Do you know the six growth principles for improving your service-based accounting firm?
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Understanding the six growth principles can help you upscale your business effectively, and they can also help you downsize should the need arise. Yes, you can use the growth principles in reverse to reduce the size of your firm if you face economic setbacks.
Here at Gusto, we aim to give accountants the best tools and knowledge for improving their firms and assisting their clients. That’s why Gusto, along with our partners at CPA Academy, delivered an informative webinar all about the different growth principles.
“How to Safely De-Grow and Lead Later” featured the business growth mindset expertise of Jason Blumer, CPA and CEO of Thriveal, and Gusto editor-at-large, Caleb Newquist. You can watch the entire webinar here.
In this article, you will learn all about the different growth principles, including market, clients, services, team, processes, and leadership, that you can use to effectively upscale and downsize your service-based accounting firm.
Smart growth principles for service-based accounting
Whether you’re currently facing a thriving market or an economic downturn, it’s important to know the different growth principles. Understanding growth principles can help you expand your firm and safely downsize your firm. Jason discussed the six critical principles you need to operate your firm successfully:
1. Market: The market will impact your ability to sell your services to clients. Favorable market conditions create a trusting atmosphere, which leads to more people utilizing your accounting services:
“The presence of a trusting market signifies your firm’s reason for existence in a normal market opportunity. … So when we can sell stuff, and we go, ‘Wow, I’m a great salesperson. … I’m getting new leads,’ that’s because that market is in a trusting place. And when they trust you, they purchase from you, and that signifies the fact that your firm is valuable.”– Jason Blumer
The strength of the overall market directly impacts your ability to find new clients and expand your firm.
2. Clients: Once you move on from marketing your services to potential customers, you connect with clients who trust you, and they then utilize your services:
“[You need] negotiation and convincing skills … to convince a person that’s raised their hand out of the market and said, ‘You’ve been marketing to me, and I now am letting you know I believe I’m one of your clients. Let’s go through that process.'”– Jason Blumer
At this growth stage, you’ve now built relationships with small businesses that see the value in your firm and trust you to deliver services.
3. Services: Once you’ve gained clients, you sell them accounting services. A critical part of selling your services is that you’re selling transformation above everything else:
“Clients purchase services that represent [the] transformation they’re looking for in their lives. … They believe your services are meant to be purchased and are meant for transformation. So they’re looking for you to teach them things that will, in some sense, change them. … That’s [how] your services are being perceived in the market.“– Jason Blumer
Your clients are looking for significant changes in their businesses, and when you’re working in a trusting market, they’ll believe that using your services will initiate transformation.
4. Team: Your accounting team plays a critical role in the growth of your firm. Jason noted that employees play a more substantial role in growing your firm than contractors because your firm’s growth is in their best interests. Your team needs to fulfill the needs and expectations of your clients:
“A team is meant to fulfill the revenue promises being consumed by trusting clients. … You start working with your team on a trusted basis, and what you all do and build together fulfills the promises you were making in sales to those clients, and then the client’s job is to consume those and use them.”– Jason Blumer
Trust plays a critical role in every growth stage, and you need a team that you can trust that fulfills the promises you made to clients during the marketing stage.
5. Processes: Your firm needs to be well organized to address your clients’ needs effectively. A well-ordered company indicates value to you and your clients. You show value to your firm by greatly reducing daily stress when operating your business, and your ordered processes show clients that your firm is trustworthy and functions smoothly.
“Adherence to an ordered set of consistent steps with accurate and timely work increases [the] value of your firm over time. So chaos always leads to less valuable companies. Chaos is hard to manage in growth. So if you come to us, and we consult with you, and you’re very chaotic, you don’t have a strong leadership team, you don’t have processes in place … we’re going to have to work on those foundations before you can grow.”– Jason Blumer
Being well organized and having consistent processes is foundational for growing your company and directly impacts your long-term value and success.
6. Leadership: Good leadership means that you’re proactive and strategic rather than reactive to circumstances. As a leader, you also need to have the ability to guide clients, allocate responsibility across your team, and have clients accept some of the financial risks of your transaction:
“Leadership is where you lead the clients [and] you lead the team. … You share appropriate responsibilities with your team. … There are burdens on you as an owner. Your team is meant to bear some of those burdens with you; they share the load. … Risk sharing is appropriate when you’re looking outside your firm to your clients.”– Jason Blumer
You lead your clients to share some of the risks in the transaction by paying you upfront. They trust you to deliver transformational services that improve their businesses, so they should be willing to bear some of the financial risks of the transaction.
Applying the different principles of growth is a critical part of expanding your firm, but you also need to be aware of the importance of safely downsize your firm.
Using growth principles to safely downsize your firm
Your ability to downsize your firm is critical for facing an unhealthy economic market. Various factors can negatively impact the economy and your firm. When Jason and Caleb hosted this webinar, the country was experiencing the economic ramifications of the COVID-19 pandemic. With the economic shutdown caused by the virus, many companies and accounting firms needed to scale back their business operations. Jason discussed the definition of “de-growth” and the importance of de-growing your business in an orderly way:
“Here’s basically what [de-growth] means: shrinking a services firm in an ordered way. … Normally, in a healthy market, we’re growing our company. Now, what you’re meant to do to survive is to de-grow, which is to shrink your firm in a proactive, ordered way, … keeping all your foundational growth components in place if possible.”– Jason Blumer
You need to contract your firm using the different growth principles to downsize while mitigating losses.
“You’re meant to stay viable for the long-term as you do the difficult things you may not otherwise do. … These de-growth principles—they’re really the antithesis to our normal operating principles for growth companies.”– Jason Blumer
The first growth principle you can use to downsize your firm involves the market. When facing a financial crisis, you’re no longer operating in a trusting market.
“There’s a layer of fear that is … on top of our market right now. And so that’s what we’re dealing with, and so that’s where we are. That’s an opposite principle that we’re dealing with. You may have to serve clients you don’t like … that are not who you would normally serve, and that’s just where we are right now.”– Jason Blumer
Dealing with an untrusting market means that you may have to work with clients you don’t want. Additionally, you may need to take on clients looking for only cash flow services:
“You may just be taking the cash right now. … That’s going to [attract] some [bad clients]. … You’re going to have [the] wrong clients that were just there for cash.”– Jason Blumer
Remember that you’re downsizing your company and operating differently than you usually do so that you can survive a financial crisis. Once you can start expanding your company again, you can move away from cash flow services and serve better clients. When contracting, you’re no longer selling clients’ transformation—you’re only selling transactions.
When shrinking your firm, you may also need to start downsizing your team, but it’s critical that you retain core members for the future of your firm:
“You may seek sustaining versus scaling with the team. So what you may do is keep your best team [members], but not keep your whole team. … Keep your team if you can because you’re going to need a team when you come out of [a financial crisis]. The market’s going to have opportunities for all of us. You’re going to need a team to deliver those services.”– Jason Blumer
Downsizing your staff is incredibly challenging, but it’s often necessary when downsizing your firm. Your overall organized processes also often temporarily break down when reducing the size of your company. Things may be chaotic for your firm because you’re performing cash flow transactions and taking on bad clients. You’re doing everything you can to mitigate losses and get your firm through an unhealthy financial market.\
Additionally, you may also need to take on more responsibilities and risks as a leader:
“You may have to take more risks for a time, … where you may not be sharing risk as much as you should be with your team. … As an owner, you may have to start producing more revenue than you have been in the past because if you let go of some of your team that you just can’t afford anymore, you may have to take the load.”– Jason Blumer
When de-growing your firm, you’re essentially doing the opposite of the growth principles for a temporary period. You’re doing everything you can so that your firm survives, contracting in a strategic way that positions you to rebound. Once the market changes and you overcome a financial downturn, you then resume using the growth principles to expand your firm.
Learn more about growth principles for service-based accounting
Utilizing different growth principles can help you effectively grow and de-grow your accounting firm. The six growth principles are market, clients, services, team, processes, and leadership. When faced with a financial crisis, your firm can use these principles in reverse to downsize in an organized manner.
If you’re ready to learn more about growth principles and how your firm can navigate a financial crisis, read Part One and Part Three of this webinar article series. You can also watch the full webinar here.
Keeping your accounting firm organized while expanding and downsizing can be challenging. Many accounting firms use Gusto for its automated processes and convenient integrated platform that enables firms and small companies to keep track of their businesses with ease. Gusto supplies businesses with payroll, benefits, and HR services, and we also provide expert support so that you can improve your firm and help your clients. If you want to learn more about how Gusto can help your firm, visit our Gusto for accountants page.