So, you are the manager at a local CPA firm. You have three large clients, but you are determining if each of these clients is creating a profit for your firm, or if one should be eliminated. This is a tough decision to make, and there are lots of pieces of the puzzle to review. Let’s look first at the revenue brought in to the firm for each client.
Customer A: $25,000.00 in revenue
Customer B: $32,000.00 in revenue
Customer C: $37,500.00 in revenue
You might be looking at this, thinking, “why would we eliminate any
of these customers? Look how much
revenue they are bringing in to the firm?” But remember, there are
other things we need to consider.
What are some of the things to consider?
While eliminating a customer, how much revenue do they bring in is not the primary criteria to judge the value of any client. We also have to look at the corresponding expenses attached to each client.
How much work hours do they require, how much money are they costing the company in terms of documentation, repetitive calls, unnecessary calls, and many other activities that consume company's time without adding to the profits.
So, we primarily look at the profits we can make from each customer and then decide which customer to keep.
Furthermore, we'll also have to look at what happens to the employees who were working with the client you are about to eliminate.
So, you are the manager at a local CPA firm. You have three large clients, but...
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