By Hitendra Patil
You might end up losing a million dollars or more. Surprised? Here are ways you could be frittering money away without even realizing it.
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1. Doing Instead of Getting Things Done
Accounting is not a service industry. Hotels and package delivery are service professions. They thrive on efficiency, technology, standardization of processes and so on.
Accounting is a knowledge industry. Your CPA qualification, your CPE credits, your expertise and insights are not meant to just “trade your time.” If you get paid based on time, your income potential is limited as we all have only 24 hours a day. Even if your processes are based on knowledge, you do the many of the same things day in, day out. Someone else could do those things if you clearly defined the processes that make them happen. You can earn on time – but not on your time.
Some key figures:
Top 25 firms earned over $230,000 a year per employee.
Accounting is ranked as the fourth most profitable industry with pre-tax profit margin of 13.61 percent
One additional employee can bring in $20,000 a year in profit. Over an average 25 years in practice, that person will rake in $500,000.
It may be crude, plain math, but that brings you to the next important decision: selling.
2. Preferring Passive Instead of Active Selling
My day-to-day work involves interacting with CPAs all over the country as my company’s services help them grow faster. My favorite question to them is “How do you get new clients?” And my educated guess is that 70 to 80 percent of them tell me referrals or word of mouth – which is nothing but waiting for customers to come in the door.
Getting new clients in the door is a different ballgame. A firm in Los Angeles runs its own call center that does nothing but sell, with a founding partner in charge of just that function – selling. One of my clients invested in SEO for nearly 18 months, and he gets so much new business that he can’t handle it and has started giving it away to his partner network! Selling as a way of thinking comes in when you think of creating a business, not just a practice.
3. Creating a Practice Instead of a Business
Imagine how Sir Richard Branson might revolutionize the tax and accounting business as he did for first, music, then cell phones and airlines. He created and then multileveraged his opportunities. Businesses create jobs. Did you want to create a job only for yourself by going independent – by creating a practice?
Technology is enabling you to transcend traditional boundaries of your practice. Today you can
- sell competencies that you don’t have,
- sell in locations that you don’t have physical presence in, and
- use a production plant approach, now possible with cloud servers that you don’t have to invest thousands into.
The possibility of converting a practice into a multileveraged business is greater than it’s ever been – and it’s getting greater. And when you create a business, your first focus is on generating revenue.
4. Investing in Overhead Instead of Revenue Generation
Unless you are an irrationally optimistic real estate investor, investing in overhead as such pricey office space in hops of turning into an appreciated asset, you should want to invest in revenue generation, or even in buying revenue. If cash is king, cash flow is the king maker.
Do the math. If you could
- reduce overhead and sell at higher profit, or
- be able to sell at profitable margin even for assignments that you can’t accept now because of your cost structure,
what would be your turnover? When you create revenue-generating work, you become busy producing and delivering work. It is almost as if “work time” were competing with “selling time.” You start feeling that working to produce results creates revenue, so you become more busy doing the work yourself.
5. Valuing Being Busy Instead of Being Busy Creating Value
Satisfaction is instant when we feel a transaction is complete, such as when you pay for a coffee right there at the counter. This traded for that. Done. We subconsciously define what work along those lines, and only when we do those tasks do we feel we “have worked.”
Accomplishing and completing are two different things. Why do we do what we do? It is a deeper question that can’t be answered easily.
Customers do not buy a drill from Black & Decker. They buy a hole in the wall (the benefit) where they can hang that painting so they can feel happy. They are really buying the benefit of the benefit. What is the benefit of the benefit of what you do as an accountant?
Habits make us go into a comfort zone. Routines make us busy. The moment we think of trying something new, our brains scare us with the notion of failure. We worry that we might look like fools if we fail. But nothing worthwhile was ever accomplished without trying something new. What have we got to lose if we try to be better?
Time is the most precious asset we have in life. Doing things that eat away time, without creating real value to anyone, is simply a case of you not valuing your most precious asset. On your balance sheet, your office – not your time – shows up as an asset, so your location drives your thinking.
6. Limiting Yourself to your Location instead of Being Boundaryless
Imagine you get a huge opportunity to “inherit” a thriving practice in another state, which will quadruple your personal income with absolutely no catch. Will you allow yourself to be restricted to your current location?
Have your clients moved to another state but are still doing business with you despite their current location? An office is, at best, an address. That’s where you kept your hardware and software. Your office was directly related to your performance. You had to go to the office.
That was then. This is now. Thanks to new technologies, your office now goes with you. So why are your marketing and networking restricted to a 5- to 50-mile range around your office address?
Boundaries exist only in the mind. Your boundaries have no physical fence to jump over. Your boundaries are only a mind-space challenge. And when you think about boundaries, you inevitably think in terms of complying with those boundaries.
7. Delivering Compliance Instead of Insightful Intelligence
Why do you go to your doctor? Not because the doctor helps you comply with regulations. You go to your doctor to be healthier, to be fitter, to get rid of your pains and to overcome health challenges. You go because a) your doctor has the knowledge you don’t have, and b) your doctor has tools you don’t have.
Can your clients come to you to overcome their financial and business challenges? You have the knowledge and tools they don’t have. That is one of the reasons accounting is No. 4 on the list of most profitable industries. People buy what they don’t have.
Imagine the unimaginable – that there are no rules governing business, no tax laws, no tax returns to be filed. What happens to your practice then? Entrepreneurs are always trying to make sense of information and find gaps between resources and needs so they can fill those gaps and create wealth. They call it market intelligence.
Not everyone has the resources to deliver market intelligence. But think for a moment. If there were no rules, there would be no compliance requirements and hence no commoditization – so the only thing you could sell would be insightful intelligence.
People want to pay as little as possible to satisfy a need, but they will pay more to satisfy a want. Steve Jobs showed the world the iPhone. The world did not need it till then – but the moment they saw it, millions of people wanted it. Show your clients what is possible; let them feel they want it.
A million dollars could easily be the lifetime difference between a small accounting practice and a substantive accounting “business.” You won’t want to give away such money. The only regrets we have in life are the chances we don’t take.
Be a millionaire accountant.