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How the 80/20 Rule Affects CPA Practice Profits - Little Tweaks Make Huge Differences

     If your CPA practice is like most others, your top clients probably bring you in the most billable hours, and profit too. Plus, A-list clients tend to take up less time and office resources.


In 1906, Italian economist Vilfredo Pareto discovered 80 percent of the wealth was controlled by 20 percent of the people.

In fact, the "80/20 rule" can also be seen who pays to the most to the IRS; and what clothesd you wear.

80/20 is a recurring pattern in nature. And you can either use it to your advantage, or fail because of it

The 80-20 rule is not exact. Sometimes the inequality can be 70-30 or 90-10 or even 95-5. But this principle of inequality occurs enough to be used as a valid formula for CPA marketing.

For example:
• 80 percent of sales come from 20 percent of the customers
• 80 percent of profits come from 20 percent of the products
• 80 percent of the problems come from 20 percent of the customers
• 20 percent of customers have the potential to spend five times as much as they do currently

A relatively small amount of marketing effort creates the majority of output.

For example, consider the following:
•20 percent of marketing efforts produce 80 percent of the results
• 20 percent of CPA clients produce 80 percent of operating income
• 20 percent of time is producing 80 percent of results
• 20 percent of clients are taking 80 percent of staff time
• 20 percent of clients cause 80 percent of the problems

How To Apply 80/20 In Your Practice

To apply this knowledge, identia nalysis for your customers will find the desirable 20 percent characteristics about their business. Export your client database file into a common format like Excel. Use Google Earth or similar mapping software to map where each client is located. Although clients customers can come from all over, a small portion of your total client draw produces 80 percent or more of your current clients.

For example, you might find you're attracting clients from 15 miles away. But the analysis shows 80 percent are coming from within a three-mile radius of your office. Have a demographic analysis performed on your database file. This will reveal income, age, home ownership status and other criteria to further define your target market. This information allows you to eliminate marketing to those who don't fall into your 20 percent group.

20 Percent Marketing Strategies

Many CPA practices could cut their marektinb budget by a whopping 75 percent and only notice a small decrease in response. While the really detailed, guerilla marketing-style programs vary from market to market, three evergreen marketing strategies--Internet, database and integration marketing-- always seem to fit into the good 20 percent category. Internet marketing. Through e-mail, online forums, chat, etc., we have quickly become reliant on the Internet as an everyday communication device. With increased online security, people trust the medium to make financial transactions. Now, local search has proven that storage operators can really benefit from Internet marketing.

These three principles lead to successful Internet marketing:

1. Be seen by those searching for you online by being represented on the first page of major and local search engines.

2. Attract traffic to a highly conversion-oriented landing page. Most operators drive traffic through their search engine rankings to the homepage of their website. While this is better than not driving traffic to anything of yours, it is ineffective when compared to driving traffic to a location-specific landing page with a strong offer and several convenient methods of contacting the facility.

3. Convert traffic into clients. A strong Internet presence is worthless if the viewer doesn't convert into a paying customer. Your conversion ratio should be better than 50 percent. Create a conversion-friendly landing page as an extension of your website and optimize it on popular search engines. Google obviously is the most well-known, but don't ignore the other sites, especially since many of your competitors will ignore them. Database marketing. Your existing customer database is ripe with opportunity to cross-sell and up-sell related products and services.

Make certain you're mailing client base monthly with an offer.Identify the characteristics of offers that interest your customers and design your letters to focus on their needs. This program is easy and lucrative when you form alliances with related service providers. Integration marketing. Integration marketing is a more advanced concept, but one of the most powerful in generating a solid stream of new customers at a low cost per acquisition.

This technique is used effectively by McDonald's restaurants and other fast food franchises. They integrate their product with another such as a movie franchise or toy manufacturer. Look for other companies serving your market that can integrate storage into their offering. Examples include home remodelers, disaster restoration companies, general contractors and estate agents. When a consumer engages one of these company's services, he is presented with the information or even a lease for a storage unit at a "special price" just for "XYZ company customers." This can increase the number of rentals from outside sources. Where allowed, negotiate a commission with the alliance representatives so they are excited about the program and work for you.

By capitalizing on the inequality within your customer base--the 80-20 principle--and these three evergreen strategies, 2009 just might be your best year ever. fy the "20 percent factors" within your business and focus more resources on them. For example, it may take two hours and $250 to form an alliance with a real estate agent who brings you five new clients per month as opposed to spending two hours and $250 on something else that only nets one client per month. By making your "20 percent" activities scalable you can eliminate a large chunk of your budget and time while achieving more.

Article Source:

Adam C. Libman is a CPA Practice Profit Strategist. He also does CPA marketing. He can be reached at 626.280.6865

Posted on 2013-07-13, By: *

* Click on the author's name to view their profile and articles!!!

Note: The content of this article solely conveys the opinion of its author.

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