Case Study

What Do the Numbers Look Like?

Assume a $10,000,00 firm with 2,000 clients and a 35% profit before any equity partner compensation. Also assumed is each client equally contributes 35% in profit, which is likely not true because all revenue may not be equal. High fee clients do contribute large dollars, but it is the quality of the dollars that firms need measure. This is one benefit PracticeMeter provides.

The Keys to Measuring a Client’s Ultimate Value

Could you be doing more for your “next 50” and “B” clients, but do not have the time or resources? The example below is symmetrical. 40% of the revenue = 40% of the profits. In most firms it is likely some mix of 40% of the revenue contributes 60% of the profits. Where it gets interesting is does the remaining 40% of profits take 80% of your staff’s time to service?

Financial Analysis

Clients
Top 50
Next 50
“B”
“C”
1040 Only
Number Of Clients
50
50
600
1050
250
2,000
Collected Revenue
$2,500,000
$1,500,000
$3,500,000
$2,250,000
$250,000
$10,000,000
Revenue By Client
$50,000
$30,000
$5,800
$2,100
$1,000
$5,000
Realized Profit
$875,000
$525,000
$1,250,000
$780,000
$87,500
$3,500,000
Profit Per Client
$17,500
$10,500
$2,000
$750
$350
$1,750
% of Total Revenue
25%
15%
35%
22.5%
2.5%
100%

Signs of Potential Client Opportunity

Surface Benefits. The opportunity could be to discuss other services or evaluate if the client is costing too much time, not producing enough profit or does not value what you do for them. Examples of signs with clients can be once a year contact, aging owners, family in the business, significant swings in revenue or profitability, and changing economic conditions.

Deep Benefit. The real opportunity is to teach staff to identify other needs within the client base, to read deeper into the financials, and to recognize other indicators with the client. PracticeMeter is a step to provide the raw data needed to begin that transformation.