CREATING AND IMPLEMENTING A CLIENT ACCEPTANCE POLICY Presented by Sam Allred, Founder and Director of Upstream Academy

While there are many excellent strategies for building a profitable accounting practice, few things will help more than choosing and retaining the right clients. When all is said and done, the foundation of a highly profitable practice is selecting great clients and giving them exceptional service. 2

“Along with your human capital, your customer selection and retention criteria are the most important aspect of crafting your firm’s success.” Ron Baker 3

PRESENTATION ROADMAP Observations about the clients we serve Creating and implementing a client acceptance policy Questions and answers Email questions to sama@upstreamacademy.com 4

 OBSERVATIONS ABOUT THE CLIENTS WE SERVE 5

OBSERVATION #1 Our firms can be no better than our clients allow us to be. “It’s axiomatic: You’re as good – or as bad – as the character of your Client List. In a very real sense, you are your Client List.” Tom Peters 6

OBSERVATION #2 The only clients for whom we can provide A-level service for any length of time are A-level clients. Serving A-level clients improves our quality of life substantially because these clients are better able to help us have successful engagements. 7

OBSERVATION #3 It seems that many in our profession feel they are morally and legally obligated to provide services to every client and prospective client that wants to be serviced, regardless of the client’s ability and/or willingness to pay for those services. 8

OBSERVATION #4 Most firm leaders simply don’t believe they should have the right to only serve A-level clients. 9

“Supposedly, professionals are among society’s most bright, educated, and elite members – people who are supposed to have more career choices than anyone else. Yet they seem to be willing to accept a work life made up largely of ‘I can tolerate it’ work and clients, and they feel that they cannot safely do anything about all that.” David H. Maister 10

OBSERVATION #5 Every firm has some bad clients. Not all difficult clients are bad clients. A bad client is just that: a client who is not worthy of our time and resources – not now, not later. 11

OBSERVATION #6 Bad clients cost us a fortune. Not only do they consume resources that could be dedicated to more profitable and rewarding clients, they add tremendous stress to our lives. Bad clients live in Quadrant I and require all who serve them to become trapped in that energy-sapping quadrant. 12

OBSERVATION #7 We tend to measure the success of business development efforts on the size of the client landed rather than the quality. The bigger the new client or engagement, the bigger the celebration. 13

OBSERVATION #8 Lots of firms talk about client acceptance policies as if they had them and were using them.  The reality is that for many firms, “client acceptance process” means filling out the right form after work for the new client has already begun. 14

OBSERVATION #9 Many firms and individuals have a poor screening process for selecting new clients. For many, prospective clients are considered good candidates if they have a checkbook and can fog a mirror. The idea of performing appropriate due diligence with prospective clients is foreign to many within our profession. 15

OBSERVATION #10 The primary purpose of a client screening process is to detect as early as possible whether the prospective client is A-level or D-level. It is much easier to part ways with prospects when we have not invested significant time pursuing them. 16

OBSERVATION #11 The only thing worse than pursuing a D-level client is landing one. 17

OBSERVATION #12 Most firms are better talkers than doers when it comes to culling D-level clients. Experience has shown that it’s much easier to lead clients in the front door than it ever is to escort them out the back door. 18

OBSERVATION #13 Serving D-level clients is extremely difficult for all members of the firm. Failure to hear complaints doesn’t mean the pain is not there. Here are some actual comments from managers of a top 100 firm regarding what it’s like to serve D-level clients. 19

REAL FEEDBACK FROM MANAGERS It’s demoralizing. They don’t allow us to be professionals. We’re not excited to serve them or even call them back. D clients lie to us. It’s discouraging. It stinks to work for D-level clients. They create enormous stress. D-level clients are anti-culture. I feel totally out of control. These clients are destroying everything we’re trying to create. D clients defeat and undermine the firm culture. They cause friction among directors, managers and staff. They try to trap us and are looking to cause problems. Our reputation is hurt more by serving these clients than by firing them. 20

OBSERVATION #14 A well written, carefully followed client acceptance policy pays huge dividends for the firm, both short- and long-term. A Success Story. 21

OBSERVATION #15 A strong client selection process enhances a firm’s ability to land quality clients. 22

 CREATING AND IMPLEMENTING A CLIENT ACCEPTANCE POLICY 23

Client screening is seldom very successful when it’s a stand alone exercise. It needs to be seen as part of a bigger plan to improve business development efforts, land A-level work, and establish win-win relationships with A-level clients. 24

CREATE THE RIGHT PROCESS Agree that client screening is vital Identify A-level client characteristics Identify the questions to ask Agree on key issues to discuss Develop a client acceptance document Establish a process to monitor client acceptance 25

1. AGREE THAT SCREENING IS VITAL Meet as partners and discuss the impact of serving D-clients and commit to do a better job of screening the front door. Each partner needs to commit to a screening process that will increase the quality of future clients and engagements. 26

POSSIBLE QUESTIONS TO CONSIDER How does serving D-level clients impact our firm? What are the barriers to removing D-level clients? What benefits would we receive if we only served A-level clients? 27

POSSIBLE QUESTIONS TO CONSIDER How can you tell an A-level prospect from a D-level prospect? How soon can you tell which level you are talking to (meeting with)? What’s the right thing to do if you determine the prospect is D-level? 28

2. IDENTIFY A-LEVEL CHARACTERISTICS Identify the characteristics of your very best clients. Keep in mind that these characteristics include both qualitative and quantitative measures. 29

A-LEVEL CHARACTERISTICS - 1994 The ability to attract and retain quality people An attitude of teamwork and commitment A strong upper management team High commitment to technology Belief in a thorough planning process for change Recognize and pay for quality services Reasonable expectations Willing to take advice (teachable) Investment vs. expense approach to change Good profitability and strong position in industry 30

A-LEVEL CLIENT CHARACTERISTICS D-LEVEL CLIENT CHARACTERISTICS Growth potential • Good economics (value and pay for quality work, good realization, good profit, refer other clients) Low risk (client has integrity, takes a team approach to engagements, competent staff, willing to ask for and follow advice) High enjoyment factor Limited growth potential • Bad economics (poor profit, slow paying, poor realization, excessive write-offs) High risk (client lacks integrity, tries to trap us, turns their problems into our problems, disorganized, not willing to take advice) Low enjoyment factor 31

A-LEVEL CLIENT CHARACTERISTICS D-LEVEL CLIENT CHARACTERISTICS Great personnel (Great to work with, longevity, treat our people with respect, realistic expectations) • Low engagement risk (client is well organized, good management, attracts and retains good people, timely in providing quality records, good internal controls) Enhances firm reputation Weak personnel (extremely demanding, unrealistic expectations, constant turnover, treat our people poorly) • High engagement risk (disorganized, weak management, unable to keep good people, inadequate and untimely records, weak internal controls) Diminishes firm reputation 32

3. IDENTIFY THE QUESTIONS TO ASK Once you’ve developed a list of A-Level characteristics, identify the questions used to determine whether the prospect has those characteristics. 33

EXAMPLE Good Character Does your organization have a formal (or even informal) code of ethics or conduct? Have you turned away clients or projects because of a conflict of interest or a question about their ethics? How do you define business ethics? 34

EXAMPLE The ability to attract and retain quality people Who does your recruiting and what are your recruiting standards? What is your turnover rate? What do you do to retain and develop your best people? 35

4. AGREE ON KEY ISSUES TO DISCUSS Develop the courage to have direct conversations with clients and prospective clients about services and fee expectations. Foster a relationship of openness and honesty with those you serve so that they can have absolute trust in your abilities. 36

Too many individuals in our profession shy away from difficult and straightforward discussions with clients and prospective clients. They seem so pleased to get the work that they appear frightened to bring up the issues of fees, invoices, and other critical expectations. 37

As a partner group, identify the key issues that need to be addressed with each new prospective client. Agree on the wording that needs to be used when addressing these key issues. 38

5. DEVELOP ACCEPTANCE DOCUMENT Modify your client acceptance documents to include the characteristics of the clients you are looking for, the questions you will ask to determine whether new clients have the desired characteristics, and the key issues that need to be addressed with the prospective client. 39

6. ESTABLISH A MONITORING PROCESS Identify the steps that will be followed to monitor adherence to the client acceptance process. Establish responsibility and accountability to monitor new client acceptance. 40

 QUESTIONS AND ANSWERS Email questions to sama@upstreamacademy.com 41

UPCOMING 2012 EVENTS MANAGEMENT PRESENTATIONS April 24 & May 16 What’s the Best Use of Partner Time? June 4 & 28 The Ten Worst Habits of Otherwise Good Leaders Emerging Leaders Academy Introductory Call January 24, 2012 at 10am Mountain Academy For Business Development Introductory Call January 24, 2012 at 12noon Mountain 42

Thank You! sama@upstreamacademy.com 43