White paper
Revenue replacement: How to approach growth and client filtering
The challenge of managing firm growth and limited resources
Today’s firm leaders face the difficult challenge of balancing growth with resource constraints. By now, every firm feels the effects of the talent shortage. According to the International Federation of Accountants:
“Between 2020 to 2022, more than 30,000 U.S. accountants and auditors left their jobs, an alarming 17% decline of registered CPAs, and the dwindling number of college students coming into the field can’t seem to fill the gap.”
With limited capacity, firms often have trouble adequately serving their existing client base, which can stifle a firm's potential for expansion into advisory services — an essential strategy for long-term success and sustainability.
However, a strategic approach often goes overlooked: revenue replacement through client filtering.
This white paper examines advanced methods for synchronizing your client base with your expansion goals by concentrating on essential accounts and executing strategic client filtering. By the conclusion, you will understand how to apply these approaches to boost your firm's capacity, innovate revenue models, and secure a more equitable and lucrative client portfolio.
Why revenue replacement matters
Over the past decade, technology has transformed how accountants work, and this transformation will continue for the foreseeable future. From automation and machine learning to artificial intelligence and data analytics, the profession is moving away from focusing solely on transactional and compliance work to incorporating value-based advisory and consulting services.
An analysis of the Accounting Today annual “Top 100 Accounting Firms” data by The CPA Journal found that among Big Four firms, advisory services revenue grew from $11 billion in 2000 to $40 billion in 2022 — a 274% increase over 22 years. Over the same period, assurance revenue increased by 100%, and tax revenues increased by 168%.
This trend isn’t limited to the Big Four. It’s impacting firms of all sizes, pushing firms to decide whether technology will be an enabler or a disruptor in their growth strategy.
As firms shift to value-based advisory and consulting services, many struggle to transition because less-strategic clients consume too many valuable resources, leaving them stretched thin. These capacity challenges make the topic of revenue replacement more critical than ever. Firms can no longer simply add more staff to bring on more clients and increase revenue. Instead, they must rethink how they deliver value and where their highest value truly lies.
Revenue replacement is not just about finding new revenue streams; it’s about reimagining the type of value your firm offers. By transitioning from focusing on transactional and compliance services to becoming a strategic advisor, your firm can replace lower-margin work with high-impact, high-margin services that position you to better meet the needs of top clients while contributing to the bottom line.
7 steps to effective revenue replacement
Now, let’s explore how to implement client filtering and revenue replacement strategies to drive growth that aligns with your long-term objectives.
Step 1: Evaluate your mindset
Successful revenue replacement begins with a critical self-assessment: evaluating your mindset. The challenges posed by technological disruption and the increasing demand for value-based advisory services require firm leaders to embrace a mindset of growth and innovation rather than clinging to familiar but outdated practices.
One of the most significant barriers to change within firms is the internal resistance to new ideas and technologies. That resistance often stems from within the firm and is largely a matter of mindset. Leaders and staff members accustomed to traditional compliance and client work may find it difficult to shift toward new ways of working, even when those methods are more efficient and effective.
As described by Carol Dweck in her book “Mindset: The New Psychology of Success,” a growth mindset is crucial for navigating transformation in the accounting profession. It encourages continuous learning, adaptability, and a willingness to take risks, understanding that mistakes are opportunities for growth rather than failures.
Evaluating and cultivating the right mindset lay the foundation for embracing new opportunities, overcoming internal resistance, and ultimately positioning your firm for sustainable growth in an ever-changing environment.
Step 2: Assess the skill sets of your team
Successfully implementing revenue replacement strategies requires an honest assessment of your team's skill sets. All progress starts with the truth, and this step is about confronting the reality of your team’s strengths and areas for improvement. It’s not enough to assume that your current team can seamlessly transition into new roles or handle the demands of more complex client services. Instead, you must evaluate whether your team possesses the right skills to support the firm's growth objectives and client-filtering strategies.
To effectively transition from compliance work to higher-value advisory and consulting services, you need to invest in developing your team's ability to have strategic conversations with clients about their business goals and challenges.
Thomson Reuters offers a range of tools and templates that can help firms level up their employees for these advisory roles with Practice Forward. These resources include conversation guides, service-offering templates, and frameworks designed to help staff engage clients in meaningful discussions about growth opportunities, risk management, and long-term financial strategies. By equipping your team with the right resources and fostering a growth-oriented mindset, your firm can better meet client needs and position itself as a trusted advisor.
Step 3: Identify your ideal client
Identifying your ideal client is not just about targeting clients who generate the most revenue; it is about understanding which clients align best with your firm's long-term growth objectives and service capabilities. Knowing who your ideal client is allows you to focus your resources and energy on relationships that offer the greatest potential for mutual success.
Start by taking a close look at your current client base. Begin with your five best clients and analyze their needs, challenges, and opportunities. What are their dangers, opportunities, and strengths? If you haven’t already had these conversations with them, now is the time to do so. Understanding which services these clients are asking for — and what services you may not yet provide — can reveal opportunities for enhancing client value.
For example, consider a tax client who currently pays $2,000 a year in fees. Instead of thinking incrementally about how to increase their value by 10%, challenge yourself to think exponentially. Ask, "How can we deliver $20,000 worth of value to this client?" This shift in perspective encourages creativity and can lead to developing innovative services that enhance the client relationship and, in turn, increase revenue.
Again, your ideal clients may not always pay the highest fees. Some clients who generate substantial revenue might actually be less suitable if they consume disproportionate amounts of time or resist the advisory services that drive your firm’s growth. Conversely, clients who are open to advisory conversations and engage proactively with your firm may present greater long-term value, even if their current billing is lower.
To further refine your understanding of your ideal client, consider implementing a grading system to evaluate your existing clients — this could involve assessing their current service level, growth potential, and the nature of their relationship with your firm. Are they predominantly focused on compliance or open to advisory and consulting services? Do they proactively communicate with your team or only reach out when problems arise? Grading your clients can help you identify which relationships are most beneficial and which may require more strategic attention.
Step 4: Update your business model
Many firms continue to operate under traditional models — such as hourly billing — despite the significant technological changes and client expectations over the past two decades. To remain competitive and relevant, firms must evolve their business models to better align with today’s value and subscription pricing methods.
Remember, changing business models doesn’t just impact your firm — it’s also a reality for many of your clients. The market dynamics have shifted, and businesses across industries must change how they package, price, and deliver services.
One of the most critical elements in this transformation is pricing strategy. Ron Baker, VeraSage Institute Founder and a recognized leader in value pricing, advocates for pricing that reflects the actual value delivered to clients rather than the time spent on services. His approach suggests moving away from pricing by service and toward pricing by client, offering tailored solutions that meet each client's specific needs and expectations.
This approach means offering clients a menu of services organized into tiered packages to meet the varied needs of clients while allowing them to see the full scope of what your firm can offer. Your current pricing and service models may inadvertently limit your firm to being seen only as a provider of a single service, like tax returns. This narrow focus limits client perceptions and hinders growth opportunities. By offering a broader range of services and clearly communicating the value of those services, your firm can deepen client relationships and increase revenue.
Step 5: Implement technology and process improvements
Transformation is more than just change management — it’s about creating a comprehensive strategy that integrates leadership, technology, and process management into a cohesive force for improvement and innovation.
Successful transformation requires a firm commitment from leadership. Leadership must buy into the idea and actively support and guide the implementation of new technologies and processes. Without this top-level commitment, any efforts to modernize will likely falter.
The "transformation triangle" addresses this challenge. This concept emphasizes the need for three key components: engaged leadership, effective project management, and continuous process improvement.
One common pitfall in many firms is that personal preferences or long-standing habits — particularly at the partner level — dictate processes, leading to inefficiencies and missed opportunities to leverage technology effectively. To truly benefit from technology, your firm must define and standardize its processes, moving from personalized approaches to a firm-wide standard.
Lean Six Sigma, a methodology focused on improving efficiency and reducing waste, is one approach many firms are exploring. However, its success depends heavily on the willingness of leadership to adopt and support these changes rather than clinging to familiar but inefficient processes. Involving employees closest to the work in these process improvements provides valuable insights into where inefficiencies lie and how the firm can better leverage technology.
One practical example of this need for process improvement is the typical business or personal tax return process. Often riddled with unnecessary loops and redundancies, these processes slow workflow and increase cycle time. By rethinking these workflows, your firm can reduce cycle time, improve efficiency, and better position itself for future success.
Step 6: Continuously improve
As firms navigate changing technologies and client expectations, focusing on refining and optimizing processes year after year is essential. Process improvement is not a one-time effort but an ongoing commitment to enhancing efficiency, productivity, and client satisfaction.
Continuous improvement should be a collaborative effort involving not just leadership but also the employees who are closest to the work. By fostering a culture of constant learning and adaptation, your firm can ensure every team member contributes to your success.
The key to continuous improvement is the willingness to experiment with new tools and methods. Firms must be open to new technologies and approaches, even if it means stepping outside their comfort zones. But to truly benefit from investing in technology, make sure your processes are efficient and aligned with the overall goals of your firm. With the abundance of technology available today, there is no reason to remain stuck in outdated processes that no longer serve your objectives.
Step 7: Get your clients on board
Resistance is one of the most common concerns firms have when implementing new client-facing technologies and processes. However, your best clients — those who value your services and are committed to growth — are usually more receptive to change than you might expect. These clients are likely going through their own transformations and will appreciate the forward-thinking approach your firm is taking.
To get your clients on board, you must communicate the value of these changes clearly and persuasively. One powerful tool in this effort is the value creation letter, which you can use in conjunction with or as an enhancement to the traditional engagement letter. Unlike standard engagement letters that focus heavily on disclaimers and legal protections, a value creation letter emphasizes the client's dangers, opportunities, and strengths. It outlines how your services will address these areas and highlights the primary benefits and outcomes they can expect from working with your firm.
The structure of this communication is crucial. The letter should place the most important details — the value you’re providing and the terms of your engagement — front and center. You can include the legal disclaimers and fine print, but they should not dominate the conversation. This approach helps clients understand the value they receive and increases their confidence in your firm’s ability to deliver on its promises.
In addition to the value creation letter, modern tools like digital signatures can significantly enhance your client onboarding process. Studies have shown that the close rate for proposals is at least 80% higher when companies use digital signatures, as they streamline the process and make it easier for clients to commit.
When presenting your services to clients, walk them through the value you’re providing before discussing costs. Doing so helps them appreciate the full scope of your services and understand how you will address their specific needs and challenges. By clearly defining the scope of work, the timeline, and the expected outcomes, you demonstrate the benefits of your services, making the price a secondary consideration rather than a potential barrier.
Leveraging tools from Thomson Reuters to implement your growth and client-filtering strategies
If your firm is ready to integrate leadership, technology, and process management into a cohesive force for improvement and innovation, Thomson Reuters offers solutions to help you achieve those goals. Designed to help efficiently manage client relationships, streamline operations, and drive sustainable growth, their tools can help support your firm.
Practice Forward and Ignition
The comprehensive program Practice Forward helps firms transition from traditional, compliance-based models to a more advisory-focused approach. It provides a structured framework and tools for implementing growth strategies, client filtering, and value-based pricing. Practice Forward supports firms in identifying their ideal clients, developing tailored service offerings, and implementing pricing models that reflect the true value of their services. Using this solution, firms can transform their business model to align with modern client expectations and market demands.
Firms use Ignition to engage clients, get paid, and run their businesses on autopilot with these features:
- Proposals. Impressive online proposals are simple to prepare, effortless to send, and convenient for clients to sign on the go.
- Automated engagement letters. These letters outline your service, pricing, billing frequency, and engagement terms in one easy-to-sign online proposal.
- Payments. Automated payments make it easy to pay and get paid. You can give your clients multiple ways to pay using credit or debit cards, direct debit, and Automated Clearing House (ACH), depending on the region.
- Standardized terms. Reduce your risk using standardized engagement terms you can customize to each client’s needs, giving both parties clarity over the scope of work.
- Client view. With a full record of all client services and upcoming invoices and payments, it’s easier to stay in control of billing and access the information you need at the right time.
- Dashboard. Ignition provides complete visibility of your sales pipeline, upcoming client renewals, and forecasted revenue so you can feel confident your business is on track.
By combining Thomson Reuters Practice Forward and Ignition, you have the roadmap to build your new firm model and the engine to accelerate your firm's growth.
Accountability as your firm moves forward
As we wrap up this discussion on revenue replacement, growth strategies, and client filtering, we want to emphasize another critical component: accountability. No matter how well-crafted your plans are or how innovative your strategy may be, without accountability, these ideas will remain just that — ideas. Accountability is the driving force that transforms good intentions into actionable results.
Accountability starts at the top. If you don’t hold yourself accountable, expecting the same from others in your organization becomes nearly impossible. Accountability should be a visible and celebrated aspect of your firm’s culture. Just as athletes keep score to track their progress and motivate themselves, your firm should openly track and celebrate the progress made toward its goals. It is crucial to document processes, set clear expectations, and ensure that everyone in the firm — from senior partners to new hires — knows what they are accountable for. This documentation helps maintain consistency and empowers your team to replicate success across the firm.
As you move forward, take a moment to reflect on what you've learned from this report. Identify at least three actionable items, set due dates, and assign responsibilities. Share these goals with someone in your organization and discuss how they can help you achieve them. By doing so, you hold yourself accountable and foster a culture of accountability throughout your firm.