If you’ve been following along with the stories of firms in this podcast, you’ll know that there are distinct stages that each one goes through. That first hire. That point when they decide to redo their workflows. Deciding when to scale up. That sort of thing.

John Seiffer has been helping businesses grow for decades. He’s the owner of CEO Bootcamp and has been coaching businesses on how to get through these stages without tears for 25 years. Through his coursework, he helps small businesses (under 150 employees) of many varieties, not just accounting, get past their growing pains and turn into something worthy of acquisition. We’ll be sharing the different stages of businesses he uses in his method in this interview. Full disclosure, our own David Cristello is a client!

Summary

• How John got into the coaching business
• The three stages of growth and the growing pains for each stage
• How to recognize which stage you’re in
• Why business books might not be your best bet to learn things
• A commencement speech worth paying attention to

Resources

• John’s coaching business: https://www.ceobootcamp.com
• John’s email: john@ceobootcamp.com
• Links to the Dan Pink speech:
  • Part 1: https://www.youtube.com/watch?v=XdD_h3i99pI
  • Part 2: https://www.youtube.com/watch?v=BauFlpkvbxQ

Each Business Stage Requires A Leap Of Faith

Organizations evolve as they grow. The biggest changes happen when they are still small. The things successful businesses do when you’re a lone practitioner are different than what they do when you have three people, or 10-12 people, or 20-30. By the time you get to around 100 people, it’s a matter of scaling what is already there.
Most business books are written by successful owners who have grown far beyond these early stages. Advice that works for them as a mature business may not be the best advice when you are small. John Seiffer has made a career out of coaching business owners on how to get through the early stages of growth. Each stage requires a leap of faith on the part of the owner.

The First Stage

The first major stage in growing a business is when an owner decides to make their first hire. That’s the point when a business owner has to recognize that there is another person dependent on the health of their business. Out of fear about this, many business owners put off the decision for far too long.

John’s recommendation for a first hire is an office assistant, someone who can do all the things that prevent you from being more productive. Anything that’s not billing a client, sales, or productive work should go to the first hire. They need to free up your time so you can make more money. That will give you the confidence that you’ll be able to meet payroll.

Once you hire that first employee, you’re at what John calls a Stage One company. You have at least one employee, but the CEO is still doing most of the work with the clients. Other people may be brought in to help or to bring in new work, but it still goes through the CEO.

The Second Stage

As your business grows, you reach a point where the CEO has to spend more time managing employees than they do managing clients and doing work. You can call this the systems development phase.

Stage two businesses are laying the foundations for scaling and efficiency. They’re exploring tools like Jetpack Workflow to optimize the business and growing their employee base. This is when you start building workflows where it’s more profitable for you to not work with clients directly, or at least where you can pick and choose which clients to serve.

The leap of faith at this stage is trusting your employees to handle the work, whether it’s production or sales. A lot of CEOs at this stage feel like they’re losing control over the work or the sales process. This can make them panic and it keeps companies small. If you want to move to this stage, you have to make a conscious decision to let your employees handle the day-to-day work so you can work on improving your employees and your workflows.

Here’s a technique you can use to keep down the fear. Give your employee a task and a deadline, then make a plan to check in with them when it’s 10%, 50%, and 90% done. Tell the employee when you’ll meet and stick to the plan. Don’t ask them about the task outside of the times. This will give you feedback on where the employee is and let you step in if necessary while also giving the employee room to shine without too much interference.

Specializing Instead Of Growing

However, some business owners love working with clients and would never want to give that up. If you’re in that position then you have to grow your firm a different way through specialization.

Your growth cap will be limited and it will be difficult to sell a business if you stay at stage one, but you can still keep your company small and profitable if you can deliver a unique service or something that’s extremely high-quality. It’s similar to being a medical specialist. They can keep small offices and have few patients, but they make a ton from each one because they have something no one else can easily provide.

The Third Stage

If you get strong enough in the second stage, you’ll start to attract the attention of people in the third stage. Stage three businesses are regional or national powerhouses in an industry. They don’t grow by getting more clients but by buying other firms.

At this stage, CEOs aren’t focused on the employees. That’s what VPs and senior executives are for. Instead, they’re focused on looking for acquisitions, keeping an eye on the industry, and looking for new markets or new products. Their gaze is on the competition and the industry.

Few firms have aspirations of this level, but the Big Four accounting firms once all started as tiny stage-one businesses. If you do want to get that big then you have to get through the earlier stages.

There’s lots more in the podcast than we can cover here, so if what you’ve learned here has whetted your appetite then listen to the full podcast. Thanks again to Mr. Seiffer for appearing on our show.

Fix Your Declining Accounting Referral Rate

Interview with Lee Frederiksen of Hinge Marketing

Did you know that accounting has one of the lowest marketing spends than any other industry? And did you know that might be what’s holding your firm back? In this week’s Grow Your Firm podcast, we’re talking with Lee Frederiksen of Hinge Marketing. They provide marketing services to professional companies.

Hinge Marketing recently released a benchmarking report about the state of marketing in accounting. We’ll be talking with Lee about some of the highlights from this report, some of which were quite shocking to us! You can get a free executive summary by going to the link in the resources section.

Summary

• About Hinge Marketing
• Why old assumptions about accounting and marketing will kill your business
• Why you have to meet your audience half-way online if you want to grow
• What the report reveals about the marketing practices of the fastest-growing firms.

Resources

• Hinge Marketing
• Marketing Budget Benchmark Study

Why Marketing Cannot Be Ignored If You Want Growth

A major downfall for many businesses is assumptions that have solidified into facts. One of the strategies that marketing companies use when first working with a client is to do interviews and surveys with some of their customers or clients, and then do the same thing with the company. The answers might be radically different because of these assumptions.

One of these assumptions in the accounting space is that most new business is generated through referrals and not through marketing. We also reinforce this assumption by cherry picking our information. If you think that your website can’t generate new business then you won’t put effort into your website marketing, and thus it doesn’t get any new clients. It proves the assumption, but it could be wrong.

The benchmarking report released by Hinge Marketing aims to show accounting firms just where their assumptions are wrong about marketing. The truth is, things have radically changed over the past few years.

It’s Not Face-To-Face Anymore

Here’s the traditional viewpoint. If a potential client has a question about accounting issues, they would reach out to the phone and schedule a face-to-face interview about their questions. An accountant interview was the single source of information to get a quick answer.

The internet has blown that dynamic apart. 70% of the research process is now done online. That’s for both finding answers about accounting and about finding accountants. Just because you have CPA or some other credential is not an automatic “in” to getting people to come to your door.

People always seek the easiest way to do things. Instead of going through the hassle of scheduling an appointment and paying for some of your time, people will do what they can through web searches first. This includes vetting referrals from other people. It used to be the case that a friend’s referral was the best way to get new business. But according to the new report, the number of referrals has dropped by 15% in the last five years!

Why is this happening? It’s because it’s so easy now to gather more information about a referral recommendation before committing to an appointment. Hinge Marketing states that people look at an average of four or five pieces of information before deciding whether to contact a firm. Three years ago, 52% of people would rule out a firm before talking with them first based on this additional information. Now it’s 90%!

This is why marketing your firm is a crucial part of growing your firm. You have to meet potential clients mid-way while they’re still gathering information and take steps to counter bad information about your business (like a negative review). Instead of waiting for them to talk to you, you need to go to them first through marketing.

Signs Of Healthy Marketing

So what does healthy marketing look like for an accounting firm? The full report compares the fastest and slowest growing firms in their sample to see what the differences are. The first thing our guest mentioned was that the fastest-growing firms generate more than $1 million per partner than the slowest ones.

Granted, there’s more to this than just marketing, like having good workflows, but if you want to replicate that kind of success in your firm then it’s wise to look at their marketing as well. First, the faster-growing firms tend to spend more on access to marketing resources, either internal or external. The fast-growing firms have one marketing person for every 24 people in their firm. The slower ones have one for every 50.

Don’t panic if you have a small firm! If you’re a smaller firm, the question to ask is how you can get access to marketing talent to do things that you can’t do well or don’t know how to do. That could be done through an early hire or it could be done through hiring an external agency to help. Larger firms usually have the resources to hire a marketing employee.

Second, your marketing efforts must balance with good workflows. If your workflows are excellent then your marketing can draw in extra clients without causing the staff to become overwhelmed with new work. Good workflows without good marketing can still land you in the feast and famine cycle because there’s not enough new business coming into the pipeline.

The reverse is worse. If you have excellent marketing and don’t have your workflows in place, you’ll burn through your potential client base and have a lot of unhappy former clients. And if they go out and talk to you online, it’ll make it much harder to draw new business later.

If you do manage to hit the right balance, you’ll still have to make adjustments as you grow. One of the companies Hinge Marketing worked with experienced a 45% growth rate in the first year. To be able to handle that growth, the firm had to keep adjusting their systems to cope.

Also, if you do hit the right mix and start getting attention, don’t forget to have the right talent. You may find you need extra people on your team sooner than you’d expect.

Third, spend your money on the right things. The slow-growth firms spend their money on traditional activities like networking events, conferences, and sponsorships. Fast-growth firms are investing in things like educational events. The amount they’re investing, for a moderate-sized firm, is between 1.5-3% of revenue, excluding salaries for marketing personnel. It is not the case that the more you spend, the better results you get, but you do have to spend enough in the right areas to get the boost you want.

We want to thank Lee Fredrickson for taking the time to talk with us. You can get the executive summary in the resources section. The full report can be purchased through those links.
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1. How to Ask a Client for Referrals (Without Feeling Uncomfortable)
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3. 2 simple techniques to get more referrals for accountants and bookkeepers

Some firm owners have a dream of selling their firm to a larger company to sit on the beach drinking margaritas. But how can you get there? In this week’s Grow Your Firm podcast, we’re talking with Ryan Lazanis. He was formerly the CEO of Zen Accounting, a customer-experience oriented cloud accounting firm, and is now the founder of Future Firm, a company that helps firm owners evolve their firms to the point they’ll be attractive for buyers.

We encountered him through his weekly newsletter and wanted to hear his story. You can listen to the podcast below or read our summary.

Summary

• How Zen Accounting got started
• Why he focused on creating better experiences rather than getting more clients
• Why this approach worked so well and caught the attention of buyers
• The state of cloud-based accounting and just how much more room there is to grow

Resources

Ryan’s site: https://futurefirm.co

The Future Firm Weekly Top Five: https://newsletter.futurefirm.co

From Zero To Sold In Five Years

Ryan’s story is a little unusual from many of our previous guests, as he didn’t have a dream of selling his own firm. But he did stumble upon a formula to make it happen. He started at a traditional CPA firm in Montreal. After six months, he realized what he really wanted to do was start his own business.

His passion wasn’t in accounting, but what he was passionate about was creating disruptive business models and using technology to solve problems. That was the focus of his former business, Zen Accounting, which was started in 2013.

At the time, the technology level of the accounting field was just getting off the ground. Businesses were still bringing in shoeboxes of receipts and losing a lot of time working with accountants. Instead of focusing on providing on improving the accounting side, he focused on how to improve the customer (his words) experience of working with an accountant. He also wanted to do the same for his employees.

Easy And Pain-Free

Ryan’s watchwords were to make the whole experience “easy” and “pain-free”. Everything else flowed from there. The easiest way to do this was through leveraging technology. He started by avoiding in-person meetings and using Skype for all client communications and experimenting with different cloud accounting tools. He didn’t have a lot of clients in the beginning, so he used his free time to try out different technologies and really dig into creating a better experience.

Another part of the experience he wanted to change was pricing. He points out in the interview that the problem with charging by the hour is that it’s hard to guess how long a job will take with a new client. Since the price point is unknown, potential clients get skittish. He recommends a subscription-based model where both the accountant and the client know the scope of work.

On the employee side, he found that a lot of his employees hated keeping up with timesheets and dealing with overtime. So he figured out a model for measuring capacity planning so that he could onboard people at the right time before things exploded into 80 hour work weeks.

To his credit, Ryan has a lot of good business instincts. He didn’t whiteboard his ideas or make a plan of attack for measuring capacity. It was something he developed in his brain by feel. Later, as the firm grew, he did have to start using tools for measuring things more accurately. He started by gauging how many hours his workers were splitting between administrative material and client work. Then, using a planning management system, he broke down that time into tasks and started to form estimates for how long a job would take depending on the person.

He says that knowing when to hire another person really depends on your business model. Firms that go all-in on internet marketing may have more leads than they know what to do with. Those who choose a more measured approach to choosing clients will need to hire less. For his business, he would start to advertise for a new position when he got to 80% capacity.

Where Cloud Accounting Stands Now

Some readers may think that Ryan got lucky focusing on a cloud-based approach. It’s just a case of the right mindset at the right time. But that’s not true. In Canada, only 10-15% of businesses use a cloud-based ledger. That’s a lot of potential business! The percentage of people doing off-line transactions is still very high as well. There is plenty of room to grow for firms to turn their attention toward a cloud-based system.

This is why Ryan founded his new company Future Firm, which helps firms transition to this type of accounting system to better serve their clients. But it’s not just a technology stack. The company also helps firms with marketing their business so they get more notice. For Zen Accounting, Ryan focused on good SEO and experimenting with different techniques to get noticed. He suggests a ready-fire-aim approach to marketing, jumping into things and adjusting along the way.

The core thing to remember is that all this technology isn’t meant to be impressive or showy. The purpose is to create better client experiences so that they’ll keep coming back for more. Firms that cannot do that will look for one that can. So if your process isn’t smooth (like if your workflows aren’t on point!) then you’ll run into problems.

Cloud-based accounting is process-driven and more scalable compared to traditional methods. While Ryan wasn’t looking to get acquired when he started the company, he thinks it was the superior processes and experiences he created that caught the attention of the firm that bought him out. It wasn’t that he had a large book of business. It was that his processes could be used to create one quickly.

We want to thank Ryan Lazanis for taking the time to talk with us. He has a weekly newsletter called The Future Firm Weekly Top Five where he talks about the top five things firms need to know about accounting technology for the week. You can look at past newsletters and sign up for the latest ones at the link in the resources.

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