How to identify the relationships draining your firm

The drive to grow is embedded in the DNA of the tax and accounting profession. We equate success with an expanding client list and ever-increasing top-line revenue. But many firm owners reach a point where the reward for that growth is simply more chaos. You’re busier than ever, your team is stretched thin, and your capacity for high-value advisory work—the work you want to be doing—has vanished.

The truth: Not all revenue is created equal. The most forward-thinking firms understand that strategic growth isn’t about addition; it’s about optimization. It’s about building a practice around a core of ideal clients who energize your team and fuel your bottom line. This requires an honest assessment of your current client list to distinguish the relationships that are propelling you forward from those that are holding you back.

Before you can build a better practice, you must diagnose the one you have now.

From anecdote to analysis: Moving beyond “gut feel”

Every practitioner has a gut feeling about their clients. We know the ones who light up the caller ID and the ones who trigger a sigh. But to make strategic decisions, you need to move beyond intuition and toward objective analysis. A simple, powerful way to do this is to recognize the common client archetypes that exist in nearly every firm:

• The Ideal Partner: This client respects your expertise, values your advice, and is profitable. They provide information on time, their work aligns with your firm’s specialty, and the relationship is a source of mutual respect and energy.
• The Legacy Loyalist: This client has been with you for years, maybe since you first opened your doors. The work is straightforward and the relationship is pleasant, but the fees you charge them are often well below your current rates. They require a level of hand-holding that makes their effective hourly rate your lowest in the firm.
• The Chaos Creator: This client is a constant fire drill. They deliver shoeboxes of receipts at the last minute, their records are a mess, and they frequently question your invoices. While their fee might seem substantial, the immense time, stress, and reactive work they create makes them deeply unprofitable.

While these profiles feel familiar, the real power comes from plotting them on a simple matrix.

The 15-Minute Exercise: The Client Profitability Matrix

The Client Profitability Matrix is a diagnostic tool designed to be completed in minutes, not hours. It helps you visualize where your time and energy are really going.

Download the Client Profitability Matrix

Draw a simple 2×2 grid. The vertical Y-axis represents Profitability, from low to high. The horizontal X-axis represents the Time and Energy Cost to serve that client, from low to high. This cost isn’t just about hours logged; it includes the mental energy, stress, and complexity involved in the relationship.

This creates four distinct quadrants:

1. High Profit, Low Cost (Top Left): These are your ideal partners. The primary goal here is to keep and nurture these relationships. Find more clients like them.
2. High Profit, High Cost (Top Right): These are often complex, valuable clients who may border on being Chaos Creators. The goal here is to strategize and systemize. Can you implement better processes, technology, or pricing to move them to the left quadrant?
3. Low Profit, Low Cost (Bottom Left): These are your Legacy Loyalists. The work is easy but doesn’t pay well. The goal is to automate or graduate. Can you move them to a simpler service model or begin the process of transitioning them?
4. Low Profit, High Cost (Bottom Right): This is the drain quadrant. These clients cost you money, time, and morale. The decision is clear: these are the first clients you must gracefully offboard.

Take 15 minutes and plot 5-10 clients on this matrix. The visual result is often startling. Many firms find that their most time-consuming clients are also their least profitable, occupying the bottom-right quadrant and actively hindering the firm’s potential.

The first step to a stronger firm

Identifying your client mix is the critical first step toward building a more resilient, profitable, and rewarding practice. This clarity allows you to stop growing for growth’s sake and start scaling with intention. But once you’ve identified the clients who are no longer a fit, a new question arises: what do you do next?

Now that you’ve diagnosed which clients are holding your firm back, it’s time to think strategically. Our guide, “The Art of Subtraction,” outlines a framework for building a stronger, more profitable practice by making the tough but necessary decisions.