Become a £1m firm: What you need to know
Many accountancy firm owners have set their sights on becoming a one million pound practice. In this article, Heather Townsend, brand ambassador for the Practice Excellence Conference and founder of the Accountants Millionaires’ Club explores what it takes to get there.
What’s the fixation with becoming a £1m firm?
Think back to the early days of running your practice. Remember the status with becoming a six-figure practice? For some firm owners, the next stage is to become a seven-figure practice. The drivers for making it to a million for most aspiring £1m accountancy firm owners I’ve spoken to are less to do with status or the challenge and far more to do with financial reasons. Having a £1m firm can provide financial freedom and a great pension plan on exit.
What stops firms scaling up to become a one million pound firm?
At a simple level, the first major hurdle is the firm owner’s level of ambition. I know this is obvious stuff, but not every firm owner wants or needs to become a £1m firm. And in my world, that’s absolutely fine.
- The time demands on the firm owner
When you started your firm it was probably just you at the beginning. You did everything from the sexy highly paid stuff through to the filing accounts and tax returns with the authorities. As you started to win more and more client work your time became a very scarce resource. As your firm grows it is always a delicate balancing act between how much time you will spend in the business, e.g. reviewing accounts, and how much needs to be done by others. If you don’t get the hang of delegating and letting your team work on your clients’ stuff, scaling your practice is going to tough.
- The need for cash to support the firm’s growth
Everything is that little bit easier with a healthy bank balance. And scaling up your practice is no different. However, many growing firms often keep too low cash reserves to cushion them from the various pitfalls that await them as they scale up. And yes, even with the best planning in the world, these pitfalls will happen. They could be an important team member going off long term sick and an interim needing to be hired to cover for them. These pitfalls often mean that the owner gets dragged back into being more of the business than they intended. This then puts a dampener on growth for the firm.
- Scope creep with the firm’s structure
Logic says that as your firm grows and you delegate more of the client day-to-day stuff to others your firm structure is going to change. However, far too many firms allow their structure to creep until it becomes inefficient to work with or scale up. Too often jobs get created to suit an individual rather than what the firm really needs. After all, it’s much easier to redesign a role or set of roles rather than have a difficult conversation with a team member about what you really need them to do. Or a key individual leaves, and there is a knee jerk reaction to replace like with like, rather than take a step back to consider exactly what the firm needs.
- Lack of consistent applications of systems and processes
It was easy when it was just you, and maybe one other. You could work the way you wanted to work. It was perfectly fine to keep how doing the things in your head. This way of working just doesn’t work as you grow. Unless your firm adheres to consistent (and efficient) processes and systems, it will haemorrhage profit and cash. Thus, making it very difficult to either scale or make a reasonable living out of your practice.
What are the three phases of growth to become a £1m firm?
It doesn’t matter where you are in your firm right now. If you skip out phase one or phase two you will find it very difficult to sustainably scale your firm. In fact we are working with a firm who turnover over £1m, but because they don’t have a stable foundation for growth are struggling to generate the right amount of profit from their firm. As a result, they have to go back to phase two in order to sort out their profitability before they can scale up further.
Phase one: Get to the starting gate
- Create the time and headspace to work on the business
- Identify your ‘why’ and drivers to grow your firm
- Create your vision and roadmap for growth
Phase two: Create a firm foundation for growth
- Get the right people doing the right things right
- Systemise your processes so they are followed consistently
- Carve out consistent time to work on the business
- Build up a war chest of cash to support your future growth
Phase three: Scale your practice
- Create a service proposition to attract in the right type of clients
- Build predictable lead generation processes and systems
- Add in the right people to fuel your growth
Not everyone will become a £1m firm. However, for those that do, the rewards were worth every single bit of blood, sweat and toil it took to get there.
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Heather Townsend is Founder and Author of ‘The Accountants Millionaires’ Club’. In 2015 the ICAEW decided she was the number one online influencer for the accountancy profession. She is the author of 5 books, including The Go-To...