It’s Okay to Have Favorites: Revisiting Your Client Portfolio

If you run a CPA firm today, chances are you’re working harder than ever — and still not seeing profits grow at the pace they should. You’ve added clients, expanded your service line, hired more staff… yet somehow, the numbers don’t add up.

Here’s the uncomfortable truth: some established firms aren’t suffering from a sales problem — they’re facing a profitability challenge. And it’s often hidden behind what appears to be success: high client volume, steady revenue, and fully booked calendars.

The Dangerous Illusion of “Busy Equals Profitable”

Too many firms fall into the trap of confusing top-line growth with financial health. The logic seems reasonable: more clients = more revenue = more profit. But in practice, that equation rarely holds up.

When margins are thin, every new client adds more work, more stress, and more administrative drag — without necessarily improving your bottom line. Many firms unknowingly subsidize unprofitable clients with the profits generated from a handful of good ones.

According to the AICPA’s National MAP Survey, the average CPA firm earns 60–70% of its profit from just 20–30% of its client base. Yet, because of inertia or fear of revenue loss, few firms take the time to analyze which clients are truly worth keeping.

The Hidden Cost of Low-Margin Clients

Low-profit clients don’t just drain time — they consume capacity, limit growth, and block scalability. Here’s how:

• Operational overload: Partners and staff are constantly at capacity, leaving no room to pursue high-value work.

• Stagnant margins: Pricing hasn’t evolved in years, and fixed-fee structures fail to reflect true workload.

• Growth gridlock: Every hour spent on low-margin compliance work is an hour not spent building advisory or consulting revenue.

• Talent burnout: Top staff waste their expertise chasing small invoices instead of working on strategic, fulfilling engagements.

The Turning Point: Profitability per Client Analysis

Every firm eventually reaches a breaking point — where adding one more client no longer increases profit but simply adds strain.

The solution? A clear-eyed, data-driven profitability analysis per client.

Here’s what that looks like:

1. Segment your clients by revenue, service mix, and hours invested.

2. Assign direct and indirect costs (partner time, admin, overhead) to each client.

3. Calculate profit per client — not just billings.

4. Rank your client base by profitability and strategic fit.

Once you see which clients are creating profit and which are consuming it, decision-making becomes far more strategic.

Strategic Decisions That Follow

After running this analysis, firms often discover a clear pattern — and new opportunities for action:

1. Reprice strategically.

Revisit outdated pricing for clients who demand more attention than their fees justify. Introduce tiered service models or value-based pricing.

2. Increase client lifetime value (CLV).

Your best clients are often underserved. Deepen those relationships through cross-selling and upselling by offering high-value services, such as strategic tax planning and high-end advisory. According to Accounting Today, firms that systematically cross-sell earn 30–50% higher average CLV.

3. Double down on your ideal clients.

Refocus your sales and marketing efforts on delivering additional value through premium services to the top 20% of clients driving 80% of your profit, while also encouraging referrals. Build your growth strategy around them, not around volume.

4. Free capacity — even if it means firing clients.

It sounds radical, but it’s often the smartest move. By pruning the bottom 10–20% of your client list, you can free up bandwidth for higher-value engagements and a healthier work-life balance.

5. Add a premium service layer.

The market is seeing a growing demand for high-value services that go beyond compliance. Strategic tax planning remains a sought-after, premium offering, while advisory services — including fractional CFO services and financial performance management — provide broader business insights. Clients will pay for guidance and actionable insight, not just compliance.

The Mindset Shift: From Technician to Strategist

CPA firm owners didn’t get into this business to manage burnout. They wanted to help clients succeed — and build wealth along the way. But to do that, you must evolve from technician to strategist.

That means viewing your client base as a portfolio of investments, not just a list of relationships. Each client either grows your firm’s enterprise value — or erodes it.

In today’s environment of staff shortages, rising costs, and margin pressure, the firms that thrive will be those that optimize capacity, price intelligently, and focus relentlessly on profitable relationships.

Final Word

Before chasing the next wave of new clients, stop and ask:

“If I doubled my current client base today, would my profit double — or just my workload?”

For most firms, the honest answer is uncomfortable. But that realization is also the turning point.

Running a profit-per-client analysis isn’t merely an accounting exercise — it’s a strategic reset. One that can transform your firm from overworked to profitable, from reactive to intentional, and from surviving to thriving.

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