No matter what business you’re in there are certain financial ratios that hold true. When you compare your business to another business in your space there are certain financial ratios that your business needs to have to be successful.
Do you know what they should be for your business?
Do you know what to do to get them in line?
There is an average ratio that Cost of Goods Sold should be of your Revenue.
There is an average ratio that Employee Costs should be of your Revenue.
There is an average ratio that your business should produce.
The list goes on depending on which industry that you’re in.
Here is the problem…
…The financial advice you’re getting from your CPA is dead wrong.
How do I know?
They are not explaining anything about your business or your industry as I just did above.
I have reviewed 100s of CPAs businesses’ financials and their ratios are far out of whack.
Let me explain…
In any CPA / Accounting business their revenues should be distributed as…
1/3 Employee Costs
1/3 Owner Discretionary Cash Flow – This includes compensation, fringe benefits and any other benefits they take from the business.
Here is what I normally see…
45% Employee Costs
22% Owner Discretionary Cash Flow
Where are they going wrong?
At immediate glance you can say they are paying their employees too much. Which in theory is true. But, they would reply they need that many employees at the level of pay to service their current clients.
So, what is the problem?
They are not providing enough value to their clients at a margin that increases their revenue and decreases their employee costs as a percent of revenue.
This is exactly why you’re not getting enough value from your CPA/Accountant.
They are providing you the minimum amount of value…
…Doing your taxes.
They are providing this service for a minimal fee.
What you need and what they need is to provide you with advanced tax planning services that increase the value you receive by putting more money in your pocket and there by increasing their revenue per client. This would drive down employee costs and make the CPA/Accounting office more profitable!
How does this relate to your business?
#1 – The numbers show that you’re getting terrible service, value and advice from your CPA/Accountant.
#2 – How do your number shape up for your industry?
Do you have too much cost associated with your overhead?
Do you have too much employee costs?
Are you undercharging for your services and products?
Are you not adding enough value to your clients?
What else could you provide to your clients to increase your value and revenue?
Looking at how your ratios stack up to your competitors will lead you to having a more successful business.
Since it has come to my attention that most small business owner’s don’t do this kind of analysis and most CPA/Accountants don’t either!
The net result?
You as a small business owner are losing out. You’re not getting what your expecting.
What should you expect?
An Accounting office to make sure your numbers in line.
An Accounting office that can interpret those numbers and help you get them in line.
So where do you get started on…
35% decrease in your taxes
Ideas to increase your revenue
Ideas to increase your value
Ideas on how to maximize the value of your employees
15% increase to your bottom line
Everyday I see business owner’s missing out on the right advice to push their business to new levels of success! What is holding you back? Do you want to know? Don’t ask your CPA.
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