Do you know how to grow your accounting firm after a financial crisis?
Although skilled accountants are great at handling money and advising businesses, they can’t control the market economy. There will be economic setbacks that hinder long-term growth for accounting firms and their small business clients. After you push through a financial crisis, you can implement healthy business practices that will help your firm recover and lay the foundation for long-term growth.
Here at Gusto, we aim to provide accountants with valuable insights for expanding their firms. That’s why Gusto, along with our partners at CPA Academy, gave an excellent presentation on how to lead your accounting firm after an economic downturn.
Our webinar “How to Safely De-Grow and Lead Later” can be watched in full here. It featured the expertise of CPA and CEO of Thriveal, Jason Blumer, and Gusto editor-at-large, Caleb Newquist who delivered critical insights into how accountants can move forward after a financial crisis.
In this article, you’re going to learn all about the component growth model, the two main driving factors that will get your firm through a financial crisis, and how to lead your firm after an economic catastrophe.
The component growth model
Recovering from a financial crisis can be a daunting and challenging task for your firm and your clients. The first critical step you need to take towards helping your firm recover is understanding the component growth model. The two main parts that make up the component growth model are market and service. The market side of the component model deals with the state of the current economic market and how you interact with the market, and the service side of the component model involves the internal workings of your company.
Jason noted that there are elements of the market side that are outside of your control, but you can control how you interact with the market:
“There’s a market side, and these are generally aspects of the [component growth] model that are not controllable to you. It is market perception. … The market generally leads us. It’s a very chaotic market that we can’t figure out. It’s a market that won’t interact without trust. … If you’re managing the inside of your company, you’re meant to be observing your market [and] responding to what a market is doing as it leads and changes.”– Jason Blumer
If you’re currently facing a financial crisis, the market will be chaotic, and people will be less inclined to use your services. Even though market perceptions are outside of your control, you can choose how your firm responds to the market. The main way your firm can handle a chaotic market positively is through personal relationships. You create order through your influence over your clients:
“The service world … [is] a world you control. It’s the inside of your firm. It’s meant to be ordered. You’re meant to lead through that order, and it is very influence-based. … And how do you influence? It’s human to human. That’s the work you do when people move from [the] market to …. identify[ing] themselves … as a client. … That’s when influence-based work can begin because you know the person, and influence happens from one human to another. … We [have] a producing side in our service, and we [have] a selling side.”– Jason Blumer
Service-based accounting involves more than just accounting and advising work—you’re also selling your services to potential clients. You create order in a chaotic market by gaining clients. They shift from being part of the general market to being your client, which means you have a personal relationship with them. You focus on the service side of the component growth model by providing excellent service to your clients. You gain influence over them through your services and personal relationship.
You can’t control the market, but you can manage your services and how you respond to the market. You can maintain an ordered firm and meet your clients’ needs to traverse a challenging economic market and prepare your firm for future growth.
The two main drivers that will get your firm through a financial crisis
Within the component growth model, two key drivers will push your firm forward and help you recover from a financial crisis. The two drivers fall under the component growth model categories of market and service.
Jason observed that the driver that falls under the “market” category involves responding to the chaotic market. You can’t control the market itself, but you can focus on reducing risks to help you traverse the market:
“Chaos means you can’t know things, and that means you have to take risks that are kind of bets you’re taking on how you’re reading the market. So your goal is to always consider, ‘How can I decrease the risk as I enter into this chaotic market?’ ”– Jason Blumer
Taking risks is critical for growing a business, but you need to reduce risks when facing a financial crisis. If the market is already unstable, you should mainly focus on surviving the difficult economic period. You can focus on taking risks in order to grow after the market stabilizes.
The other key driver for pushing forward through a financial crisis is increasing your firm’s perceived value:
“What can you constantly do to change the perception of value that a client [perceives] so that they can step out of that market, identify themselves as a client, and move closer to you in service where you can begin the work of influence over their life? … On the market side, you’re always trying to figure out, ‘How can I display myself so that I’m always producing more value?’ “– Jason Blumer
When you increase the perceived value for your accounting firm, your prices will follow. Price is a reflection of value within the market:
“Price follows value. … Your goal is to influence, commit, convince, [and] share with the market that your value is increasing. … Your price just gets to be higher as your value increases.”– Jason Blumer
The price of your services needs to reflect your firm’s perceived value. Although you may be facing a chaotic market, you can push through the economic setback by reducing your firm’s risks and focusing on increasing the perceived value of your firm.
Leading your firm after a financial crisis
Significant economic setbacks within the market often force accounting firms and small businesses to adopt practices that are counterproductive for growth. Firms and businesses typically shift away from proactive growth strategies in favor of survival mode, meaning that they focus on fixing day-to-day financial setbacks and increasing revenue rather than investing in long-term growth. Even so, by using the right contraction strategies, including those discussed in Part Two of this series, you’ll be better positioned to rebound when the time is right.
After the dust settles, you find your firm or its clients reeling from needing to downsize or otherwise shift its focus away from growth during a financial crisis. That makes it critical for you to know how to get your firm back on track once the market stabilizes. The three key ways you can focus on growth rather than survival are reimagining, rebalancing, and rebuilding.
Reimagining your firm means that you’re pivoting your business. You’re shifting your focus and evaluating how you want to proceed with your firm, and you’re also strategizing how to promote the value of your firm’s services:
“This is your time to rethink your clients [and] rethink your value proposition, which is your promise to the market: … ‘Here’s why we’re a valuable [firm] and why you should purchase from us.’ You get to reenvision [a] new team and training, and there are processes you have to go through to reimagine who you’re meant to be. … Maybe you should have already been considering a pivot or a change and … [a financial crisis] is giving you the opportunity to see the truth for you to reimagine a new future.”– Jason Blumer
Significant financial setbacks can be incredibly revealing for your firm. You can use an economic crisis as an opportunity to reimagine your firm and evaluate your current team, clients, processes, brand, and position in the market.
In addition to reimagining your firm, you need to rebalance your focus on the market. You can evaluate the market and strategize how your firm should respond to the market. You can rebalance your firm and determine what areas you’ve neglected or if you’re taking unnecessary risks:
“Ask yourself, ‘Where have I not been focusing on the markets? Have I not been thinking about increasing client value as much as I should, and have I not been considering where I’m taking undue risk in my firm?’ … You may be seeing … where [you] were taking risks that [you] shouldn’t have been taking or where [you] were not displaying [your] value or where [you] were not valuable.”– Jason Blumer
You can rebalance your firm to increase your value in certain areas and improve your services as well as your response to the market.
Finally, you need to rebuild your firm after facing a financial crisis. You may have adopted unhealthy business practices during the financial setback, such as working in triage mode. Triage mode means that you were focusing on prioritizing and fixing individual problems that appeared on a day-to-day basis. Triage mode is often necessary for businesses when facing a financial crisis, but it conflicts with long-term growth. You need to rebuild your firm by investing in your long-term growth.
Additionally, you may have shifted your firm’s focus away from offering transformational advising services in favor of purely transactional business. You need to shift your firm away from unhealthy business practices and reiterate your focus on offering clients transformational advising services:
“You’re going to have to fix those things as you come out of [the financial crisis]. There’s going to be a sense of you rebuilding. … You’re going to have to undo some of the wrong hiring[s]. You’re going to have to undo some of the wrong clients you brought in. You’re going to have to try to get back to [the] market and convince [potential clients] you’re a transformational advisory firm.”– Jason Blumer
Economic downturns dramatically affect the way we do business. Even though certain unhealthy business practices may be necessary temporarily, you need to steer your accounting firm away from them and toward long-term growth. By reimagining, rebalancing, and rebuilding your firm, you can expand your business and increase the value of your services for your clients.
Learn more about recovering your accounting firm
It’s critical that you know how to lead your firm through a financial crisis, but you also need to know how to grow your firm once the economic market stabilizes. While facing a financial disaster, you’ll need to focus on reducing risks while raising your perceived market value. Once your firm survives the economically tumultuous period, you can refocus and adopt healthy business practices that will expand your firm.
If you want to learn more about how to lead your firm during a financial crisis, read Part One and Part Two of this webinar article series. You can also watch the full webinar here to learn even more from Jason and Caleb.
If you’re looking for more ways to grow your firm after a financial crisis, consider signing up for Gusto! Gusto offers invaluable services for accounting firms, such as payroll, HR, and benefits, and we also provide a support program that can help you grow and de-grow your firm effectively. If you want to learn more about what makes Gusto such an essential tool for accounting firms, visit our Gusto for accountants page.