In the beginning…

Let’s look at why accountancy firms grow and why the frustration starts to mount as this growth slows.

The Growth Roller-Coaster – take a look at the illustration below.

The starting point is the beginning of an accountancy practice, usually created by a sole practitioner or a small partnership.  Typically, the partners are very hands-on at this stage with few, if any, staff and modest resources.  In the early months and years the firm grows very well.  Clients receive a high degree of partner attention with high levels of expertise and client-care as a result.  Costs in the modest operation are relatively low and the firm can respond quickly to client and market needs.  Word is spread by clients and referrers about the great, cost-effective service and new business is easily gained.  The Practice quickly expands to a peak at point A , driven by the personalities and skills of its owning partners.

In an ideal world, two conditions will now be met.  Firstly, the partners will recognise that they have reached the pinnacle for a personality driven business and, secondly, the business and financial performance will be at a level that completely satisfies them.  In reality, neither is the case.

What happens in the real world is that the partners continue to drive forward.  However, with the growth there now comes problems.  Staff and resource levels have been increased to serve the growing client base, increasing costs and tying up partner time.  Partners themselves become under increasing time pressure, being torn between client, staff and practice needs.  Falling service levels and rising costs see the growth constricted and dissatisfaction around the firm grow in its place.

Ever heard yourself or a colleague say “Do you know, this was so much easier in the early days!”

Now the partners find themselves at point C .  Reality has dawned and the firm is at a crossroads.  Do they remain a personality driven practice and attempt to claw their way back to point A by downsizing, culling clients and using the lessons learned to try and raise point A to a higher pinnacle. Or, do they undertake the investment required to move forward to become a systems-based firm at point C .  A higher pinnacle but riskier road.

Both types of firm can be successful with the right planning and management.  However, too many firms find themselves falling into the trough in between simply because  they’ve not considered early enough what their fundamental strategies and goals will be.  So much emphasis is placed upon the process functions, delivering compliance, support and advisory services to clients that the essential management of the business itself is overlooked.  Growth is flawed.

All is not lost but some fundamental questions have to be answered:

Answering a) and b) is fundamentally linked to your exit strategy and availability of resources.  The business cannot move forward successfully without these being answered.  Only then is your current position relevant.

From here, strategies can be devised that minimise the short term benefits lost whilst tackling the issues (area D )  and also minimise the pain to be addressed (area E ) if driving forward to a more systems based business that runs on auto-pilot.