From your perspective, how important is financial resource allocation to success? Our mission is to provide value-added services to our clients as a trusted business advisor, so this topic is really at the heart of everything we do. That includes taking a proactive approach to tax planning and financial statement preparation and, above all, analyzing how their clients are using their resources. We use a collaborative team to solve problems, including our financial advisors, attorneys and, of course, CB&T. In the 26 years we’ve been in business, we’ve handled a wide range of industries, which allows us to apply that breadth of knowledge to each industry. Since staffing is your largest expense, what are some of the factors in your decision-making process? Obviously, COVID-19 skewed the business world in many ways, and that’s true in our industry, too. A rule of thumb for professional services used to be spending about 33% to 35% of revenues on team members or staff. Right now, accounting and tax professionals are leaving the industry, while fewer young ones are coming in. We’re having to recruit at increased salaries and full benefits. So that’s a challenge for us. But in a way, that can be viewed as a benefit since our services are going to be even more in demand. It’s going to be hard for some companies to find in-house accounting or outside CFOs, which means they need to retain services like ours on a contractual basis. As we invest higher figures into salaries and benefits, we’re analyzing our pricing and costs. Because we’re now fully staffed, we’re anticipating adding new clientele in business management and higher-level tax-return preparation. Did the pandemic influence your marketing allocation? Historically, we spend about 5% of our budget for marketing, although last year we didn’t market as aggressively. Most of that is dedicated to our website and marketing materials for potential clients. The one big change is that we haven’t been doing live seminars with our collaborative partners, such as attorneys and bankers. We’re hopeful we can get back to those, and anticipate marketing being a bigger part of our 2022 budget.
How does logistics figure into the equation? That’s about 20% of revenue, including software, supplies and all our IT needs, which are handled by in-house IT managers. I believe we’ve done a good job with our facilities — only about 5% or 6% of our revenues go to rent and about 7% to utilities and maintenance. We negotiated a long-term lease about five years ago, with the possibility of purchasing the space as an office condo at some point.
Regarding profit, how does that number compare historically? Our target profit margin is about 33%, but that’s not achievable in the current economy. I’ve noticed the same trends in other service industries, with salaries and benefits increasing and so many professionals moving from one place to the next. Our goal is to make the company more profitable with higher-end or higher-paying clients, while having the staff work at a reasonable pace — not 80-hour weeks! Any final thoughts on what companies can do to allocate their resources more strategically? One of the main lessons of the past two years is that organizations with a solid infrastructure in place were able to withstand the pandemic. In our business, we call it the “enterprise risk assessment process.” The sustainability of your business isn’t just about IT and facilities. It requires retaining quality personnel and the only way to do that in a place with a high cost of living is with high-level services and fees that can support it. Finally, management needs to develop solid client relations so that, as the company grows, everyone in the company can prosper.
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