Axiom CPA, P.A. - Axiom CPA Blog

Financial statements report end results really well but they don't give insight into daily activity. For that you need to understand the drivers behind the numbers. This is easy to do once you understand how to keep peeling back the layers of the onion. Here's an example.

One of our clients has a professional practice. He wants to get his practice to the point where he can take three days per week off without experiencing a downturn in his take home pay. His number of customers is pretty much capped, meaning additional marketing efforts to bring in new customers would just be throwing money away since he's already at capacity. In order to take three days per week off he will need to hire another practitioner to cover for him on those days. We calculated that he has about 3,600 appointments per year and the cost to have someone cover three days per week would be approximately $45,000 for the year.

So now the question becomes "What is the key revenue driver in this business?" If we can identify that we can focus our efforts on improving it to generate more revenue. We already said the number of customers is capped so that's not the answer. Pricing could be a driver but his practice is already the second highest priced in the area and wouldn't tolerate any across the board price increases. The driver that was left revolved around the average transaction price. This business has the opportunity to sell add on services and products during each client appointment. So here was our answer. If we could increase the average revenue per appointment by just $12.50 we would have the $45,000 needed to pay for his three days off (45000/3600=12.5).

So how to do that? What we've settled on over the next thirty days is implementing a series of business processes that structure the sales script. This has two advantages. First, it brings structure to the practitioners follow up conversations with the client. There were many instances when the business owner would fail to take the opportunity to cross sell a related product or service just because he was busy or forgot. Practitioners who cover on his days off hardly ever took advantage of the opportunity to cross sell or up sell because they had never been trained or incented to do so. The second advantage is that with a formal script the paraprofessionals in the office can be trained to sell and cross sell in cases where the practitioner isn't needed. This frees up more of his time and results in much higher profit margins.

Whether this strategy works or not only time will tell. But the search for underlying drivers uncovered a strategy that to date had not been pursued.