Managing partners whose firms achieve consistent growth understand there are many components that lead to growth in revenue and new clients, whilst most partners think it’s just about doing more. However, a selective few managing partners, who are leading regional firms to achieve exceptional growth, know the importance of both focusing on the big picture (strategic model development) as well as the drilling down into operational improvements that deliver consistent effectiveness (new revenue streams and doing things better to produce better profitability) is truly what drives exceptional growth and profitability. Currently, these selective few are outstripping the industry benchmarks and leading the way.
For a managing partner to get everything right, they need to be cyclically zooming in and out of the operational and strategic models of the business, first to ascertain where the real growth lies and secondly to question the future sustainability of the models in play.
Will revenue streams last beyond this season of economic environment?
When will new revenue streams become core offerings?
And is the business model sustainable under the new streams of deliver?
So many firms are blind to the effects of change in revenue stream on their existing business model. Knowing the real impact and when it’s time to revitalise, is where the real success lays.
Innovating and installing new revenue streams is often undertaken with little thought beyond capacity management. This is leading to stalled growth and even worse complacent profitability.
Take CFO services as an example, most firms have launched down this road as it’s the most complementary match to what clients want and the perceived capabilities of existing people. Whilst the initial feedback has been beneficial, now firms are discovering its lead to operation bottlenecks and stalled growth. Typically, firms are now experiencing;
- People burn out – busyness of their best people,
- Lack of engagement from key people to sell – total revenue growth has slowed considerably,
- Poor consistency in pricing – overdelivery of services to meet perceived client expectations, therefore, partners believe their pricing needs to improve,
- Inconsistent take up from clients – unclear conversations that leave clients confused as to the value to them, are shying away from adding more services.
What is really going on?
Regional firms who have focused solely on revenue growth and not considered the impact on their existing business model, are now complaining about busyness and lack of growth.
Their lack of zooming out and questioning the underlying operational model is now revealing itself. These firms are:
- Ignorantly placing huge pressure on your best people. You are running the risk of losing your best people to other firms or worse these people will leave and set up dynamic firms, taking your future market share. Take a firm in Brisbane that was formed 2 years ago from a group of managers leaving a mid-size firm. Currently, reaching a turnover of $2m, they have taken an immediate share of the same market yet they took very few clients when they left! This dynamic firm simply left behind the old model as they experienced its limitations and started with a business model that allowed for instant growth, higher profitability and one that will hold them as leaders for this current economic cycle.
- Clients will seek alternate providers, ones that understand how to explain the value to them and deliver results beyond their own expectations. Clients are paying fees that are 3 to 4 times higher than they paid their old accountant and are enjoying the benefits of doing so.
- Ignoring the lack lust improvement in profitability. Over the past 20 years’ profitability has risen less than half the inflation impact, check your numbers as a percentage of turnover after partner salaries.
The real impact of ignoring your business model
The One Firm One Way concept is being completely ignored, that is, the focus on who you serve and the clarity of what you serve them is now so diverse it’s confusing your marketplace. Adding more services and upsell has simply complicated the marketing and selling process. The perception in the business community is that accountants are missing the point and not providing the real advice they want. This is reflected in the recent surge in numbers of consultants, coaches, and advisors entering the small business market, it’s quadrupled in the last 5 years.
Why look at your business model NOW?
The reality of automation is now present in our industry. Services focused around; processing, analysing or reporting are experiencing price pressure or worse, been questioned on value by clients. Reflected in recent benchmark surveys, another revenue has increased significantly over the last 2 years yet most regional firms are now experiencing lackluster growth in gross revenue. In fact, most firms report they have merely filled the gap in reducing processing revenue. And that’s lead to everyone been busier and erosion in profitability.
Therefore, if you are sick of trying to keep up with a changing marketplace and instead want to switch to be a leader in your market you need to zoom out and question your business model.
Deny it or not, successful business owners know that at some point in order to thrive they must questions the lifecycle of their business model and there comes a time when you have to reinvent and rejuvenate the business model to create new growth engines.
TwentySix Group Business Accelerator Session
A one-on-one Online discussion that identifies the drivers that will determine your one critical decision, which model is right for your Firm of Tomorrow. Facilitating this process, it is important that you and your partners understand how your firm sits in the market now and how it should sit in the future. Even more critical is to know, how clients will determine the value to them and their business. You will walk away with a plan on how to bridge that gap that exists between where you are now and your desired firm of tomorrow.
Coverage of the Program:
Focus – Identify your target client
Clarity – Understand your Unfair Advantage
Confidence – Know the gap between where you are now and the firm of tomorrow