I get asked all the time what a perfect firm looks like. I’ve never met one but I have met hundreds of firms who are doing many things right. However, never one firm that does everything right. My reasoning as to why so many firms do not work well is because they are designed by default – they just happen. Most firms are started with very little capital input and they just grow. No plan, limited capital at the start & limited capital re-invested to make a real sustainable, highly profitable business.
Every one reading this has an opportunity to start again with a new sheet of paper and a new plan. You just need the desire to change and the courage to action. Sometimes the actioning part will never happen in the firm you are in – which might mean you need to leave the firm you’re in and start anew.
If there was a perfect firm here’s what it would look like:
People & structure
- There would be one owner only unless additional partners / owners could demonstrate that they can sell at least $1M in new revenue per year. If a Partner cannot (or will not) sell and bring in new business (all based on value based fees), then they are an overpaid Accountant and not needed as an Owner.
- Initially the owner would be the CEO but as the business got larger a full-time CEO to be appointed.
- From day one the Primary owner did zero chargeable time. They were involved in sales heavily from the start but not doing any of the work that was sold. The owner is a Client Relationship Manager not a Client Doer!
- External Chairman & board of directors / advisors. Holding the CEO and management team accountable.
- Corporate structure where every team member qualified at some point in time for the employee share ownership program.
- Full time Marketing Manager. Locally based and this person will build an off-shore team to market the firm. Hire immediately.
- Full time quality controller / reviewer. This person checked all client work before it went out the door. Typically, this is the partner at the start. We don’t like that plan – it stinks of effort.
- General Manager. This person runs the day to day operations of the business. Hire at 8 people.
- Lead workflow manager. Someone who was coordinating all the work that needs to be done.
- Client Service Coordinators. A ratio of 1 CSC: 3 Professionals. This team would be based off-shore and would interact with the clients for all administration work associated with the professional work.
- Off shore processing professionals. All processing work is done off-shore. If it can be done more efficiently for $5 – $10 per hour offshore, then why on earth would anyone pay $35 – $60 per hour locally.
- Local Client Relationship Managers. All local professionals were client relationship managers (CRM’s) and they were delivering client work at a high level and selling new projects. All CRM’s must have sales ability otherwise they are not needed.
- Revenue manager. Initially the CEO could do this task but as the firm gets larger it would need a full-time person to make sure the revenue is sold and delivered.
- Administration functions of the business would be performed by a ‘virtual assistant’ team offshore.
- Locally the business is client facing (sales and advice) and everything that is administration or processing is done offshore.
The General Manager is running a finely tuned instrument. Everything just works. The systems are awesome, the rules are set and every team member and client follows the rules.
- 100% of internal technology is cloud based. No server required and the business can operate from anywhere in the world on a mobile device.
- 100% of clients Accounting systems are cloud based. No cloud accounting = no client of the firm.
- All internal cloud system seamlessly interact with client cloud systems. Client trading data is visible to the firm every day.
- All clients are on an ‘Annual Accounting Service’ for known regular work. They pay a monthly fixed fee for a set scope on the first day of every month in advance.
- If there is an additional project then this is priced up front and the entire fee is collected up front as well before commencing work.
- All team members are paid 20% + above market salaries. Attract the best money can buy.
- All team members have 5% of their salaries allocated to a learning & development fund for ‘soft skills’. Seminars, book of the month, internal speakers etc. So if your payroll is $1M then $50K is allocated to L&D.
- All team members have a code of cultural ethics they live by – performance standards on culture behaviour and client service.
Any services that are offered need to be recurring in nature. You’re building a subscription business. The litmus test on services is that they are ‘mission critical’ meaning the client must use them to protect assets, grow and develop revenue / cash and create wealth. The client cannot do the work themselves and they use the services from you every week, month or year.
- Bookkeeping – delivered offshore
- Accounting – delivered offshore
- Business advisory – cashflow, profit & revenue planning – delivered locally in person
- Coaching – group coaching 8 businesses at a time – delivered locally in person
- Tax Planning & Structuring – delivered locally and offshore
- Insurance – home, contents, motor vehicle, key man, life etc – delivered offshore
- Legal services – general legal services – delivered locally and offshore
- Financial / Wealth Planning / Investment services – delivered locally and offshore
Audit is not mentioned in this list because I believe Accounting software will self-audit or blockchain technology will take a big chunk of it away.
The marketing manager is driving the brand and generating leads every day.
- The firm is called a snazzy name – not ‘XYZ Partners’ or ‘XYZ & Associates’
- Annual benchmarking survey of all clients
- A book is written about your chosen niche market
- Your firm is the global (national if you want to water it down) leader in your space
- A database of all prospective clients in your niche is acquired, curated and nurtured – at least 50,000 names
- Content marketing to entire database every week
- Monthly webinar series and quarterly seminar series
- Annual conference of all clients.
The key to clients is that they are all ‘A’ class clients. Life is too short to work with people you’d rather not work with. Defining what an ‘A’ class client is for you to work out. Here are my thoughts.
- Clients would be only 1 industry type.
- Client would be 100% business clients and only personal returns if it was associated with the business.
- They would be all over the world and unless they were from the chosen niche market then they were not accepted as a client.
- All clients would go through a rigorous goal setting program at the outset. Understanding their personal / business goals and then matching professional services to the goals. Unless they had goals then they are not accepted as a client of the firm
- Every year a Personal Performance Review (PPR) would be held with the client owners. It would encompass personal goals, business performance, wealth creation and risk mitigation. New services would come off the back of this.
- Every client would have as a minimum a live working and real time cashflow forecast and a quarterly coaching meeting on cashflow, profit and revenue improvement.
The business needs to perform at a suitable level so you get a great return on capital employed. Here are the metrics.
- Average hourly rate for client work >$500
- Average hourly rate for all hours worked >$200
- Team member client productivity <1,350 hours per year
- Owner(s) client productivity 0 hours per year
- WIP & Receivables (Lock UP) days <10 combined
- Average fee per client group >$40,000
- Revenue per full time person >$300,000
- Gross profit (revenue less all salaries) >75%
- Profit before owner(s) salaries >60%
That’s what a perfect firm would look like. My buddy Michael says ‘A breakthrough often happens after a breakwith’ – what do you need to breakwith to breakthrough?