Why do you want to scale your firm to multi-millions?

Hey 👋 - Brandon here.

Happy Saturday to 1,555 growth-minded accountants.

Here’s one growth tip for you and your firm.

Today’s issue takes less than 6 minutes to read.

Why do you want to scale?

Why do you feel the need to get to $100M? Running a $3-5M business is living better than most people. You can buy everything you need and have all the options.

So why scale?

More employees, more responsibility, more more more.

This is a paraphrased Tweet I read this morning.

The author is targeting wannabe business owners who talk big but don’t take action.

Still, I thought it would make for a good newsletter topic today.

After all, what IS this point of scaling?

Once you reach certain thresholds, isn’t that enough?

The underlying issue here is not understanding that when you achieve a level of scale where you experience the leverage gained and the compounding effect that comes with it, you likely won’t want to press the brakes.

If your firm can grow 30-50% per year while giving you and your employees a pretty reasonable work life balance, and everything feels controlled, why would you intentionally slow down?

It doesn’t make sense.

Unless… you are running a firm the traditional way.

If you don’t have a model that scales, but instead relies on partners doing more client delivery (low leverage work) in order for the firm to make more money, I can see how the prospect of scale would be daunting.

In my experience, business gets easier at scale

I know this sounds counterintuitive, but it can be true.

I don’t think it’s true if you run a traditional accounting firm build. Meaning, partners do all the client delivery and manage a $1-2M book.

But if you design your firm in a way to enable your leaders to work on high leverage tasks, you’ll be surprised at how “calm” your business feels as it grows.

We did ~$8.5M last year and will do ~$12M this year.

It’s fast growth, yet the firm feels organized and coordinated. There are few fires to put out.

Compare this to 2019 when our firm grew from $1.25M to $1.75M.

It was hell.

I was doing a ton of client delivery, I didn’t have time to invest in coaching/leading my team so they all struggled as a result, I didn’t have the money to hire great talent or a leadership team, and clients were constantly angry (which was mentally draining).

Scale gives you cash which gives you optionality.

You can invest more in hiring top talent and direct them toward the biggest fires that need to be put out and prevented forever in the future.

You transition from “client delivery” to “business operator” to “platform builder” to “capital allocator.”

Right now, I’m somewhere in between “business operator” and “platform builder” - more on that in a sec.

Here are specific points of leverage I’ve experienced as we’ve grown our firm:

Systems leverage

The systems you develop today become even more valuable as you scale.

The automation that saves you 1 hr per week will also save your employee an hr a week.

100 employees?

100 hrs a week.

If you are good at developing systems, you will experience immense leverage at scale.

If you are not good at developing systems, hire a VP of Ops/COO to do it for you.

One of our business coaches has a rule called 3 and 10.

Every time you 3x, or hit a multiple of 10, you will find your systems must be torn down and re-built.

I think about this in terms of people:

3 employees → 9 employees → 30 employees etc

10 employees → 100 employees → 1000 employees etc

People leverage

When you scale a firm, assuming margin % stays the same, you will have more money to invest in people.

I’ve written about this before, how firms hire bottom up to save money.

They also undercut the market in hopes of getting a deal.

Both of these approaches will cost you more time and money than simply ponying up an extra $10-$20k to attract a better talent pool.

We have hired amazing people at our firm.

Our top people are always looking for ways to improve systems, client service, team building, and overall value.

When you have an army of high achievers who want to contribute to growth, scale will become much easier to manage.

Capital leverage

As you grow, you will have opportunities to allocate capital.

For very large firms (think $50m+), capital allocation is the primary job of the firm’s top leaders.

Imagine that - you set annual goals and KPIs, hold leaders accountable to executing on the KPIs, and then try to figure out how to allocate a few million bucks each year (software, systems, people, M&A).

I’m not there yet.

And I think many CEOs try to jump into the capital allocation role too early (they shed their operator hat because they are burnt out).

But it’s interesting to think about nonetheless.

That's all for this Saturday. See you next week.

Cheers,

Brandon