TFYW #021 Three Ways To Wreck Your Trajectory

Feb 3, 2023

I want to talk about something that comes up a lot during coaching calls with my clients.

Many clients hear me say: “Ah, I wish I had someone tell me these things when I was starting my firm.” I’ve easily said it 50 times.

I do it to emphasize the importance of the topic.

The topics are always mindsets and approaches you need to take now to have a big impact in the future.

But first, an analogy.

In aviation, there is this thing called the 1 in 60 rule. For every 60 miles a pilot travels one degree off course, the pilot will end up 1 mile from the desired destination. So if the pilot flies 600 miles off by 1 degree, they will finish their flight 10 miles from the intended destination.

In your firm, if you get entrenched in certain patterns and do not course correct, you will end up quite distant from your intended firm.

Below are the top things I wish someone had explained to me early on in my firm.

Marketing + Content

Good marketing takes time. Good marketing and content will qualify your clients and help you increase the percentage of high-value clients you service.

When it comes to clients, the saying sticks: ‘Easy Come, Easy Go.’

Finding clients is not the issue. Most firms can find clients, and by adjusting your core offering each time and throwing out a price that is ‘fair,’ you will pick up most clients.

However, clients that sign on quickly, without a proper qualification process, are usually low-margin clients and won’t hesitate to leave for whatever reason.

My advice is to create marketing assets and content to be more proactive about finding your ideal clients.

Marketing assets are pdf guides, templates, or information you create for a niche. These tools work 24/7 to introduce your firm to potential clients.

Generic compliance or general how-to guides are not marketing assets. If the google-ability of the pdf guide content is high, that guide is low value. You want to create valuable, tactical information that addresses a problem in the client’s business.

Note: THEIR PROBLEM IS NOT BOOKKEEPING.

Yes, yes, I know most businesses suck at bookkeeping, but for business owners, bookkeeping is not the direct problem that keeps them up at night.

Write about their ‘wake up in a cold sweat’ problem. Talk about that problem on your website, and then offer the solution in a guide as a download. Start building your email list now.

The same thing can be said about creating content. Steer away from obvious content.

General compliance content is obvious. Again, the google-ability of your content should not be high.

A step-by-step explanation of how a semi-complex corporate structure protects assets for a construction company and builds protected wealth is non-obvious content.

There is an added bonus when you include a real scenario that applies to other companies.

Attention is the oil of the information age. Distribution through connections is your competitive advantage. If you can capture attention and increase your firm’s connections, you will find qualified, valuable clients faster.

So if you’re not creating content, or do not have any marketing assets for download on your website, start those things now.

Pricing – Gross Margin

I talk a lot about increasing value so you can increase your prices.

  • Prices are the number one lever for gross margin.
  • Gross margin is your number one indicator for your firm’s scalability.

The gross margin of your past engagements fuels your current and future scalability.

The major part of the scalability equation is team members, and a poor gross margin is why hiring is so hard for most accounting firms.

Most firms wait until the last minute to hire a new team member due to tight profit margins. With everyone at capacity generating combined lower margins, a new hire creates a massive cash flow pinch until more revenue is generated.

Most firms are low on profit, so growth (and additional cash) is required before they can make a new hire. However, sustainable firms actually use the new hire for growth. This backwards perspective equates to a busy owner/ partnership, stressed team members and a bad client experience. It is a vicious cycle.

Start adjusting your pricing (and value delivered) so there is cash flow to hire and train BEFORE the new hire is urgently needed.

I know that many firm owners spend most of their time on billable work and do not build in proper margins into the prices as they do the work. From day one, prices should include a 30 % gross margin AND work you would typically do, is done by someone just as qualified.

The second major part of the scalability equation is tech. I speak to a lot of firm owners who are concerned about the price of upgrading their technology. I would be more concerned about the time wasted dealing with ok tech that saves a few bucks a month.

Increasing your profit margin makes the additional cost of better technology negligible and opens up so much more time for you.

You can’t grow if you won’t remove yourself from the majority of the work, while still being paid.

Invest In People

Good team members are a cheat code for an accounting firm.

My first hires were junior team members that I felt I shouldn’t pay much for. They were going to do mostly administrative, low value work. Why would I hire really good people?!

I quickly discovered that by skimping on wages (and skills), I stopped doing the administrative work and replaced it with managing the people doing the administrative work. There was some saved time, but the gains were minimal. I never maximized the time I could have saved.

Time and energy are your most important resources as a firm owner.

Sometimes we fall into the trap of thinking we can hire a less experienced person and train them. Training will consume a large portion of resources you don’t yet have if you are a small firm. The savings in cash will never outweigh the time lost.

My advice would be to pay more for a better first new hire and double down on finding better clients.

As your firm grows, training is crucial. You can either spend resources upfront training and supporting your team OR later managing and replacing your team.

If you don’t remember anything else from this week’s newsletter, remember this:

 

Don’t confuse waiting to hire once you grow with hiring people to help you grow.

The best way to continually invest in people is to ensure that you have a steady source of qualified leads generating the right profit margin.

Thanks for reading along with me today.

Build The Firm You Want!

Mark

P.S. Email Mark@FirmNexus.com with something that you want me to talk about. I’ll add it to the list. 

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