Nearly every growing firm encounters a painful period of growth, where their growth is hampered by the work in/work on trap.
In this article, Heather Townsend, brand ambassador for the Practice Excellence Programme and founder of The Accountants Millionaires’ Club, explores why this trap occurs, what this trap is and how you can get you and your firm out of the trap in order to remove the barriers to growth.
The work in/work on trap: what is it?
The simplest definition of the trap is where key individuals in the firm get sucked back into working in the business rather than working on the business. The net result of this is typically that growth in the practice will plateau and stagnate. You will know if your practice is in this trap because it will be characterised by a period of intense frustration; often punctuated by minor crises which blow up to become major crises. It will feel as if for every step forward, you then have to take three steps back.
The problem with this stage of growth is just when you think you have all your ducks lined up in a row, and full steam ahead to the merry land of fast growth, something unexpected will happen which will throw you off course. Before you know it, you’ll be back stuck in the work in/work on trap.
The work in/work on trap can happen at any time in your practice’s growth. However, when a practice is growing from £100k to £500k it is most vulnerable to the “Work in/Work on” trap.
Why does it last so long for small growing accountancy firms?
If you think about how a small accountancy practice scales it normally starts with one person, the founder, being the business. They do everything for this business. Of course, with an accountancy practice it’s very difficult to scale beyond an annual turnover of £60k without adding in extra resource (unless you are an interim contractor).
As a result, at each stage of growth in an accountancy practice the owner is having to take difficult decisions about what responsibilities and tasks they are NOT going to do and either delegate, outsource or ditch. Couple that with the fact that small accountancy firm owners are not normally held up as role models of delegation, and you can see why it’s so easy for a firm to fall into the work in/work on trap.
Given the fact that a practice needs to be pretty substantial, i.e. over £500k, before they can truly delegate all their client responsibilities, there is always going to be a delicate balance for owners about how chargeable they need to be and how much time they can allocate to growing their practice. The more chargeable they are, typically, the more profitable the practice is - particularly in the early days of the firm. However, the more chargeable they are, the less time they can allocate to growing their practice.
It’s not just about how much time the owner is spending being chargeable in the business. Very often a small growing firm is just being run too leanly. This could be that the firm is running at over capacity or running low on cash. When a firm is being run too leanly it doesn’t have the resilience to navigate any bumps in the road.
So, what should be minor dramas become major crises, and the owner finds themselves working long hours again and working in the business again. Then despite their best intentions, the growth of the practice stutters and stalls again.
How to get your firm out of the work in/work on trap
If your firm is in this trap, it will probably help you to know that it’s a fairly standard growing pain that any accountancy firm (or service based business) needs to overcome as they grow. Given some accountants’ natural tendencies, i.e. need to be in control, it’s also pretty hard to get out of.
- Grow your cash reserves
Cash isn’t the whole answer, but when you can pay for extra resource it does make it easier to avoid being sucked back into working on the business.
Our clients have used these methods to increase their cash reserves:
- Put in place a price increase
- Exit from unprofitable client accounts
- Taken on external funding, e.g. bank loan or overdraft facility
Whilst some of these options may seem unpalatable for you right now, in our experience, many firms are not charging enough. This means they can easily increase their cash reserves by implementing a fee increase and charging new clients more.
Every time we’ve helped a firm increase their fee levels for both new and existing clients they have been pleasantly surprised just how little clients they have lost. Very often it is the clients you want to lose that are the ones which will go if you implement a fee increase.
- Identify what responsibilities and tasks you can delegate or stop doing
The plants, or more accurately the daily watering of the plants, became a tipping point for one of our clients. They realised they didn’t need to water the plants. This could be done by anyone on their team. It may not be the plants for you, but take a look at what are doing. Then decide on what can be delegated, delayed or ditched. You may find that using outsourcing is a way of freeing up your time to work on the business.
- Stop the crises
The early stage of growth is often characterised by mini and major crises. These crises almost always blow up to be much bigger than they really need to be. As a result, you get pulled back into the business.
Crises happen for many reasons. Often these are due to poor forward planning, team members have slightly different ways of working or make mistakes, stuff keeps slipping through the cracks due to poor practice management procedures. To stop these regular crises, you need to systemise what you do and have one way of working. In addition, develop your numbers that matter, i.e. KPIs, so you can easily spot a trend occurring and head off a crisis before it becomes a crisis.
No more Mr (or Mrs) nice guy
The niceness of accountants and a desire to always please clients often means being too accommodating with poor performance from staff and bending over backwards because of disorganised clients.
How many times have you worked far too many hours in November or January because your clients have been disorganised with their record keeping? Keep doing either of these things, and you find yourself being pulled back into the business again to get the work out the door.
If you are going to avoid the pain of the work in/work on trap you will need to take a careful look at what you will delegate to others, systemise your practice and increase the cash reserves in your firm.
Heather Townsend is a brand ambassador for the Practice Excellence Programme, and the Founder 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 4 books, including The Go-To Expert, and ‘How to make partner and still have a life’ (co-authored with Jo Larbie).
Heather is always up for a challenge. Perhaps that is why she has built a track record of helping accountants grow the size of their practice by 50-200%, often in under two years. Often helping them make partner or equity partner in the process.
Heather is a high profile member of the accountancy profession in the UK. She has worked with over 300 partners, coached, trained and mentored over 2000 professionals at every level of the UK’s most ambitious professional practices. Heather's clients have included: 7 out of the Top 10 UK practices, including all the Big 4 firms.
In 2016 her and her team of coaches have coached:
1) 7 people successfully to partner
2) Professionals from all of the Big 4, from every major continent in the world
As well as helping accountants make partner, she still spends 40% of her time helping small firms, typically under £1m GRF:
1) Create profitable revenue streams from advisory services and reduce their reliance on revenue from compliance services
2) Radically increase their profitability, even if they are a cloud based practice, often helping them achieve a net profit margin of 40%+
3) Double or even triple the size of their practice within 3 years
4) Win bigger and better clients
5) Grow the right team around them so they stop working stupidly high hours and spend quality time with the people they care about
Her articles appear regularly in the UK national and trade press, including The Financial Times, Accountancy Age, The Sunday Times and The Guardian. Heather is also in-demand for her speaking and has recently returned from the South African Accountancy Academy conference.