Did you hear the one about the firm with two partners, each making $1 million a year? I heard they’re only working 20 hours a week and have just a handful of projects. They have a skeleton staff, makes liberal use of contractors, and do some of the most cutting edge work around.
Nope, never heard of them, but that’s ridiculous. To make $1 million a year working 20 hours a week you’d have to charge, what, $1,000 an hour? Nobody charges that.
That’s the other thing, I heard they don’t charge by the hour.
Impossible?
Let’s put aside limiting language right now, get rid of words like can’t, won’t, never, either/or, and but, and spend time contemplating what would have to happen for this small but mighty firm, where each partner makes over $1 million a year, to exist.
While we’re at it, let’s figure out what would have to happen for the partners to put in no more than twenty hours a week too. Finally, let’s imagine how they could do it without massive staff and thousands of clients.
That’s what this article is about. Not every ProAdvisor will want to chase the idea of a low volume, high value practice, but every one can take elements from this exercise and consider ideas that may apply to their firm right now. Let’s jump into this “firm of the future,” the FOF.
There are three trends I see converging on business in general, and service businesses specifically. One is technology, automation and artificial intelligence (AI) will continue making us more productive.
The second is emerging economies will continue producing better educated workers hungry for what democratic capitalism can provide in their own countries.
Third, service providers will continue to make their solutions to problems more complex to justify higher prices and value.
For every reason why it’s dangerous to grow into a low volume high value service provider, there’s an equal and opposite reason to why it will work.
With these trends in place, how will the FOF position itself to take advantage of the changes? This article explores three concepts to master.
- Constant client acquisition
- Rethinking value
- Partnering with clients
Constant client acquisition
In a recent AccountingToday survey, a statistic jumped out. The question was about firm focus for 2017 and responses were segmented by small firms and large firms. The overwhelming focus for small firms is on acquisition – defined as finding more and better clients and projects.
The focus for the large firms, on the other hand, is on internal issues – HR issues – big firms are focused on what to do with their people. It’s like the big firms have enough business and their brands are strong enough to attract new business, so they leave acquisition behind and focus on how to keep everyone happy while delivering service. This isn’t unique to accounting firms.
The focus when you’re small is on external issues - survival and growth, while bigger, more established businesses focus on recruiting and retaining.
The FOF question is this – once a steady flow of business is coming in, why do firms get larger and transition into HR challenges where the partners make incrementally more money, but everyone works like dogs to get there? What if a firm never stopped looking for new business and focused on outsourcing help if necessary, shifting their focus to finding bigger problems to solve? What if they never hired staff to take over the work they did for their first clients, and instead moved on to newer and different challenges?
The story of how a lobster grows tells us why firms add little lobsters to the team instead of growing the existing lobster. In order for the lobster to grow, it needs to shed its shell. After it sheds the shell, but before the new one grows, the lobster is exposed. Predators can move in without having to crack through the old shell. The lobster is vulnerable. Who wants that exposure for their firm?
The FOF focuses on an alternate fact, the larger the lobster, the fewer the predators. Recently, there was a story about a massive 23-pound lobster caught in Maine. It was possibly over 100 years old. They named him King Louie. The only predator left was the fisherman that caught him, and once he brought him in, the fisherman turned around and set him free.
My point is this – for every reason why it’s dangerous to grow into a low volume high value service provider, there’s an equal and opposite reason to why it will work. If you’re interested in building the FOF, start the process by making a choice to be a high value, low volume firm, then make daily decisions aligned with that goal.
Rethinking value
In addition to shedding old work, the FOF will rethink the value it provides clients and how it prices its services. Value is a funny thing. I am on the board of a small non-profit that provides professionals with a creative outlet.
If you ask those professionals what they’re willing to pay for this service before it happens, the cap is low, and for that reason it’s offered at no charge. Once they’ve completed the program, however, most participants donate the equivalent of $1000 to support the program.
What happens? The service doesn’t change, it’s the same service that’s been offered for years. The pre-course description is accurate and the past participant testimonials are stirring, so where does the additional value of the service come from? What they’ve found and embraced is that the change in perceived value occurs in the participant, the client.
When moving to the FOF, the second thing we consider is that nature of value. As in, where does value come from? Here’s a hint, if you describe the value you provide by making guesses or assumptions about the value your clients get, that’s not where value comes from.
The value of your services resides in your client, not your services. Your job is to unlock their view of the value, using their criteria, using their words, using the elements of your service that mean the most to them.
That’s why the FOF will work on deepening its understanding of what their client is trying to accomplish and help the client express it. The value a particular solution provides to two clients with the same need is going to vary based on what each client is trying to accomplish. You know this intuitively because there are times you have the perfect solution for a client and they have zero interest in it, even if you don’t charge them a dime.
Conversely, you have clients that would have paid you three or four times more than you charged because what you provided perfectly fit their desired outcome.
The FOF is going to spend a lot of time thinking about the value they provide through the eyes of the customer. They will work with customers that put a premium value on their advice and they’ll walk away from opportunities where the value to the client isn’t big enough for either party. As the saying goes, the FOF walks away when “the juice ain’t worth the sqeezin’.”
That leads to the last point.
Partnering with clients
I understand the eye rolling that accompanies any mention of partnering. Everyone wants to be a “partner,” but there are few true partnerships between clients and service providers. Put those feeling aside for a minute and consider this idea.
A true partner is one who shares the profits and risks in a venture seeking a particular outcome. That implies the partner has control over variables and input on calling the shots. Most clients don’t give their advisors that level of control, but expect the outcomes discussed before a project begins.
Since you can't control all the variables (staff skills, departures, other’s decisions, etc.) you won’t have full control of the outcome. The FOF understands this nuance and helps their clients understand it before the work starts.
Here’s an example. It’s typical for client conversations about outcomes to result in an offer from clients to include performance incentives as part of the compensation. Reach this target, and we’ll share the results with you. The FOF recognizes that this is not wise because of the nature of control that I described above.
Instead, the FOF works to provide clients with the right approach and builds the expectation that clients will invest their time and authority into that approach to reach their desired outcome. They do this because the approach is best for the client and recognizes the fact that ownership overly influences a firm’s short-term decisions, often not in the client’s best interest.
The client will achieve their outcomes due in part to your efforts, but not solely based on your effort. It’s a distinction that provides the FOF a more workable and effective definition of partnership.
Wrapping it all up
The value of these exercises are that most accounting firms are already excellent problem solvers. By painting a challenging future vision, the firm-of-the-future, and then imagining what decisions will have to be made in the meantime to make that future a reality, you’re going to come up with some unique ideas.
The firms I work with are looking for a new way to approach the work they love and they start by envisioning what an ideal future looks like. From there, we ask ourselves what would have to change today for that to happen. Start by asking mind expanding questions that start with “How would I. . .?” and “What would have to happen for. . .?”
That’s how you build the firm of the future.
Greg Chambers Pivot Industries
Greg Chambers is President of Chambers Pivot Industries, a sales and marketing consultancy that helps growing companies find new business by focusing on strategies, management and technology practices that FIT each organization. You can find him at chamberspivot.com