There are many books out there on growing a business, indeed many which will help you grow your accounting firm. I found many designed for small business owners to excel at leadership and management, but what I haven’t found, is a single book which explores mindset. I couldn’t find a book that tells me how a small business owner needs to change their mindset and focus as their business grows from 2 to 10 people, let alone what those changes were. So, if you are looking for a similar book for accountants or accountancy firms on how to grow your accounting firm, you can forget it!
In our business, we have grown this year from 3 to 8 people and with it came a whole host of pain. Stuff which I wished I had known about in advance. So, this is what brought me here. This blog post shares how your mindset and leadership needs to adapt as your accountancy firm grows from 2 to 10 people, including the mindset shifts you need to make and what now becomes important to focus on.
How to grow your accounting firm: Mindset shifts required
Have to be confident about your firm’s revenue
Think back to the early days of running your practice. When it was you and a trainee or administrator. Your costs were low. The majority of your time was acquiring clients or managing the client work you had. Your role in this stage was to be the linchpin that held everything together. You were the business. And if you had team members they tended to be low cost and reported to you.
As soon as you go above 2-3 employees, and grow your accounting firm, your wage bill starts to become a significant part of your monthly costs. And with that comes a burden of responsibility. One of the reasons for starting the Accountants Millionaires’ Club, was we struggled with a lumpy pipeline of work. This is typical for a coach. The big peaks and troughs of workload, and cashflow, were a major barrier to our confidence to take on more staff. And without more staff we had hit a revenue ceiling. Whilst we may now be a membership organisation, it’s the same for you as an accountancy firm. When you go above 3 people you will tend to have brought on your first big hire. I.e. the qualified accountant who is going to cost you over £30k a year. And before most of us can do that, we need to be confident that our revenue will hold up. Luckily being an accountant you have the luxury of clients who stay for years rather than months.
You need to become mentally tougher
When your practice was only you it was, easy compared to now. However, growing your accounting firm means employing people. And, employing people means you are responsible for others. This responsibility is much more than paying their wages. It extends to their livelihoods, happiness, development and the quality of their work. It also means you are now in charge, and need to be a great ‘leader’ and ‘manager’.
As you grow your accounting firm, you need to provide for many more people. This means you need to become mentally tougher. In my experience, most small accountancy firms have some early turnover of staff. (And we have not been immune in our business either!) This early turnover could be because of poor recruitment decisions. Or the firm outgrows the first few hires’ competence.
As well as the feeling of needing to provide for others. There is another reason you need to get mentally tougher. Very often in the early days you have to invest ahead to get the resource you need to fund your growth. And at the point you invest you may not have the revenue to justify hiring another person. But if you are going to grow your practice and preserve your sanity you need to be able to do this. And from personal experience, this ‘investment’, takes mental toughness. Particularly if you know your accountancy firm is going to be making a loss until they are able to pay for themselves.
You need to establish systems and processes (and stick to them)
This year we went from 3 people to 7 by the end of the year. It’s not something I would recommend doing in the middle of an all-consuming pandemic. In the midst of the pandemic, we realised our business was struggling because we didn't have established systems and processes. We could no longer rely on a weekly team meeting with everyone. Particularly when some of our team were only working 1-2 days a week and could ill afford to spend 90 mins a week talking about all things with all people. When we split down into our small operational units, it revealed our systems and processes, were inadequate for 7 people. We rapidly had to answer the following questions:
- Who was responsible for doing what?
- How did each team link together? Who needed to be be informed at what stage?
- How did we keep each other informed?
- How did we start to use technology to stop needing to take all our meeting time for updates?
Suddenly in my role I had become a professional nag…. At times it seems like my role has become the person who checks everyone has done what they said they were going to do. AND it has been recorded on the firm’s practice management system.
Practice management becomes a priority not a nice-to-have
When it’s you and 1 or 2 others, you are the linchpin. You normally know exactly what is happening and by when. However, as you grow your accounting firm, your headcount naturally creeps up. This means you can’t keep everything in your head any more. You have to trust others to get things done. And you realise that you need to manage by exception. To do this you need to have dashboards, where with one glance you can see exactly what tasks are running late. And then, capacity planning, and finally work allocation who is going to do what, by when. This is the essence of practice management. (Oh and making sure that the business is running profitably!)
You may need to rethink your prices
When we got to £200k turnover in our business I had a shock. The kind of shock which hits you in the gut and keeps you asleep at night. It was the realisation that we were not charging enough to scale. If we had carried on with the same pricing levels, we would have found that we needed a huge amount more members to move the needle on our profit line. As you can imagine this was a low point in our history. But, we see this all the time with our members. There almost always comes a point where we have to point out that they are not charging enough to be able to afford new team members.
Communication needs to become stronger
We’ve always been a virtual business. But this is the same for any business regardless of where people work. Imagine this (real) scenario. It’s 08:55 and I am rushing to get onto zoom to run the Daily Power-Up Call for club members. As I log in, I happen to see that one of the team has set up a private meeting room for the call. So, I log into that room. And then I wait, and wait and wait. No-one turns up… So I text a team member to find out what link I should be on. “The normal one”, was the reply. At which point I hurry out of the zoom room I am in and log onto the normal link where everyone is waiting for me. What my team had not thought to tell me was that they had added in a recurring meeting for the Daily Power-Up Call in zoom to stop people booking other calls in this slot… D’oh...
This was one small incident. But the reality is that when you grow your accounting firm, and go over 3 people, communication becomes so much more important. From the big stuff like the business strategy and vision, through to the day-to-day nitty gritty. If you are going to avoid becoming a nag, this means your team needs the ability to update each other on what is happening with the workload.
Not everyone can report to you
I loved it when our business was 3 people. Not that I don’t love it now, but when we were 3 people it was much, much easier. Everyone reported to me, and I knew what everyone was doing. Our team was the leadership team. But when we got to 4 people we couldn’t do this anymore. We needed to start the painful journey of breaking into operational units and having a leadership team in place. I still feel guilty that not all of my employees can come to the leadership team meetings. (Yes, this is irrational I know)
Trusting someone to do something is one level of trust. Trusting someone to do something who doesn’t report into you is a higher and much harder level of trust. But if you are going to get your firm to more than £300k of turnover, this is part of the journey you must get through.
People management is your day job: More time is needed to lead & manage your team
In the process of growing to 7 people, I have needed to put in some formal people management stuff. I know my people are good, but they are not mind readers. They can’t tell just by listening to me exactly what I expect of them. Every quarter we press pause on our business and reset our ONE BIG FOCUS for the next quarter. This means time needs to be set aside for a leadership team meeting, 1:2:1s with my direct reports to set objectives and KPIs on the work coming out from the leadership team. Then I always speak to my team members every week on a 1:2:1 basis. And this time all adds up. Time which I wasn’t needing to spend a year ago when we were just 3 people. It will be the same for you as you grow your accounting firm. People management becomes much more of your day job.
Can’t keep everything up in your head
3 years ago we were less than half the size we are today. That’s a huge amount more of moving parts and things which need to get done. And the reality is I, plus key members of my team, can’t keep all this information up in our heads. As mentioned earlier in this article, as your grow your accounting firm there needs to be better communication from you, but also between team members when you grow from 3 to 8 people.
But it’s not just the day to day which needs to be communicated. My team have to continually remind me that I need to let them know my thinking about my strategy for the future. In fact, one of my team says that the strategy can change in my head from week to week. (Ooops)
You need to increase the resilience of your accountancy firm
Now that I have 6 people relying on me to pay their wages each month it comes with a huge amount of responsibility. And that means I need to make sure the business is robust enough to carry on paying their wages. But to do this, means the business needs to be resilient. As an accountancy firm your revenue tends to be fairly resilient. Particularly if you charge your clients monthly fees paid by direct debit. Resilience is more than just how reliable your business income is. It’s whether your business can continue to trade if a set of circumstances change. My team hate me talking about if I or someone else went under a bus. But, could your practice still trade if you or a key member of your team were unable to work for 3-6 months. Or, what would happen if you were the victim of a cyber attack? Or a key piece of cloud software you use, were a victim?
Increasing your firm’s resilience is about contingency planning, but wider and deeper. It’s about having a plan A, B and C for each person, process and technology. It’s not being overly reliant on one route to market or a handful of clients.
From the most chargeable to the least chargeable member of the team
If you are going to have the time to manage and lead your team, win new client work, set and execute the strategy of your firm, that all takes time. And if you are stuck doing day-to-day client work, this just isn't going to happen. Now this is the hardest growth transition you will need to make in your firm. I.e. massively reducing your chargeable hours. Particularly if these are clients you have worked with since the early days of your firm. But if you can gradually reduce your chargeable hours you will find that the growth of your firm accelerates massively.