Making Profitability a Way of Life

Profitability is more than revenues minus expenses. It is a value- and impact-driven behavior system that should influence how a firm operates every day.

When profitability becomes part of the culture, firms have greater flexibility to pay people well, invest in technology, reduce unnecessary work, and create better opportunities for their teams. This creates an environment where talented professionals want to stay and grow, which can reduce staffing woes and improve succession options — all while creating a more profitable firm.

Here are four actions that can strengthen profitability while reducing staffing pressure and creating a happier, more sustainable work environment.

1. Focus on what you do best and where you have the greatest impact.

Limiting the scope of services you provide or being more selective about the clients you serve allows your team to become more focused and more expert. Greater expertise builds confidence, creates more value for clients, and supports higher fees. Increased profitability can then be reinvested in compensation, automation, training, and tools that reduce the grind and allow people to grow intellectually and professionally.

People who feel challenged, valued, and successful are more likely to be happy in their work — and more likely to stay.

2. Implement a purposeful bonus plan.

If you want people to perform beyond the norm, give them an opportunity to share meaningfully in the results. A strong bonus plan should reward the behaviors that drive profitability — efficiency, client service, business development, leadership, and sound business judgment. When employees see a clear connection between their contributions and their compensation, they have greater incentive to improve performance and remain with the firm.

3. Share meaningful metrics.

Accountants understand numbers, so use that strength. Share meaningful firm-performance metrics and help employees understand how their individual actions affect profitability. Utilization, realization, billing, collections, productivity, and other measures can become powerful management tools when employees understand both the numbers and the behaviors behind them.

Just as important, know which metrics actually matter for your firm. Industry averages can be useful, but geography, service mix, client base, and firm strategy all affect what strong performance should look like.

4. Establish minimum fees for every service.

Minimum fees should not be limited to 1040s. They should apply throughout the firm. Being more selective about the work you accept generally leads to fewer clients, less administrative burden, and fewer low-value engagements consuming valuable staff time. The goal is to generate the same — or greater — revenue with less aggravation and less demand on your people.

Strong profitability creates options: fewer staffing pressures, better compensation, greater investment in your people, and a stronger platform for succession.

Know the metrics you are trying to achieve, build the behaviors around them, and create a more profitable, less stressful — and ultimately happier — firm.