Improving Your Firm With Age
Each stage of your firm's growth cycle has its own set of opportunities and challenges.
March 3, 2008
by John Bowen, Jr.
Remember the good old days when you had just started your CPA practice? You would accept any client under any terms just to make the business happen. All your efforts were geared toward your survival. You served your clients well and they referred more clients, and before you knew it you had a much different problem: dealing with rapid growth.
As many of you have learned the hard way, if you don't have systems in place to handle your firm’s rapid growth, you just work harder trying to be all things to all people. You find yourself channeling all your clients' service and advice through one person — you. To build a successful business, you can no longer be everything to everyone. You must focus on designing the systems needed to deliver the best accounting and investment services to your clients through the collective efforts of everyone. The focus should not be on you, but on the business.
Understanding exactly where your company is in its growth cycle will enable you to distinguish between problems you should expect and those that derail your efforts. Each stage of your firm's growth cycle has its own set of opportunities … and challenges.
Formulation. At this stage, your organization is not yet born; it exists only as your idea. As an entrepreneur, you have an emotional commitment and belief of its functionality in the marketplace. You zealously communicate this. Your excitement will propel your idea into reality.
Infancy. At this stage, you're not particularly profit-oriented, but you are focused on results. You're action-oriented and opportunity-driven. You have few systems in place and few set rules or policies. Performance is inconsistent and management is by crisis. There's little delegation — it's a one-man show. You are constantly being tested and passing those tests is crucial to your survival.
Negative cash flow is to be expected at this stage, so it's important for you to have sufficient capital. Hard work often makes up for lack of capital and mistakes, but abnormal risks can be overwhelming. A chronic negative cash flow may result in an inability to continue. You may rush to establish rules, systems and procedures before you know what the best practices are.
Pre-Adolescence. At this stage, your business has developed momentum. Opportunities seem endless, but rapid growth can breed arrogance and a lack of consistency or focus. It can no longer be a one-person show. Leadership, style and philosophy must now be designed into systems.
Here is where it’s important to make a distinction between making decisions and implementing decisions. When the task is to implement a decision that has already been made, and the authority given is only tactical in nature, that is delegation. When the task is to initiate decisions — for others to decide on issues and make the decisions — that requires decentralization. It is only appropriate to delegate because you cannot yet afford to decentralize.
Adolescence. Here is where a fundamental change occurs in leadership as you move from being an entrepreneur to being a professional manager. Your team is in place and you are ready to move from absolute monarchy — where you make all the decisions — to constitutional monarchy, where everyone (including you) is willing to abide by agreed-upon systems and processes.
Everyone must switch from working harder to working smarter. Expect conflict between administrative and entrepreneurial types. Trust and respect may temporarily suffer as power shifts back and forth. Communication is critical.
Adulthood. By now you have survived the inevitable growing pains and designed workable systems with accountability. Now it's time to empower team members further so they begin to share the company's vision and feel they truly make a difference to it. Expansion of responsibility and sharing critical business information and financial data are particularly powerful. Team members, empowered by knowledge, assume full responsibility for their decisions and the resulting numbers.
You begin to reach the optimal point in the business life-cycle curve where, with a shared vision created from the input of every member of your organization, you can focus on functional systems and organizational structure. Your CPA firm makes solid business plans, with a resulting predictability of outcome that may well exceed expectations. Your company should concentrate on truly satisfying your clients and helping them achieve their financial goals.
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John J. Bowen, Jr. is the Founder and CEO of CEG Worldwide, LLC, a leading research, publishing and consulting firm serving independent financial advisors, CPAs, insurance representatives and registered investment advisors. Download the latest research from CEG Worldwide or learn more about our coaching programs for financial advisors.