My colleagues sometimes accuse me of being a little indecisive. True, I don’t often see things as black or white. The world is a complex place and quick, simple answers don’t usually measure up over the long-term. But on the topic of why clients leave, most fail to understand that there is an easy answer – value.  Perceived benefit – cost = value.

In a May 2011 article for the AICPA’s Insider, Jean Marie Caragher cites a Bay Street Group LLC study claiming that the top reason clients change CPA firms is poor client service and inattentiveness. The study apparently held  that this reason alone was sufficient, having been given most often by a nearly two-to-one margin.

She also mentions a 2010 survey sponsored by CCH in which 36% of business clients responded they are likely to change CPA firms during the next year. Now the study says it covered all sizes of business: small, middle market, and large organizations. Unfortunately, I could not locate much more on this survey. However the keynote address at the CCH user conference where it was apparently presented did have at least one memorable war story. I think I have preserved the link here.

Can you imagine the upheaval if one-third of the Fortune 500 decided to change audit firms? I doubt this group made up the statistic. Can you imagine how devastating it would be if it happened in your practice? In fact, I don’t believe the statistic. The firm where I work experienced very little client attrition and very little client acquisition during the last year. We did manage to eek out around a net 3% growth so far, and, in this economy, I consider that a major win. Word to CCH, make sure your statistic passes the smell test or reconsider your survey methodology.

One of the best articles I have read on the subject comes from industry consultant Allan Boress titled Why Clients Leave CPA Firms and posted by AccountingWeb in the Community News section of their website in 2007. Allan starts by saying that when fees and timeless are given as reasons they are more akin to polite lies told to spare our feelings. He then goes on to list nearly a dozen sound-bite type reasons in his article. Interestingly enough he lists lack of communication, including lack of timeliness and lack of responsiveness as his first.

Not until we get to the third reason does he hit the mark, “No perceived value.” He also mentions firm indifference, staff turnover, outgrowing the firm and so on. Yes, he even gets around to fees, “A dramatic fee reduction was offered/sought.” Overall, he focuses on lack of soft skills – the nontechnical sorts of things not taught in college – as the single most important factor, skills such as systematic selling, personal marketing, and client retention techniques. Of course, teaching those things is his business. Hmmmmm.

I agree with Allan that intangibles, like face time, perceived caring, communication skills, and so forth create real value. Soft skills become a great ally in wining and preserving client relationships and influencing the client’s decision process, a critical element in both perceived and real benefit. A client that is not properly advised and influenced to act does not reap the benefit of the advisor. Soft skills also serve as a source of irritation to those who believe their technical superiority or effort alone should win the day.

As to fees alone, let me give you my real example. I recently changed insurance companies. My old provider kept raising my premiums every six months like clockwork, at a time when inflation is low and my cars are continuing to depreciate. Absent any change in my or my wife’s driving record, 10% plus increases didn’t make sense. I asked my agent and she said, the whole industry is raising rates – claims go up in a recession…..true but not that much.

I priced the insurance around, did homework on the state insurance website regarding the number of complaints, company ratings, prices, and so forth. After some phone and web shopping, I determined that I could get coverage from a comparably rated company with the similar or lower complaint ratios and save over $400. There were even lower cost options, but complaint ratios and ratings led me away from those choices.

Now the agent I was leaving had a friend-of-family type connection, provided excellent service when I needed it, and genuinely seemed upset. However, the agent does not control price, so what more could she do. Of the two competitors I narrowed it to, one was about $30 less than the other. I chose the higher of the two because I felt the reputation of the second company was better and the agent on the phone seemed genuinely excited about the prospect of having me as a customer. The other sales person was friendly enough but seemed a little apathetic. Yes, soft skills and caring matter, but price drove the decision, although not price alone.

I’ll admit there is very little correlation between the accounting profession as a service and insurance services. But, fees matter. No, wait a minute, value matters.  When we believe we can get the same quality service at a considerably lower cost, we are inclined to switch. 

Next time someone says fees or timeliness, you can just smile. When they ask what you’re smiling about you can say “Yes, your right, that certainly is a part of it.” To avoid conflict and admitting you might know something they don’t, they might quickly respond “Well of course, there’s more to it than that……..but that’s the most important part.”

Yes, half the formula is better than none – price matters, of course it does, value is incomplete without it.