Business is about profit. Everyone understands that in theory, but many business owners end up getting stuck in the hamster’s wheel of constantly trying to earn revenue just to pay for the overheads. The main culprit for this dilemma is the tendency of business owners to cave in to the pressure of making profit and end up chasing every client that they can get a hold of and getting busy to the point of losing sight of what really matters. Certified Profit First Professional, Andrew Royer teaches business owners how to escape this vicious cycle of grow, grow, grow, and spend, spend, spend and to really focus on the bottom line – profits first. He spends time with Michelle Weinstein on this episode to explain his system.
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STOP Chasing Clients And Focus On Profits First With Andrew Royer
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If you’re one of those accounting professionals and you feel frustrated and stressed trying to get the right clients, it seems like you have no control over who you work with and don’t know how much you can truly charge or charging a monthly fee is definitely out of the realm of possibilities, it is not your fault. I know that nobody is training you on how to fix these problems and connect the dots. Up until now, only my high-end clients have had access to this type of information. I’m excited about sharing this with more of you. I am offering a complimentary coaching session to discover the possibilities that you have within your firm if you want to get to some of those truths. You can explore more and head on over to TheAbundantCall.com.
If you’re sick of the way it’s been going and want to jump two feet in and discover all the possibilities because doing what you’re doing, you’re sick of it and there’s no more. You feel you have zero confidence when it comes to sharing the fees and you want to charge a client and you don’t believe in ever-doubling your firm revenue as possible by lowering the volume, then this free coaching session is for you. I only work with five accountants at a time. If you’ve been in business for at least two years, you own your own firm, head on over to TheAbundantCall.com.
We have a special guest, Andrew Royer. He began his journey at KPMG. If you don’t know what that is, it’s the largest accounting firm in Canada where the structure of the firm fed his entrepreneurial spirit right away. A growing family inspired him to expand his focus to bookkeeping where he could apply his entrepreneurial mind to help fellow business owners thrive. A couple of unique facts about Andrew. He has a diploma in Computer Information Systems. He spent thirteen years writing accounting software before switching to accounting. He got those thoughts when he was writing the software. He is a CPA and CGA accountant. He’s a bookkeeper and soon to be Certified Profit First Professional for Mike Michalowicz. Let’s welcome Andrew to the show.
Thanks for having me, Michelle.
Thank you for being here. I love the topic that we’re talking about. A lot of times, we might chase revenue, clients, and trying to grow our top line at the expense of our bottom line. That’s what we’re talking about with Andrew. Before we start, Andrew, can you share with everyone where you live and what kind of firm you have? I’ve already done your intro but it’s important that it comes from you directly.
We’re in Langley, BC, Canada. We have a firm, it’s a profit first bookkeeping firm. Primarily, we do tax and other accounting and consulting. It’s me and there are two bookkeepers that work for me.
I’m excited to know your stories. Andrew, did you ever feel like you’re a hamster on a wheel, you kept spinning in circles, and you never could get off of it?
Everyone starting out feels that way.
Can you share a little bit about how you learn, what you did to implement, and some personal stories about chasing after every single client that came your way for the revenue at the expense of your bottom line and some of the big things that you learned? I know we’re going to talk about three of them. What do you think is the most important one that you wish you would’ve known when you first started your firm?
This is the advice that everybody gives after they’ve come out on the other side. I don’t know if it’s possible to learn this the easy way. When we first start off, we’re always taking on every single client that we can get. Everyone will tell you not to do that. When you’re at a point where you have to feed your family and you got to bring money, it’s hard to say no to every client that comes your way. The biggest advice would be to try and figure out exactly what it is that you want to do, the type of client that you want, make sure that you’re going after those clients and not everybody that comes to see you.
Once you come out to the other side, it’s easier said than done now. What do you think would have had you do that back when you were first getting going that you see it now? Everyone says that so it’s not working because you take on whoever is calling you. What do you think would have you say no to a client? Someone reading could say, “There’s a better client around the corner.” Even though you can’t see it. It doesn’t even seem fathomable that that’s even a possibility.
Ideally, if you could set yourself up in a situation where you don’t need every client that comes in and it’s not always the case, especially if you’re starting this and you have a spouse that makes more money, you can do it right and know that the money is going to come eventually. When you first starting, you’re panicking and not confident in yourself. You feel like you have to take on everything. You have to learn from other people’s experiences and know that these clients can end up costing you a lot more money in the long run rather than bringing in the money that you think they’re going to.Don’t chase every single client you can get. Find out the type of client that you want and go after them. Click To Tweet
Share with us a story on how you learned your lesson that it costs you more in the long run.
At this point in the business, I had a bookkeeper that was well-known in the industry that was looking to have some clients that he was going to get rid of that he had outgrown. Due to his reputation, I took those clients on no questions asked. Even with the clients, I brought on, I did little investigation into the clients before I said yes. If the client was interested in me, I signed them on. I’ve been given the advice to do the value pricing. I wasn’t doing hourly billing at all. I started the business with value pricing right from the beginning. I’m a firm believer in do what you say you’re going to do.
There are a few clients like, “This is your fixed cost. This is exactly what it’s going to take to set you up.” I start looking at these clients and, in some cases, there were years behind having filed their taxes. They had these amounts in their clearing account that didn’t make any sense and things on their balance sheet that they didn’t understand. The more I kept looking into it, the more I realized how much of a mess these books were. For one particular client, I’m charging him $500 a month. I told him that there would be no cost to clean up the books because I assume that the books were going to be clean. It took us two years to clean it up. When we finally got it done, I sent him a $6,000 invoice with a $4,000 discount on it. That was 1 of about 9 clients that we took on. They were all similar situations. Some we still haven’t fixed yet.
If you discounted $4,000, you collected $2,000. If you had nine clients and you lost $4,000 on all, the hole is about $36,000. Did I get my math?
I don’t have my calculator in front of me but I’m sure that’s right.
This happens a lot. If you are reading, you’re like, “That happened to me too.” What did you do, Andrew, to rectify this moving forward where you’ve made changes in your process and you’ve done things a little different in order for you not to be surprised by the mess that took you two years to clean up?
For all new clients, if any prospect that comes to us, we have what we call a Deep Dive Database Review and we charge a fee for that. We get paid for that work in itself because it takes us a lot of work to go through the books to see where they need improvement.
What do you charge for that?
It’s a $500 fee. What that’s helped to do is weed out some of the clients that don’t value our service. They see that the $500 is too much, they go somewhere else and we’re happy to let them do so. If they can’t afford the $500 for us to do that investigation, they’re not going to be able to afford the fee that we’re going to quote them to clean it up. Even if they decide to keep their existing bookkeeper or they decided to go with somebody else, we provide them with a report that tells them what needs to be fixed. If they find it to be too expensive after that, they’re welcome to take that report and bring it to another bookkeeper to make those corrections. There’s value in the report of itself.
They’re getting a deliverable of some sort.
More importantly from our standpoint, we now know what’s the first thing that we’re going to work on when we onboard that client. We need to make sure that those books are nice and clean before we start getting them into our systems and getting it going. It makes us profitable from day one.
Not only profitable but then you don’t get mad at yourself. It’s that confidence piece you were talking about earlier or the lack of what to do, you’ve stopped the $36,000 and bleeding. If you had nine clients, you gave a $4,000 discount, $9,000 times $4,000 is $36,000. That’s how I came up with it. Not only that, you’re getting rid of people who don’t even see the value in a $500 report to you, but you’re also stopping the bleeding on driving yourself crazy. You said you still have a few that you haven’t even cleaned up yet. How do you feel doing the work when you didn’t get paid enough but you want to do what you promised in the beginning? I love the Deep Dive Review fee. That’s a great idea if you’re not doing that. How does it make you feel doing the work now versus on the clients that you still haven’t even cleaned up their mess yet?
It’s a night and day difference. The ones that still aren’t done keep me up at night versus the ones that we’re doing now, they’re getting a much better service and I feel better about it. If you’ve finished the work, it’s deflating to say, “We finally got this done. Here’s my $2,000 invoice.”
You feel deflated. If someone is not willing to pay your $500 Deep Dive Review fee, they don’t see the value in you either at that point so you don’t even need to waste your time with them. We don’t want to chase the revenue at the expense of profit that you have implemented in your firm that had been night and day. It doesn’t keep you up at night but it inspires you and awakens you to get up every day and help some of these clients. Can you share the situation you’re in because you have a big family and you had a lot going on?
Initially, I got into bookkeeping on my own. I was working at a big four firm and we had two children and one on the way. In Canada, they were working on merging the three designations into one. There was a deadline to get my accounting designation done before the merger happened. Otherwise, I’d have to start all over again. Going through long hours at a tax firm and having a baby on the way was a little crazy. I figured after taxes and after childcare, I was making $500 a month. Somebody reached out and asked me if I knew a bookkeeper that I could recommend.
I asked them if they’d be willing to pay $500 a month. That’s the first client who got my start and finished my designation. After that, I was thinking I was going to take things a little slow. We bought a fixer-upper. I was going to work on that and add a few clients. I found out we were pregnant with our fourth and my wife wanted to take a year off again. I tried to talk her out of that. Here I was with one client and I needed to grow that business before she went on maternity leave so that she could take the year off. I had to get my pedal to the metal.
How’d you get your pedal to the metal? We can’t always predict what our future is going to entail. For those reading, you might’ve dealt with the pandemic that went on if you live anywhere in the world, and your wife saying, “I want to take a year off.” How many do you have, Andrew?
We’ve got about 30.
You went from 1 client to 30 and you put your pedal to the metal. You said you created systems in order to do that. Can you share a little bit about that?
I got a mentor. That was the first thing that I did.
Did you invest in the mentor?
I did not. I switched from being a software developer to an accountant. Before I worked at a big four firm, I worked for a small bookkeeping firm. I went back to them and asked if they’d be willing to mentor me. She’s a good friend of mine and she helped me out. I kept picking her brain on how to get to where she was. It took her twelve years to get to where she was and I’m like, “I need to do it in six months.” I wanted to ask her what she had done, I kept picking her brain, and trying to follow her footsteps.
Where did she get to in twelve years? Can you share?
She’s gone even further now. I don’t know all the details but she had quite a few clients who’ve been doing quite well. Since then, her husband has come on. Their business has been growing leaps and bounds.
You got there in six months’ time instead of twelve years.
I didn’t quite get to where she was but I got a lot closer and it got to where I needed to be. I knew that I didn’t have time to develop the systems from scratch. What she had been doing is she had looked into a new bookkeeping system and she recommended that I buy it. That’s what I did. I bought the system so that I had something to start with and then I kept tweaking it to customize to what I wanted to be able to do.
When we were talking, you customized it with your team. They felt a part of it as well. That minimizes the amount of work you get to do which then increases profitability.
When I first got the system, I started using it for myself but not to its full potential. There were a lot of things I kept inside my head which was a mistake. When I ended up growing and needed to hire team members, I brought them on. I told them what was in my brain and got them to change the systems themselves.Focus on the bottom line. If your spending is growing faster than your top line, then you're not getting anywhere. Click To Tweet
These are the things that we need to be aware of. When you’re navigating the dangers of some rapid growth and the bumps in the road that you might find. For you, what I’m hearing is developing the systems upfront but you didn’t have the time to do that so you bought it, invested in it, and that made your life a lot easier. How many clients did it take you, Andrew, to figure out that you needed to review the client’s books before quoting any fees?
Not quick. If there were any issues, they were minor and I didn’t feel so bad. Maybe I lost a few hundred bucks but I felt like, “I’ll get better quoting.” I only learned a lesson when I onboarded nine clients in a short period of time and most of them were a mess. I blew one of my staff’s wages on that mistake.
That was $36,000. That’s huge. That’s a great way to look at it. You’re a profit first professional so I was to bring that up and you focus on value pricing. As it relates to increasing your revenue, not at the expense of profit, can you share with people what do you do about your pricing? How do you figure that out and what’s worked well for you in terms of your value pricing and your profit first engagements?
When I first started the business, I wanted to be able to help other businesses to become profitable but I mostly spoke lip service to that. When I first started out, the pricing was based on compliance and I looked at what other people were charging. I slowly kept creeping my price up when I saw the quality of the books that were coming out of other bookkeepers that I was taking over for. It wasn’t until I got into profit first consulting and then I was able to double my fee for the clients that were having the profit first services.
What’re the ranges now for someone who’s like, “What should I charge?” It’s always the discussion here at the show.
It’s always a hard one to answer because it’s, what do you offer? In order to do value pricing, you have to look at what is the competition offering, what are you offering in comparison to that. A lot of bookkeepers that I talked to don’t charge less than $500 a month. I have clients that are $250 a month that are some of my more profitable ones, but they’re not getting the full value of some of the other clients that are $1,500.
Is there anything else that you’d like to share that you’ve learned over the years for someone who wants to prevent the dangers of rapid growth in their firms and how to navigate that or how to not chase the revenue at the expense of their profits?
When I first started, I needed to replace my wife’s income so that she could take a year off. What you’re looking at is you need that profit. I needed to make enough money in profit in order to replace her income. The problem is then you start thinking about how do I do that? I need more clients. You start chasing revenue. If I get more revenue, I’ll make more money and that’s a lie because you start chasing after these clients and you’re like, “I don’t want to bring clients into my house and I’m going to get more clients if I get expensive office space.” I rent that office space. I’ve taken all my profit and I’m now paying it in rent but I’m getting more clients.
It was great because my revenue is going up but now I’m getting too busy so I hire staff and now you’re giving all that money to your staff and it continues to grow. You continue to increase your expenses when your revenue goes. If you’re not focused on increasing your profit then you get caught in this trap of grow, grow, grow, and spend, spend, spend. It wasn’t until I started putting profit first into my own business that I noticed that I needed to change the focus and look at the bottom line. The top line’s important but if your spending is growing faster than your top line is growing then you’re not getting anywhere. You’re on that hamster wheel that you talked about at the beginning.
The spending cannot be faster and I’m all about profitability. How do you grow your revenue and keep your expenses the same or have them decrease? We’ve talked about this Andrew on other show of upselling, thinking about your clients, and what other services that you can offer to them to increase the value to your top-line revenue from that existing clients, that’s not going to add an additional expense which will then cut into your profits.
In the beginning, I wanted to make sure that we had quality books, we were explaining in detail to the clients how to read their financials, and make sure that they had financial clarity. We wanted to create a profitable strategy for them. When I first started out, I got those first two down quick but I was mostly playing lip service to the profits. It wasn’t until I added that additional service which increases the revenue and made me feel better about the service that it was offering. I was doing what I intended to do right from that beginning.
Was it six months is how long it took you to replace your wife’s income with your additional profits for her to take the year off?
She did take the year off. I don’t know the amount of debt that we went into less. Let’s put it that way. I didn’t quite replace her income but we were able to manage through.
Maybe it’s not a kid. I’ve had a client where their significant other has gotten cancer. There’s always something that will pop up. Again, how can you utilize your business in order to replace that loss of income from your significant other? It’s a beautiful way you did that. Is there anything else that you’d love to leave the audience with as it relates to chasing after their revenue at the expense of their profits that you learned that you’re like, “I have to share this.”
For most of the things that we’ve already shared, I don’t think the systems are important. The focusing on the profit was important, doing that thorough review, all of those. It was having confidence in yourself, investing in yourself, doing what you do best. One last thing that came to mind is that when I started to hire, I was hiring staff to do the billable work because I didn’t want to spend money on my staff unless they were bringing money in. That was a mistake as well because what happens is that I had the most experienced in the business. I’m the company’s best employee and I was doing more admin work. I’d hired less experienced people to replace the work that I was doing. If I had to do it again, I would have started with hiring an admin staff to replace that work so that I could do more higher-end stuff.
Where you’re focusing more on the consulting work, the profit first work, and the higher value. I did a podcast and I don’t remember if four categories. You’re either doing the admin work, managerial work, one other bucket, and then the high-level consulting work. If we spend our time in that bucket each week, at least 30% to 40% of your time then your revenues will be high-end your profits will be high. You could offload that admin work that is lower value since you’re your most valuable employee. A lot of people reading have that same feeling or same setup with one person or 1 to 5 people and thinking about where are you best utilizing your time so you’re not trading your time for dollars.
Thank you, Andrew, for sharing your story on how you replaced your wife’s income and that she was able to take off. You have four little ones then you can’t even make it on a hike like we were talking about before the show started. Thank you for being here with us. It’s always great to hear from other accounting professionals how you’ve implemented so we can reduce the amount of time it takes to improve everyone’s profitability here so they can have the life of abundance as well.
Thank you for having me.
What an amazing episode with Andrew. I want to thank each of you for being here. It’s been a while since I’ve requested a written review. I would love to make a request and ask each of you if you could take twenty seconds to go to Apple Podcasts and leave a written review of your biggest takeaway from the whole show or even from our show with Andrew. How has this helped you in your conversations with your clients? If you’ve increased your revenue, I want to know about that too. Thank you for joining us. It’s always an honor to be here and fun to meet people like Andrew and others. I will see you in the next episode.