Sudden growth sounds like a dream come true but without smart planning, it can break your business.
When it comes to success stories, Farnell Clarke’s is definitely one to be envied. The Norwich-based firm of accountants has been in business since 2006 and can boast a growth rate of 38% year on year for each of the last ten years.
“We thought it would slow down after the initial spurt, but it never did,” says founder and director Will Farnell.
But he also admits the beginnings were challenging: “We placed too much focus externally, keeping the clients happy and bringing on new ones, and not enough focus internally. We didn’t stop to think about how we controlled and effectively scaled everything, from systems and process to people and performance management.”
If their results are anything to go by, Farnell Clarke recognized and dealt with the challenges quickly. But in many other emerging accounting and bookkeeping businesses sudden or rapid growth can trigger a real crisis.
The hamster wheel
“Sudden growth can be a sign that you’re doing something right, but it can be dangerous if you don’t have a plan, the resources and the systems in place to deal with it,” says Rudi Jansen, author of The Highly Profitable Accountant and head coach at Accoa, a training consultancy for managing partners of accountancy practices.
Jansen points out that, when small businesses grow suddenly, the service quality usually drops and so does client retention. “Clients become unhappy very quickly and may leave you for your better prepared competition,” he says.
When the work starts to pile up and you are not prepared for it, you will be like a hamster spinning on the wheel. “You’ll be stressed out trying – and failing – to do everything: service all clients, run the practice and keep on top of all your paperwork,” says Mark Lee, accountancy commentator and mentor of sole practitioners.
More serious problems will arise if you start missing deadlines or cut corners. “Be prepared for client complaints, being reported to your professional body and even negligence claims,” Lee says.
Get a grip
Lee believes that sudden growth mostly occurs if an emerging practice quotes very low fees. “Review your pricing because if you are attracting more clients than you can handle, you should be charging more,” he says.
Be choosy about who you take on. “Don’t be afraid to price yourself out when potential clients are not the right fit,” says Farnell.
Watch your profitability, too. Jansen says: “When starting out, it’s easy to get so sucked into doing the work that you fail to ensure the job is actually profitable. Review jobs regularly and agree revised fees if need be.”
Jansen adds that managing your clients’ expectations is absolutely crucial:
“Let them know that your business is experiencing sudden growth and you may not be available to take their calls or respond to their emails immediately.” He also recommends that you spend at least one hour a day solely on customer service.
Failing to make time for billing and cash collection is another potential nail in the coffin for an emerging business. “Consider putting your clients on Direct Debit – it puts you in control and allows you to take payments when they fall due. GoCardless is a great solution for this and you can automate the process even further when using add-ons such as Directli,” says Jansen.
Leanne Owen is partner at HSJ Strato, a technology advisory business within HSJ Accountants based in South Wales. She believes that growth cannot be managed and sustained without automation and the right technology.
She says: “First establish which accounting, CRM and task management software will best support your growth. Then use the technology to automate the £10 tasks so you can focus on the higher-value ones and on client engagement.”
Owen explains that automation should be a tool to use, not a replacement for human interaction. “Automation should result in you spending more time speaking with your clients and delivering a quality service,” she says.
Jansen recommends that you also create a habit of systemising everything. “If you find yourself doing something more than once, systemise it. Not only that, but systemise it as if you were building a franchise. When you build systems in this way, you and your team will become much more efficient and effective,” he says.
Also, your technology, systems and processes should be scaleable so that they will suit and support your business, and your future growth, for a long time to come.
Last but not least, hire in additional help – just make sure you choose them wisely. “We had to recruit quickly on a number of occasions, which meant we took on staff who were perhaps not quite right for us at the time,” Farnell admits.
Jansen points out that when you need additional people urgently, it’s very easy to hire anybody who more or less fits the bill, without checking if they are going to be an A+ team member. “But one A+ team member can usually do the work of two or three B team members, so hire carefully. I’d also suggest building a relationship with an outsourcing agency such as Initor Global so that you have access to affordable resources for particularly busy periods,” he says.
Iwona Tokc-Wilde is a business journalist.