I remember the day that Google went public in 2004 at $85 a share. It quickly went to over $100 and I remember thinking “how do you value a company that seemingly gives everything away for free?” I didn’t buy any shares. That share is now trading for approximately $3,000, not considering the stock split in 2014. And people ask me why I drink…

A key reason Google is so highly valued is their uncanny ability to monetize the data they have access to. It is both impressive and scary what Google knows about me.

I was interested in purchasing an SUV and did some research using Chrome. For the next few weeks, guess which ads showed up on the Wall Street Journal homepage? Yup, SUVs. And not just any SUV. The brand and key competitors of what I was researching.

Which is why I switched to DuckDuckGo for my search engine, but that’s another story.

The point is, CPA firms are sitting on valuable data as well. Data waiting to be converted to information and insights. Tax returns, general ledgers, and financial statements are treasure troves of numbers that can be grouped, matched, compared and analyzed to identify trends, outliers and “aha” moments. There is no reason you can’t be your own Google.

An idea:

  1. Using the NAICS structure, organize your clients and select the largest group.
  2. Identify a single performance metric – gross operating margin, net operating margin, salaries as a percentage of revenue, cost of goods sold as a percentage of revenue – and calculate that for each client.
  3. Calculate the average of the metric across all clients. Consider further segmenting the clients by revenue or other attribute if there is a wide variance in results due to factors such as scale, geography, etc.
  4. Determine the performance metric by quartile (i.e., the 1st quartile average metric was X, the 2nd quartile average metric was Y).
  5. Let each client know which quartile they fall into. No breach of confidentiality. All companies are anonymous. It is merely how each client compares against the subset of comparisons. If you can get more comprehensive market data, even better.

Armed with this information and these insights, schedule a meeting:

  1. If the client is performing well, discuss how they can maintain or extend their advantage.
  2. If the client is not performing at the level they could be, discuss the underlying causes and some actions that can be taken to improve the outcomes.

You can also send a summary of the information to prospective clients which will help establish your firm as having specific knowledge and insight into their business and operations. Follow up with an offer to meet and discuss how their performance compares.

Everyone wins with this approach:

  1. Your clients – they have insights they didn’t have and a reference point to measure their performance against.
  2. Prospective clients – they gain insights as well and your firm has stood out as a go-to source of information.
  3. Your firm – you’ve stood out from the competition, offering valuable insight for free, and established your firm as a knowledgeable business advisor.
  4. Your staff – they’re doing the grunt work, learning what makes businesses tick, and improving their analytical skills.

Don’t let valuable information lie dormant in your files. And don’t be evil…


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