TFYW#062: Newbie → Experienced → Pro

Nov 17, 2023

Today, I want to get into a few thoughts about mental models for thinking bigger.

Getting Past The Symptoms

There was a question that came up on LinkedIn a few months ago.

“What is the number one reason small businesses fail?” All the usual comments showed up:

“Cashflow issues”

“Run out of cash”

“Poor cash management”

I used to think that cash flow issues were the number one reason most small businesses fail.

It’s not rocket science that when cash runs out, businesses fold. So, cash flow issues become the easy answer.

However, cash flow issues are not the reason businesses fail; it’s the final symptom.

The same can be said about heart attacks.

A heart attack is the event – the final symptom – that kills a person. However, the reasons someone has a heart attack are poor diet, lack of exercise or a genetic disadvantage.

 So, my response to the LinkedIn question?

“Most small businesses fail because the owners think too small.”

Small businesses routinely lick their thumb and put it in the wind to guesstimate how much is needed to succeed.

They think small when it comes to

  • the number of sales they’ll need.
  • the marketing effort or investment needed to drive those sales.
  • the research and refinement required to craft a successful message.

Unfortunately, many small businesses are doomed before they start because their thinking is calibrated too narrow.

The other unfortunate thing is that many accounting firms are stuck in a similar cycle.

We’re stuck working crazy hours, complaining about crappy clients, and feeling undervalued. (Get a play by play of this on #TaxTwitter April 10, every year).

This happens because we’re calibrated for it.

We’re focused on service delivery and doing as much client work as possible.

We’re on trajectories to stagnation and disaster, leaving us with more work than is healthy for humans to complete.

Although it’s not financial bankruptcy, it leads to health and fulfilment bankruptcy.

Recalibration requires different mental models.

Mental Models

When evaluating a new approach or model in your firm, everyone jumps through mental hoops to determine its validity.

We routinely avoid new approaches simply because we can’t wrap our heads around them.

Whether a proposed new approach is valid to us has everything to do with our own experience and limitations.

 

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

 

We are only receptive to mental models immediately adjacent to our experience and perspective.

 

There is a lot of good advice out there, but some of it is not yet digestible or actionable because we don’t have a starting point to implement it.

It’s like we’re jumping from boulder to boulder in a river. We’re stuck on one boulder getting advice from someone five boulders away on how to get on to their boulder.

When I started my firm, I thought I needed to hire a full time senior accountant, but I hadn’t gone through the process to hire a part-time virtual assistant. I was spinning my wheels because I was trying to execute on something three steps away.

It is hard to leapfrog mental models. Thinking bigger is a progression.

The faster we can move through the mental models, the faster we can build scalable, sustainable firms.

I’ve broken down the general mental models into three categories:

Newbie → Experienced → Pro

My comments below are not a definitive list, but it is a heat check to see where you may be.

Firm Tech

Newbie

  • Actively looking to pay as little as possible for tech.
  • Avoids tech because they are “not tech savvy”.
  • Sees business strategy separate from tech strategy.

Experienced

  • Thinks tech is a silver bullet and will end their woes.
  • Expects tech to be a plug-and-play solution.
  • Thinks a firm’s tech stack is QBO → Dext → Bill.com → Gusto. That is not your firm tech stack, that’s your Service Fulfillment stack.

Pro

  • Knows tech takes a monetary and time investment to leverage fully.
  • Has an IT/Automation expert on the current or future org chart.
  • Engages experts to complement holes where your internal team needs help.

Firm Team

Newbie

  • Learns new hard skills when a client asks for help.
  • Doesn’t hire a VA to save $1,000/month.
  • Hesitates giving work to a contractor due to potential poor work quality.

Experienced

  • Does not give room for team members to make mistakes.
  • Hesitates to hire overseas for doubts about security and professionalism.
  •  Doesn’t give full autonomy over how work is completed.

Pro

  • Knows that mentors, not managers, help develop people.
  • Knows that each engagement takes at least three roles to complete: (1) Admin (2) Preparer (3) Reviewer.
  •  Knows a talent acquisition system has to be as strong as their client acquisition system.

Firm Trajectory

Your firm’s trajectory depends on your pricing, offerings and client selection.

Newbie

  •  Justifies cranking out random personal tax returns at any point during the year because it’s easy money.
  • Thinks saying ‘Yes’ to everything is their competitive advantage.
  • Creates pricing tables based on the volume of work.

Experienced

  •  Thinks a niche is serving an industry’s clients from $2M to $25M in revenue.
  • Uses macro market demands to justify price increases.
  • Is slow to fire clients when there is not a value fit.

Pro

  •  Knows that future growth depends on current clients, not future clients.
  •  Positions themselves as experts and builds a timeline for that to occur.
  •  Consistently refines their offer to deliver maximum value to clients.

This list is primarily crafted based on my personal beliefs and journey.

I can substantiate each of these mental models with my own experiences, so I hope you don’t feel attacked.

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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