IPA Pulse Survey: Culling Clients Is Difficult but Worth the Effort, MPs Say

Troublesome and less profitable clients are driving firms to go through the sometimes-tricky process of culling them, according to the latest IPA Pulse Survey published in the December issue of IPA Monthly.

IPA invited MPs who regularly eliminate clients to offer insights on the culling and grading process at their firms, how often they are letting go of clients and some of the hang-ups they’ve come across in the process.

IPA received responses from 40 firms that indicated in the latest IPA Firm Administration Survey that they have a formal culling process in place.

At nearly all responding firms (98%), a formalized culling process is nothing new. Two-thirds of the reporting firms have had this process in place for one to three years, and in 15%, it’s more than six years.

For most firms, the goal is to get rid of the less profitable clients and the difficult and troublesome clients, at 92% each. Eliminating delinquent clients and lessening the workload for partners/staff, at 71% each, were other popular reasons for putting a formal culling process in place.

When firms are terminating the relationship with a client, that decision is made by the engagement partner at 41% of the participating firms, the executive team at 20% of the firms, and the full partner group at 15%.

Two-thirds of the firms are removing about 2% or less of clients every year with a quarter of the firms culling between 3% and 5%.

IPA Monthly also asked MPs about the criteria used to assign clients grades that determine whether culling is necessary. Several simply indicated “realization,” while at other firms the decision is much more personal. One respondent said, “Totally subjective. If I like them, they stay.” Other responses included:

  • “Profitability of the engagement”
  • “Is the client a risk?”
  • “Does the client align with our strategic definition of an ideal client?”
  • “1) Staff grading of the client is key driver for straight culling. 2) We run profitability-by-client reports to determine the next level of examination needed.”
  • “Clients that are a combination of late getting information to us, difficult to work with and not meeting profitability metrics.”

The decision to begin a formalized culling process is not without its issues. In only 20% of firms, the partner group is fully supportive of the firm’s culling process; 61% of partner groups are mostly supportive; 15% are only somewhat supportive.

The biggest challenge, according to 61% of respondents, is ending the client relationship, with only 12% worried about losing revenue.

IPA interviewed Mark McKinley, CEO of New Philadelphia, Ohio-based Rea & Associates, on client culling in early 2022. McKinley, who calls it pruning, said Rea put the process in place in 2021 after an update of their strategic plan. “Without pruning, we’re stunting our future growth. We have to prune relationships that aren’t moving us forward to make room for additional revenue opportunities, ease the burden of busy season and give our people opportunities for more exciting and challenging work. We’ve come to accept that it’s a painful process for both us and our former clients, but the results have been pretty dramatic – in one region, we’ve already replaced pruned revenue with new revenue.”

This great content is available to IPA Monthly subscribers. If you’re ready to expand your practice management knowledge, email [email protected] to start the subscription process.

If you have an idea for a future pulse survey, please email us at [email protected].

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