s done this several times. Not just me but with other people inside the organization.

Thank you so much for being here with us. It was an honor to have you.

Thank you, Michelle. Talk to you soon.

Thank you all so much for joining Heath and me on the show, talking about setting boundaries for your CPA firm and understanding where to draw the line in the sand. I’m sure a lot of you have hundreds of clients like Heath had. Understand that there is a way out of that and how you can transform your practice. We talked a lot about the pros and cons. All I ask is that you put 1 or 2 of those things into action because it is where confidence is built. That’s where you can make a huge difference and dent in your practice. I would be grateful if you had a quick second to leave me a rating and a review on iTunes and also subscribe to the show because I always love hearing from you.

One last thing before I let you go. If you want to build an award-winning accounting practice with premium clients who pay you what you’re worth while never having to negotiate or compromise on your fee, then I invite you to sign up for my free masterclass at TheAbundantAccountant.com. You’ll learn how to communicate your value, collect higher fees with confidence and get paid what you’re worth you can work less, make more money and have that life of abundance. I would love to see you there. Thank you so much for reading. Have a great day.

 

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