We hear that we need to Play The Long Game all of the time.
This week, I want to brake down how that looks in our firms.
I live in a rural farming community.
On windy days, you can smell the manure from the neighbor wafting in the air.
Since moving here in 2017, I’ve learned that farming might seem like a dying business, but the demand for the product is not the reason the industry is shifting.
The industry continues to contract because people need a long-term perspective to succeed in farming and most people don’t have that.
We’ve evolved to want faster investment returns, and farming does not offer that.
Here’s an example –
My friend down the road has a biodynamic farm.
A few years ago, he spent the summer planting over 50 fruit trees. When we finished, he explained with a huge smile that he would have truckloads of fruit in 20 years.
I was confused – Did he say 20 years?
At the time, he was 32 years old, and he’d been working on his father’s farm since he was a boy. He was fully prepared to not see an ROI on those trees until he was 52 years old!
But the thing was, the trees his father planted two decades ago were producing 10s of thousands of dollars of fruit every year. The farm currently offered a valuable and profitable product only because they had played the long-term game.
There are absolutely no shortcuts in farming. You must have a long-term perspective from day one. There is no other way.
Building an accounting firm is similar.
There are many ‘shortcuts’ to generating revenue and reducing costs. These shortcuts make things easier initially, but they almost always lead to a tougher road later on.
I am not saying that every decision you make should be viewed with a 20-year time horizon, but rather, we should balance and optimize for more long-term actions.
The major stresses in my firm were due to short-term perspectives and actions.
Most of the time, I didn’t know I was thinking and acting short-term, because I had no other experience or perspective to compare against.
The newsletter this week is designed to help you shift your perspective and start playing the long game today.
The Long Game
The long game is hard to watch unfold in real-time.
The cause and effect of the long game is years and decades, not weeks and months.
Social media is a poor conveyer of how most people succeed. It is true that a viral video can make you $1M and grow your audience at breakneck speed, but that is more luck than skill.
By the time someone is successful and we see them truly winning, they’ve already put a decade or two into their craft.
I turned 40 years old this past week, and I spent some time thinking about the things that helped me reach where I am.
From those experiences, I see that things most valuable for me now were not apparently valuable at the moment.
In 2018, I ran about 7 in-person meet-ups to land more accounting clients. I invested quite a lot into the meet-ups, but overall, they weren’t very successful, except for the final one I ran in Dec 2018.
The meet-up was for tech start-ups, and I ran it like the rest of the meetups, pitching my evolving advisory service at the end.
Unknowingly, the CEO and CTO of an augmented reality start-up were in the small group. I impressed them enough to get a meeting with their team. That presentation led to about $70,000 in fees, a Fractional CFO role, and a small equity position in their company – not to mention experience and skills I couldn’t have gotten anywhere else.
Short-term actions would have kept me at home, working on client work and waiting for referrals.
The long-term actions led me to
- Organize half a dozen meet-ups.
- Spend thousands of dollars and drive 100s of Miles
- Present to dozens of business owners
- Get a few bad presentations under my belt
- Land a few smaller clients
- Sign the largest client of my firm.
If we can spend more time and resources on long-term actions, we increase the probability of significantly more success down the road.
We’ll work endlessly to find the balance between short and long term actions, but the framework that I like helps categorize actions based on value and leverage:
Each activity you perform has a specific value.
As the firm owner, you want to high grade what you do.
Spending 30 hours a week on client work (at $300/hr) will generate onetime revenue of $9,000. I am not turning my nose up at the high billable rate.
And I am not discounting that delivering good client service won’t secure the client’s work the following year. I want to highlight that client servicing actions generally only generate value for the time you spend on it.
Your 30 hours are limited to the $9,000 in revenue.
Here’s another way to split up the 30 hours:
Spending 10 hours on biz development could land you two clients at $8,000/yr of recurring revenue.
Spending another 10 hours on training and mentorship could increase your team’s efficiency by 5%, creating additional revenue-generating recurring capacity of $1000 monthly.
Spending the final 10 hours on systems and tech could increase efficiency by another 5% for the next few years.
These numbers are exaggerated for effect, but when you compare your individual value potential against that of your team and systems, your value will lose every time.
The biggest value upgrade for your actions is from service delivery to business development.
I view business development not only as landing more clients, but refining what you do, so you can sell more to each client.
So that includes:
- Refining your niche
- Developing your messaging
- Building your marketing assets
- Installing sales funnels + lead magnets
- Identifying the problems impacting clients
- Refining an advisory offering + associated tools
- Creating a content + audience-building strategy
If you’re not generating the value (or firm profits) you want in your firm, you are simply doing the wrong things.
Your long game depends on how much time you spend on high-value activities.
I understand that a firm’s existence depends on service delivery, but as the firm leader, you have to prioritize the highest value-generating work and then build as much leverage as possible.
Each activity you do has a leverage value.
But unlike value-generating activities, you can increase the leverage potential of most activities.
Creating leverage comes from positioning what you do so it can be amplified, used again or duplicated by someone or something else.
I found in my firm that maximizing leverage was far easier for things I did repeatedly (not a surprise).
Creating leverage in your service delivery or any firm function is harder if you haven’t standardized what you do.
I also found that creating high-leverage activities postpones the immediate return but 10X the future return.
The biggest leverage upgrade for your actions is from service delivery to team management and mentorship.
- Paying more for the roles in your firm
- Spending more on training and skill improvement
- Including the WHY and not only the WHAT in trainings
- Sharing as much leadership responsibility as possible
- Building a living repository of SOPs and internal processes
- Focusing on building a training system, not just training people
- Aligning your firm goals with your team member’s personal goals
- Ensuring that your team doesn’t do work they’re over qualified for
I know tech and AI play a large part in building leverage. I am a big fan of tech.
But for the next 5 – 10 years, building firms to maximize people will generate a better return than anything else.
If you don’t remember anything else from this week’s newsletter, remember this:
The success of your ‘Can you go on vacation without bringing your computer?’ is entirely based on how well you leverage your people.
Your long game depends on whether you view labor as a cost or as leverage.
I hope this has helped reframe how you can move from playing the short to the long game.
Build The Firm You Want.