Building Block #01: It's a Business
Let me ask you a serious question: Why did you start your Accounting Practice? Perhaps I should rephrase that ... why did you start your Accounting Business?
Yes, your Practice is a Business!
~ Perhaps you just wanted to be your own Boss?
~ Perhaps a potential client suggested you go out on your own, and they'd follow?
~ Perhaps you wanted to make more money and have a better life?
Building a business is tough. In the beginning there is no money and no clients. You have to find premises, hire and train staff.
You have to do everything yourself!
If you work diligently, then after a few years you get more and more clients. You get busier and busier. The Government seems to keep piling on more regulatory demands.
As you become more successful, within a few short years your Practice is running your life! You are working harder than ever before, longer hours and less holidays.
Soon, things start to go wrong. Staff turnover, unhappy clients, mistakes. Life was better when the Practice was smaller?!
There is a reason why the average Practitioner has less than 10 staff. It's the same reason why 97%+ of businesses have less than 20 employees. As you add more staff, you seem to get more problems ... jobs that go wrong. Who is there to fix all the problems? You! It's painful to grow, so better to stay small, right?
You, like the majority of business owners in the world have reached a plateau. It's called the Peter Principle (in management theory, an observation that people tend to rise to "their level of incompetence")
Steve Jobs, founder of Apple, Inc, once said : "Stay Hungry, Stay Foolish". We cannot become complacent. We must keep learning and improving. SMP's need to recogise something very important at this stage of their Practice development.
Running an Accounting Practice (management) is an entirely different skill to doing the technical work of servicing clients (operations).
Accountants spend CPE time focused on technical matters such as Accounting Standards, Tax regulations, etc with little or no training in management, strategy, marketing and HR.
Your Accounting Practice is a business.
That makes you an Entrepreneur! Stephen Covey (Author: 7 Habits of Highly Effective People) says you should Begin with the End in Mind. Surely the purpose of getting into business is to create a better life for the business owner?
As an Entrepreneur looking to grow a successful business, it's important to understand the concept of ROI (Return on Investment). Your Practice is a business, and your business is an investment. Your business investment, when structured correctly, should deliver 4 levels of return:
- Market rate of salary (remuneration for your role);
- Profit (in addition to the salary);
- Equity (goodwill); and
- Investment returns (compounding the savings of 1, 2 & 3 into other investments)
Many professional practitioners don't see their Practice as a business. It's a job. Why waste productive time on planning? They don't understand ROI. Why spend money on technology and software? It's not uncommon for accountants to be running out of date software and operating systems on dinosaur computers. The office environment is still set back in the 1970's with paper and files piled to the roof. Is it any wonder that millennial employees run for the hills!
By treating your business is an investment and understanding ROI, you'll start to make better business decisions.
To 'invest' time in personal development to become a better leader, and to 'invest' money in technology, marketing or training, are no longer costs. They are investments that will deliver returns in the short, medium and longer term. Now you are the Entrepreneur!
How do small businesses break through and become large? To grow and function effectively, every business needs an Organisation Chart. An organisation has many departments:
- Management (the Board & CEO)
- Operations (audit, tax, company secretarial)
- Human Resources (hiring & training employees)
- Finance (cashflow, KPI's, forecasts, analysis of performance)
Finally, these Departments need to be organised, documented and systemised. Without systems and processes, the business will struggle. Things will go wrong.
To get bigger, to obtain scale and leverage (more profit), you need to get better at management and you need systems.
If you are a sole practitioner, then you should consider yourself fortunate. Partnerships are complicated!
Whenever you have two or more people in a relationship you are bound to eventually run into challenges. This is why I recommend to Practitioners they create a corporate business model. You cannot have two or more CEO's (Managing Partners). The corporate model does not work that way, and accounting practices should not work that way either. There can be only one Boss.
The truth is, SMP's and SME's lack management skills. The CEO needs skills that are typically learned through an MBA. I'm not suggesting that's the only way to obtain management skills, but the curriculum of an MBA can be learned informally through self study.
We are fortunate to learn from corporate history over hundreds of years, how to successfully structure the management of a business. Shareholders appoint a Board. The Board appoints a CEO. The CEO has the vision and creates a Strategic Plan and surrounds themselves with a winning team. This is called Corporate Governance, and the small business owner commonly overlooks this critical element.
Remember, the Board meets only 6 to 10 times each year. It's the CEO that runs the organisation day to day, not the Board. Furthermore, if you have six or more equity partners, and each have a Board position, then its getting to an unmanageable size. So Equity Partners are shareholders, but not necessarily the "Boss" or not necessarily a Board (exco) member.
Over 20 years ago True North Group (TNG Global) created its flagship training course designed for accountants, called the Business Advisor Training Program (BATP). It's a 12 month course to provide accountants with the skills, the mindset, tools and templates to move from a traditional compliance based role, to a proactive, strategic business advisor. Ultimately, it's about helping your clients to grow their business, and in the process having a more rewarding professional life.
Who should be your first business consulting client? Of course, it should be your own firm! You need a Practice Strategic 5 Year Plan, and TNG Global is here to help.
Let's end Building Block #01 with a summary of key points:
- Treat your Practice as a business
- Broaden your competencies beyond technical skills like tax, into strategy, marketing and technology
- Draw an Organisation Chart and appoint a CEO (visionary)
- The CEO creates a Strategic Plan, and selects his Team
- Understand ROI (return on investment) and be prepared to invest in your business
- Systemise processes and use technology to increase efficiencies and lower costs (Building Block #04)
Thanks for reading our Practice Growth Series.
If you have not already done so, please access your FREE download: TNG Practice Building Blocks canvas. There are 10 Building Blocks. Use the canvas to take notes as your read through this Series.
In our next post, we'll be discussing Building Block #02, Pricing of Services. How can accountants immediately increase Practice profits through a better understanding of pricing psychology and tactics.