TFYW#090: The 3rd Option for Growth

Jun 7, 2024

This week, I get into how to better leverage your greatest asset: you.

 

The Third Option

Last week, one of my coaching clients asked me a question.

We’ve been working together for over six months, and he’s gained a lot of clarity and traction.

He’s made changes to remove himself from lower-value work through offshore hires.

He has niched down to amplify his ability to impact clients and charge for it.

And most importantly, he’s identified his zone of genius and interest:

“I am good at selling, process design and automation, and talking strategically with clients.”

Now, he clearly sees what his next step is in leveraging himself.

“The execution of highly technical things like compliance work is not an area where I am most efficient.”

“I was just wondering what your thoughts were on [finding a partner for my firm] or if it was ever something you’d considered.”

He brings up a topic that doesn’t get enough air time, especially for small firms.

I wrote about Buy Vs. Build To Grow Your Firm last year, but there is a third option:

Partnering with external firms and service providers.

Bringing on an actual equity partner in your firm is a topic for another newsletter.

I’ll stick to building partnerships outside your firm today.

There are a few different ways that you can partner in your firm but each method helps you stay in your ‘zone of genius.’

The zone of genius is the place where you can maximize yourself.

Most firm owners try to run a tight ship and recognize when team members are not being optimized.

But when it comes to optimizing themselves, there’s a disconnect.

We struggle to position ourselves in our zone of genius so that we can do as much high-leverage, high-value work as possible.

 

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

 

Your time spent in your zone of genius is the best indicator of how fast and sustainably you’ll grow and how happy you’ll be.

 

I understand that each stage of firm ownership comes with a learning curve, so some inefficiencies and mistakes are required.

However, some inefficiencies result from well-intended strategies that hogtie us into slow growth rates.

 

One Stop Shops 

One strategy that is prevalent in our space is the One Stop Shop.

I get it.

Clients want it.

It’s a good value proposition.

And why not? …most of us have the aptitude to offer end-to-end services.

However, the One Stop Shop model can be a world of hurt for small firms.

It is unlikely that a sole practitioner has a zone of genius that straddles tax, accounting, payroll, advisory, system building and team management.

A zone of genius expands with two partners, but there is still a lot of stuff that two partners can’t do without incurring significant opportunity costs.

This One Stop Shop idea is reinforced by the fact that most of us came from larger firms that can effectively be One Stop Shops.

However, there is a major difference between a one or two-partner firm with 8 people and a five-partner firm with 35 people.

We’re talking light years of difference – and I’m not being dramatic here.

I am not saying that we shouldn’t try to deliver as much value as we can to our clients. But we, as small firm owners, need to reimagine how we do it.

Without a plan and commitment to it, you’ll be lucky if you’re in your zone of genius for more than 10% of the time with a One Stop Shop firm.

Partnering is the only way to be in your zone of genius, offer a complete small business accounting and tax solution, and grow sustainably.

 

Ways to Partner

Tech and firm specializations have opened the door to seamless, profitable partnerships without getting into bed with another owner.

I didn’t partner soon enough in my firm.

I remember many times when a client would encounter a scenario that required me to spend hours doing tax research.

Everything else in the firm would lose my attention.

The complex tax work not only annoyed me but increased my anxiety and liability – I was always wondering if I had done it correctly or missed something entirely.

Then, one of my clients needed some significant restructuring and planning.

Was I qualified to do it? Yes.

Could I have figured it out? Yes.

Would I have made revenue? Yes.

Could I have leveraged the work/ research beyond that client? Probably not…  only if another client needed that same guidance before I forget all the research.

I decided to engage a tax firm. I passed the whole transaction to them. I only managed the communication.

My client trusted me and my judgment and had no issues with the partner or cost. They knew it was an important transaction, and the additional support made sense.

I stayed in my high-value, high-leverage role, maintained an opportunity cost of zero and made a small margin.

That experience changed everything.

Again, the time you spend in your zone of genius is the difference between loving and hating your firm.

 

How To Use Partners

 

1. Find Your Partners Before You Need Them

You are going to run into bad partners. Many of the potential partners out there are not going to jive without. Just setting the expectation.

Start early and send over a lower-liability engagement or projects. Figure everything out before bigger-ticket items come up.

Let an outsourced payroll provider handle one of your clients first before you send over the 15 other clients.

Sidenote: Check out my conversation with Valor Payroll Solutions about how they work with accounting firms as an outsourced provider.

 

2. Find a Partner That Interfaces With Your Processes + Systems

One major issue with external partners is that it can come with added administration.

You’ve spent time building your processes and creating efficiency, so don’t get tied to a slow firm.

Ensure they either use the same tech as you or are flexible enough that you can interface easily with their process.

Living in email hell, sorting out documents and process steps with a partner is annoying.

Shared secure document transfer + storage, async communication, and project tracking should be high on the list when finding partners.

 

3. Ensure Your Pricing Can Accommodate The Partnership

Good partners are not always cheap.

Whether you use fixed pricing or hourly, ensure that you can adjust your pricing to accommodate the potential added cost of the partnership.

For my fixed-fee clients, I would assess whether their year-end tax work would be simple enough for me to keep it in-house.

If the client was growing or expected to encounter some transactions during the year that required tax expertise, my service agreement would include a year-end scoping process to ensure that I could add new fees.

 

4. Managing the Client Relationship

I opted to be the go-between with all of my clients and external partners.

I wanted to ensure that the communication was controlled and consistent.

When an external partner needed more details, that was relayed to me and then I followed up with the client.

The trade off for this approach was the admin work, but it helped me to stay in the know about the engagement and manage client expectations.

I have seen other firms turn the communication entirely over to the external partner.

The trade-off for this approach is that the client may encounter a poor client experience.

And for me, the client experience is the only thing we can use to distinguish ourselves.

The reputation and relationship you’ve built can easily be undone by an unresponsive partner.

That’s it for this week. Partner up.

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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