How To Use Income Targeting To Build The Firm You Love

We have a very special guest. Our special guest has been a bookkeeper since before the turn of the century. She is a Mastery Level Certified Profit First Professional. She’s the Lead Technical Guide Coach for Profit First Professionals organization. She’s also a frequent contributor to NerdWallet, AccountingWEB, and other industry publications.

Our special guest started Pocket Protector Bookkeeping in 2012 to provide an excellent virtual bookkeeping and managerial accounting solution for small businesses that cannot yet justify employing a full-time in-house bookkeeping staff. She has since transitioned principal ownership of the firm to her adult son and went from 35 clients to 10. When she’s not guiding others to permanent profitability, you can find our special guest on a hiking trail lost in the woods on purpose.

Before we welcome our special guest to the show, if you are an accounting or tax firm owner and you are sick of grinding fourteen hours a day and sacrificing time with your family and friends, and postponing vacations, I get it. It’s a vicious cycle of pleasing clients, losing sleep, and feeling exhausted, powerless, depleted, and burnt out. I bet you want it to come to an end. To be honest, none of it’s your fault why it’s that way. I also know that no one is teaching or training on how to fix those problems and how to connect the dots so that you don’t have to feel powerless, tired, and exhausted all the time.

If you want to step up and take full control of your firm’s sales with ease, then here’s what I have for you. Myself and Denise have set aside the next couple of days to talk to you personally about how you can apply different ideas like we are going to talk about in this episode of growing your firm revenue and offering different services.

To be honest, whatever your challenge is, we’ve seen, heard, and know how to overcome it. Head on over to TheAbundantCall.com to book your call. It will be about a 45-minute to 1-hour phone call, and this is for firm owners. You must own your own tax accounting, bookkeeping, profit first, tax resolution or tax planning firm. Let’s welcome our special guest, Billie Anne, to the show.

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Billie Anne, thank you and welcome to the show.

Thanks, Michelle. Thanks for having me here.

I’m excited to have you here, but not everyone might know you. Before we start, I’ve done your intro, but it would be great if you did your own intro and shared with everyone who you are and some of the people you might work with.

My name is Billie Anne Grigg. I’m the Lead Technical Guide or Coach at Profit First Professionals. I’m also a bookkeeper with many years of experience, which is so bizarre to think about now. I’ve had my bookkeeping practice called Pocket Protector Bookkeeping, which I’ve transitioned to my adult son. I work with accountants, bookkeepers, and financial coaches, helping them implement profit first with their clients and then also to generally grow better and healthier businesses for themselves and other business owners.

Billie and I met through Profit First. She’s a total rock star. I said, “What you’ve done is incredible, and how you are at Profit First too and have a successful firm.” We are going to be talking about one of your favorite topics to build the firm you love, using income targeting and what all that means to help clients grow strategically and what all that means. We are going to dive deep into that.

If you have a pen and paper, you might want to grab it and take notes because here at the show, we are all about increasing revenue. If you use Profit First, you can’t do any of it unless you have sales and revenue. This is all about different ways to increase your revenue in your firm. Thanks, Billie Anne, for being here. If you could start out, what is income targeting?

The way we approach income targeting with Profit First Professionals is reverse engineering the total income or the total revenue that you want for your business based on a goal. Not to get too technical but profit first has the above the line, which is your total revenue, and then you subtract some costs and get to your real revenue. Below that line, you have four main categories, profit, tax, owner’s comp, and operating expenses.

Typically, when we do income targeting, we are going to base that on the desired owner’s compensation. What does the business owner want to bring home from their business? From there, we reverse engineer what the total income needs to be to get there. We then start fiddling a little bit with the different parameters and ways to get there, the number of clients, the average sale per client, and those things, all within the Profit First model.

We are doing this to make sure that the business owner can pay themselves what they want to pay themselves. We do encourage them to dream big. None of this, “I would be fine with $30,000 a year in salary.” There’s nothing wrong with that if that’s what you want but don’t limit yourself. Let’s think big about all your goals. We will make sure that your business is profitable. You have money to pay your taxes because when you have a profitable business, you are going to have taxes to pay and still have money left to run your business.

Can we go through a client of yours where you used income targeting with them? I guess that you also charged for this service. I would like to know how that also impacted your firm and how it grew your revenue so you could build this firm that you love, that now you’ve passed on to your oldest son, as you said. How does the client grow strategically from that as well? If we could talk about two sides, how does this benefit your client or the business owner, and then also the firm owner? How does that impact their top line? How did you come up with a package, or how did you charge for something like that?

Let me start with one of the clients that I worked with in my bookkeeping firm. We will call him David. Names are changed to protect the innocent here. When David and I first started working together, he had a $250,000-a-year business. It was a decent business. It’s doing well, growing and all of that but he wanted more. The first thing that we targeted was his personal income. What revenue did he want to bring home? What did he want to provide for his family?

We backed into the number that he needed. The first number that he needed was $500,000-ish, not exactly, but pretty close to that. “You need to double your revenue. Can you do that with the pricing and the staff that you have and the customers that you serve?” The answer to that was, “Yes, with some exceptions.” There were some client changes that had to be made but mostly, the changes were in pricing. He wasn’t charging enough for his services. When we looked at it, “You need to double your income,” does that mean you can double your clients? No, absolutely not. There are only so many hours in the day. “We had to do a mixture of targeting some different clients who can pay some higher prices for you.”

Fast forward a couple of years later, we have gone from targeting based on his owner’s compensation because that is fine, and now our income targeting is around strategic growth in the business. We have to start looking at what investments he needs to make in the business because he’s gone from $250,000 in annual revenue to hitting $10 million this year in a couple of years.

That’s a massive change.

It was a combination of that income targeting, starting with what he wanted from his business and his personal life first.

This is $500,000.

This thing is growing. We have a tremendous impact. We need to do some strategic hires and invest in the business to keep it growing. It’s a very profitable business. In the profit-first model, the profit taps out at 15%. He’s taking 25% off the top for profit and sharing that with employees. This income-targeting thing is a great way to position yourself as a strategic advisor. That’s the guidance that our clients are looking for. They don’t want to survive. A lot of people think the profit-first model is all about fixing something that’s wrong, and then that’s fixed, and moving on. You can use this income targeting to grow a thriving business or an enterprise, if you will.

You can use income targeting to grow a thriving enterprise.

David went from $250,000 to $10 million, paid himself over $500,000, and has 25% of his profits going to his team and others. I’m sure a lot of people are thinking because I’m thinking, and a lot of firm owners are thinking, “If his pricing wasn’t right, he had to target different clients so they could pay higher prices.” How did you support and advise him being the strategic advisor you were in this scenario, to do so and make these shifts in his firm or his business?

It did not hurt at all that he was a very receptive client. He was not resistant to anything because he had this open mindset and was ready to grow, and he still does. He values the advice and knows his industry very well but wanted to partner with someone. That was the number one key. I wasn’t working with somebody who was resistant to growth and change.

A lot of times, we run into that, especially when we start talking about things like targeting different clients and especially raising prices. It’s not accountants and bookkeepers that can be resistant to raising their prices. Everybody’s afraid of doing that in the business space but he was open to it. That was beneficial and helpful. We have grown together, so I didn’t start charging him CFO-level amounts of money. It was more beginning bookkeeper amounts of money but we grew together with time and built this nice advisory relationship to where we bounce ideas off of each other. Sometimes he bounces ideas off of me, and sometimes, I bounce ideas off of him too. It’s a nice collaboration.

What do you recommend as some of the first steps to your profit-first clients or to a firm owner who’s reading this on how to make this transition to offer income targeting as a way to help clients grow strategically and for them to do more advisory work where they are able to continue to build a firm that they love with higher paying clients? As you said, David grew into a higher paying client for you but what are some steps that you would recommend firm owners take to start offering this and thinking more strategically than having to fix problems and being reactive versus proactive?

You have to talk to your clients. That’s step number one. Open the conversation. One of the first questions that we ask is, “What do you want for your business or what do you want from your business?” Those answers typically fall into a category of either something tangible. They might have a total revenue goal, a number of clients they want to share, or specific product or service offerings. Sometimes it’s something intangible. Maybe they want a lifestyle business or to be an owner and not self-employed. From there, you ask, “Why do you want this?” There’s a reason that we ask these questions in this order because once we find out what they want and why they want it, we can put a dollar amount to it.

People say, “Money is not everything. There are some things that are priceless.” You can put a dollar amount to anything, including freedom because freedom has a certain amount of money that you have to have to have a freeing lifestyle. That’s different for everyone. It doesn’t mean that one answer is better than another but you want that dollar amount because that helps you, number 1) Have something to target, and then number 2) You can measure against that. When the client starts getting discouraged, you can say, “When we started working with each other, you were making $250,000. Now, you are going to be a $10 million company this year. We are making progress.”

You can put a dollar amount to anything, including freedom because freedom has a certain amount of money to have a freeing lifestyle that's different for everyone.

Sharing in the profits. Can you share, on the firm owner’s side or from your point of view, how this helped you with your other clients, including David, and how you were able to use income targeting to build your firm and now pass it down to your oldest son? How do you price the package too?

I do income targeting for myself too. That’s something we teach all of our Profit First Professionals to do as part of our pricing program. Whenever you are looking at your pricing and everything, one of the first things that we encourage our members to do is write out all the things that you are doing, look at your current clients, and what’s your average client revenue. How many of these clients would you have to hit your revenue target?

A lot of times, that’s going to come up to 100-plus clients, and then the question is, “Do you want that many clients?” The answer is usually no, especially if it’s a smaller business or maybe 1 or 2 people in it. The thought of serving 100 clients is daunting. Now, we have to start organizing our packaging and pricing to where we have the number of clients we want, that we are providing the services that we want to provide them to at a price that we need to make to earn what we want to earn.

How did that work out for you in the firm?

It was amazing.

If you could start from the beginning and how long you’ve had the firm to where it is now, you passing it down to your oldest son.

It’s one of those things that I wish I had done sooner. That’s probably one of the things I hear the most from Profit First Professionals is, “Why didn’t I raise my prices sooner? Why was I charging $250 a month for bookkeeping for so many years when I could have been charging three times that?” It’s having more impact, having fewer clients, earning more money for myself, and then helping my clients earn more money and be more profitable as well.

If you don’t mind sharing for your firm, how much revenue did you grow or even percentage by implementing this, having more impact on your clients, and reducing the client load? If you could also share how many total clients you even had in your firm? The mindset is, “I need more leads. I need more clients,” that’s what I hear all the time. “Michelle, I have a lead problem.” I’m like, “No, you got a pricing and conversion problem.” That’s typically what it is.

If you can’t sell very well, people want to tell you, “You are too expensive. Someone else is going to do it for cheaper.” You are still seen as a commodity. You got too many clients on your plate, and you don’t have enough time to have a bigger impact and fewer clients. How many clients do you have? If you can share what that growth looks like over time from when you even started?

I went to my maximum from having 35 clients and being stressed out. I’m making good money but not the money I wanted to make to have ten clients, more time, freedom, and money. That’s what you are looking at when you do those highly specialized services. It’s not for everyone. Some people like having a lot of clients, and there’s nothing wrong with that but for me to have that relationship and impact that I wanted on that more personal level, I had to scale down the number of clients that I had. Making more money with fewer clients and working fewer hours was the best thing that I did. Again, it was one of those things that I wish I’d done sooner.

I’m sure David and others probably refer your business now to other business owners to help someone go from $250,000 to $10 million. From his point of view, you are probably one of the most trusted advisors on the team, which goes a long way. On average, what are you charging David now and the other nine clients?

It’s about $2,000 a month. Could I charge more? I could totally charge more. I’m happy with where I am. Again, my son is taking on a lot of this stuff, so the firm is changing as it is growing and going. It has been good. It’s a lot different to have that trusted advisor relationship and be able to go deep with those fewer clients. I totally could do this with a staff of 10 or 15 people. It’s absolutely doable as well. It’s just not the direction that I wanted to go.

As you said, it’s about what makes you happy. That’s always my pricing motto. What makes you happy? What are you doing for the clients, and if you have more time freedom, fewer clients, you are not at your max burnt out, stressed, overworked, and underpaid, then that’s all that matters. Could you charge your $10 million company a lot more now? Probably, but that’s up to you. In your bookkeeping services, what other things are you doing on a monthly basis for these business owners, if you don’t mind sharing? You are doing the income targeting but is there anything else in addition to that in the profit first system plus the books?

We don’t do as much as a lot of bookkeeping firms do. We do not do accounts payable and bill pay. That’s for the client to do. We will help them set up a system and teach them how to use that, but we don’t do bill pay for them. Payroll is something that we either outsource completely or we set them up on a service like Gusto, that’s full service, and manage that. We do billing for 1 client as add 1 service that we do. It’s more about what we don’t do than what we do.

A lot of people think, “If I want to have $2,000 or $3,000 a month, I have to do more.” No, absolutely not. If you don’t want to do something, don’t even offer it as a service because, for years, I thought that I had to offer accounts payable. That’s something that a bookkeeper had to do, and I always hated it when clients would choose the package that had accounts payable in it because now, I’m tied to their billing schedule again or payable schedule.

Finally, one day I’m like, “I’m going to take it out and see what happens.” I would have people say, “Don’t you do bill pay for me?” “No, but I will set up a system for you and show you how to write it.” “That’s fine.” I don’t want to say that what we do is basic bookkeeping because some of it can be complex but it’s your basic bookkeeping. It’s not full-service back-office controller stuff.

You totally nailed down the head because you are saying, “Someone is going to charge $2,000 or $3,000 a month for bookkeeping, and they have to do all the things like the payroll where you are saying, “No, here is what I offer and my monthly services.” You are doing the profit first stuff. You are doing something unique and different but they can take care of those other areas on their own.

The one thing that I had to get over, and I see a lot of our Profit First Professionals have to get past it too is, “This is so easy and I feel bad for charging as much as I do for it.” It’s only easy for us because we know what we are doing. It’s not easy for the client. If it were easy for the client, they would probably be bookkeepers or accountants. They sure wouldn’t be partnering with us to get the results.

How did you overcome that? How did you shift your mindset with that if there are any tips and tricks that you use? I hear that a lot. “Michelle, I could do this in five minutes. Do you want me to charge $5,000?” I had water leaking in my AC unit. I asked the AC guy if he can come over and fix it, and I will pay a rush fee. I don’t care. I need it fixed because the water was leaking everywhere. He fixed it in about 30 seconds, and it was $1,000. I said, “No problem.”

Most people might have charged for that 30-minute trick charge, and I’ve seen that before. If he didn’t fix the problem, I would’ve had water damage, mold, and a whole slew of other problems that might have fallen down the path. In reality, it’s about your knowledge, and how well you do it because a business owner is never going to do it on their own or if they are, it’s going to take them forever, and then they might do it wrong. Now, you have a bookkeeping cleanup project on your hands.

Everybody heard the story about the engineer that knew what pipe to bang on and the software guy that knew what zero to take out of the code or whatever the variation of that story is. It finally sunk in that it’s only fast and easy for me because I’ve put in years of education, work, learning, testing, measuring, tweaking, and then delivering this stuff and seeing the results. There are some geniuses out there that could do it but because it takes me an hour a month to do it doesn’t mean that it’s not worth $2,000 per month to this client. They are getting that amount of value ten times over from implementing what I’m suggesting and staying the course and having that accountability.

It’s holding the client accountable for doing the things that they need to do to make their business healthy. There’s a lot to be said for accountability. It’s something that a lot of accountants and bookkeepers don’t necessarily want to charge for but it is impactful. Not every client is going to get it. You are still going to have your clients out there that say, “I could go to this big-name online company, and they will do it for $200 a month.” First of all, that’s a starting price. A lot of times, it’s a lot more than that by the time it’s all said and done. We won’t talk about quality or anything like that but if that’s what they want, then that’s fine but they are not going to get the advice that they need to grow their business.

The other thing, including the accountability piece, is educating them on the alternative. Let’s say a plumber. You attempted to be your own plumber for you and explained that’s why you hire a plumber because you don’t have that skillset. This is something you do every single day. Some people reading this have done it for 10, 20, 30, to 40 years or their whole life. You are an expert in a very niche area and service that people need.

Maybe it’s relistening to all those different stories about the engineer taking out the zero or the plumber knowing where to bang on the pipe, or me with my air conditioning unit. It’s listening to those over and over again because the alternative, if I didn’t get it fixed and paid the premium to get them there that same day, pay extra, and begged them to come, could have cost me more in the long run.

A lot of times, as the firm owner, we need to think about how much extra would it cost them to do it themselves and go somewhere else. How many times have firm owners here seen books that have been messed up because whoever was doing their bookkeeping was too busy, overwhelmed, and tired? When they are tired, then they make mistakes. There are so many elements to this. Thank you, Billie Anne, for sharing.

Is there anything else that you would love to share with our readers that maybe you haven’t covered yet on how to use the income targeting to build this firm that they love better and get happy again? Maybe even, as you said, not be so stressed and have the time and freedom to go from you were at 35 clients down to 10, and how to make that reduction or anything else that you would love to share with a firm owner before we say goodbye?

The key element in this is you can do what they call bottom-up budgeting or whatever where you are saying, “This is the amount I want to make. This is how much I need to make to get there.” The key, though, is to put this in the profit-first framework. Otherwise, there are some things that will slip through those cracks like your tax payments.

Making sure that you have money for profitability or maybe even making sure that you are strategically saving money for capital improvements, education or those things. I can’t stress enough that while you could do some income targeting or bottom-up budgeting using more traditional methods, the profit-first method and my unbiased opinion, is 100% the way to go with this to have the best results for yourself and your client.

While you could do some income targeting or bottom-up budgeting using more traditional methods, the Profit First Method to have the best results for yourself and your client.

If they are a firm owner doing bookkeeping and are interested in becoming a Profit First Advisor and learning about that, how can they do that?

They can do that by going to ProfitFirstProfessionals.com or you can email me at BillieAnne@ProfitFirstProfessionals.com, and I can get you on the right path.

Thank you so much, Billie Anne, for taking the time to share your wisdom and knowledge. I’m proud of you and everything you’ve accomplished, not only in your business but personally, too. We didn’t even get into that but you are a gem and awesome. Thanks for taking out the time to be here to share your love of what you are doing with others so they can implement it in their firms and not be stressed, and enjoy their life a little bit more.

Thank you so much, Michelle. It was a pleasure to be here.

Thank you all so much for joining Billie Anne and I on another amazing episode. If you are a firm owner and you want to be like Billie Anne and go from 35 clients down to 10, and go from being stressed out all the time to having more time freedom and having the ease to go hiking as she does. Also, do all the other fun stuff without losing sleep, being exhausted, and powerless then remember, we have time set aside to have a call with you.

If you are fed up and ready to fix it and have a conversation about what you can do personally to apply even some of the ideas that she shared on this episode, then head on over to TheAbundantCall.com to book your call. On our call, we are going to get crystal clear on a few things like where your firm is at, where you want to go with it, and what’s keeping you stuck.

We will identify where you want your firm to be in the life that you want, but also ensure that you are paid first and avoid all the pitfalls along the way. You can save a ton of money in the process. We will also plan out the exact next steps you can take to double your firm’s revenue at a minimum. Head on over to TheAbundantCall.com. We look forward to connecting with you soon. Have a beautiful day.