5 Tips for Scaling Your Service-based Business
Shane Mason
CO-FOUNDER,
CPA/PFS, CFP®, ECA, CPWA®
So, you’ve turned the corner. You made it through the Valley of Death, beating out the roughly 50% of small businesses that fail within their first five years(1). To be clear, you’re on the other side of clawing tooth and nail for every tax return, general ledger and “C” client that was a cast off from bigger firms with seemingly unlimited budgets for talent, software and client events.
So what’s next?
Well, some professional small business advisors believe you have three options. You can scale to become a more efficient lifestyle practice, a small giant or an enterprise(2). Regardless of which of these options you pursue, I have a few tips for how QuickBooks Online (QBO) can help you reach your goals.
But first, when I say scale, I don’t just mean grow. Most businesses can grow their revenue through acquisition, marketing, overstaffing, etc. When I say scale, I mean it in the Silicon Valley sense of growing revenues while expenses as a percentage of revenue fall. In other words, revenue is up as well as your margins.
Growing is great. Scaling is better.
Not Scaling
Scaling
Yes, I made these graphs with Microsoft Paint. While it’s fun to use the hottest tech, like Photoshop or Miro, a big part of scaling is recognizing when you’re using a flamethrower to mow the grass.
With the important definitions out of the way, let’s get into the tips.
1. Value Pricing / Billing
Hourly billing is antithetical to scaling. While I understand the inertia behind changing the hourly billing model, which includes the feeling that it is more ethical in some regards, I would like to challenge your resistance to value billing.
Value billing is determining a price to present to a client for a project/deliverable, etc. It’s providing a fixed price to that client, no matter how much time or effort or investment the provider requires to deliver the service.
The fact is, you are already value billing every time you quote an hourly rate for your staff. You have guesstimated how much value they will provide to the client at a fixed rate. You’re not analyzing the actual value provided within each hour that your staff are providing, so in effect, you are estimating a fixed value for their project, albeit on an hour-by-hour basis instead of the whole project at once. Congratulations, everyone is value billing to some degree.
Additionally, you are ‘value billed’ by every company you interact with every day. You don’t get an itemized number of hours for how long it took Apple to build your iPhone or Toyota to build your car. Fortunately, we do get an idea of the profit margins of these companies since they’re public. We also get to see three commas on their revenue lines. Do you have three commas in your revenue line? You need the profit more than these companies who value bill you every day.
I recommend you explore value pricing(3) or subscription-based billing using a product like QuickBooks Payments to allow for automatic collection of revenue, to be done with unpredictable one-off, project-based work and to move to an accounts receivable-free future.
2. Advisory
Would you pay me more to tell you a story or tell you the future? How many famous historians can you name vs. famous prophets?
I am of the opinion that people will pay more to see the future than to understand the past, which is why you see profit margins and revenue multiples of financial advisors far exceeding those of the accounting industry despite a much less rigorous technical background. They simply focus on the future while we focus on the past.
With the expansion of the CAS world, or whatever you want to call small business advisory (AaaS anyone?), accountants have the firmest grasp of their clients’ financial past and present to help them extrapolate out into the future.
Using tools like the forecasting features in QBO Advanced, you can analyze past data, increase or decrease accounts by a fixed percentage and play around with numbers to see how various tweaks will impact the bottom line (e.g., hiring employees, firing employees, and capital investments).
3. Delegation
The business owner is the most expensive person at the firm. The more you can push work down to other people’s plate, the more successful the business will be. One of our firm’s core values that has allowed us to grow is Delegate and Elevate.
By delegating tasks, you’re giving someone below you an at-bat at something they haven’t mastered yet and giving yourself more time to work on mastering new skills. It may seem counterintuitive, but you probably shouldn’t be doing any tasks that you’ve mastered—unless it is mission critical, especially in an enterprise practice (see above). You should be spending that time training your team to be as skill loaded as you are. By the way, are you outsourcing yet? I hear everyone else is.
Scaling requires pushing work down the line to less expensive employees (everyone except the owner). Businesses are more valuable come M&A time if the owner is not required to be in the room to get the work done. Think ahead. Delegate it all! If you feel guilty, that’s what therapists are for. If you don’t have a therapist, close this tab and open Betterhelp.com, my friend. Thank me at Intuit Connect.
And while we’re hanging out, let me show you around Intuit’s Payroll features. As a member of Intuit’s Partner Council, I’ve seen them make huge investments in their People functionalities, including payroll features (like payroll tax form submissions), org charts, W9 collection and 1099 distribution, workers comp and benefits, as well as an HR advisor—all baked into the QBO interface.
You’re not still on QuickBooks Desktop are you?
4. Automation
In my opinion, there are three sizes of companies:
The owner does everything because there is no one else there to support them yet.
The owner is able to delegate to staff but still does client service work.
The owner doesn’t have to see clients at all anymore unless an emergency occurs (I recommend owners get involved every time the word lawsuit or ‘we’re not litigious but’ shows up in your staff’s email).
At all three levels, automation has the power to help you reach the next level or be a lot more efficient in the level that you’re in. For example, Zapier can pipe data from thousands of online tools (some say there are as many tech stacks as grains of sand) to whatever other tool you’re using.
We’re a Slack firm, meaning we use Slack for anything urgent and to monitor data flow. Anytime Zapier offers a way to pipe an update (e.g. client has completed an organizer in Cognitoforms) to our Slack, we see it instantly. And not only do we see it instantly, it doesn’t sit in our email inbox clogging up client-facing communications. Do you want all of the client’s answers to your organizer piped into a Gsheet so you can copy/paste them into a format suitable for completing a 1040? Zapier can do that too.
I implore you, get creative! Find your inner automation child. Try to automate your whole business. Organizational psychologists believe that the most important three factors for workplace happiness are developing autonomy, mastery, and purpose(4). Nothing that Zapier can do will give those three things to your staff. If a computer can do a task, your staff probably don’t want to do it!
By the way, Zapier has a HUGE integration with QBO. Here are just a few of the examples of how you can pipe data into and out of Zapier.
I almost forgot to mention that you can bridge your trial balance directly from QBO into Intuit Proconnect. It’s truly one of my favorite features of any general ledger. Yes, it does the balance sheet. Swoon.
5. Standardization
Finally, we have to stop treating all of our clients like individual snowflakes. At least when it comes to the bread-and-butter tasks, like organizers, Chart of Accounts, email updates for status of tax returns, etc. Henry Ford figured this out for us 100 years ago, yet we spend 24 hours per week on emails(5), which are—by their very nature—customized. Here’s a great article on handling that problem, and don’t forget to sync up those tools to Zapier.
But we need to standardize. Every client needs to get the same requests, workflows, cover letters, Chart of Accounts, etc., which allows us as technical experts to do what clients want the most from us: face time.
Nothing makes a client feel more appreciated than when they get to have a 1:1 with their most trusted advisor, and nothing feels less intimate than another email. Have you explored Surge Meetings(6) yet?
A great way to standardize is to use a Chart of Accounts template that you can plug into every new clients QBO file. QBO has this feature wherein you can set up a template and then plug it into all clients. Just copy and paste, and don’t let your clients change it. That way you can even take all of your rules from another file (e.g. all of these Amazon ‘tax fraud’ or whatever other maniacal approach you have).
As much as customization makes our clients feel like the unique little lovable snowflakes that they are, our goals as scaling business owners should be customization, but at scale (a.k.a. – the Holy Grail). My favorite examples of customization at scale is using YAMMs (or whatever mail merge tool you prefer) to send a standardized email to hundreds of clients with variables within those emails that reflect something unique to that client.
For example, your email can go something like this:
Boom! Templated email with customized inputs to make everyone feel special and at scale. Maybe one day some A.I. tools will help us with these types of customization at scale tasks, but for now, I encourage you to designate an automation and scaling champion to commit time to making this magic happen.
Scaling Successfully
Ultimately, scaling from a small business into a lifestyle practice, a small giant, or an enterprise is more than possible. Following my five tips for utilizing QBO’s many fantastic features, I believe you’ll set you up for spectacular success. If you’d like to learn more, contact us today.