Just having to deal with the big challenges, frustrations and stresses for business owners that I mentioned last week and the week before, sometimes I ask myself why oh why am I that crazy that I want to be a business owner? There are so many challenges, frustrations and stresses that comes with the job title of CEO or Business Owner. Working for someone else is definitely easier. As an employee, you get to go in to work, put in a day’s work and go home and leave all your work problems behind. You get a regular pay-check and life can be oh so easy. Go into business and you very quickly learn all about one of the biggest challenges that face business owners – Feast and famine!
Having said that, I would not trade my life for another. Working for someone else does not give me the satisfaction nor the excitement that only being an entrepreneur can give me. So, rather than complain about it, I put my mind to work and faced that challenge head on. Albert Einstein is credited with saying “Insanity is doing the same thing over and over again and expecting a different result.” I say that insanity is complaining over and over again about something and not doing anything about it. Complaining will not get me to where I want to go. I need to get off my butt and do something about it. Whining and self-pity never gets anyone anywhere.
Those days of feast and famine remain fresh in my mind even today. We have all been there. It keeps me motivated to do what I do today. In my 40 years of doing business, I don’t believe I have come across a single business that hasn’t been through this – especially in the early start up days.
You are so busy you don’t know where to scratch yourself – you’re barely keeping up with the work, trying to keep your customers happy, you got to do the work, customers love your stuff but you’re starting to get some real unhappy customers because you’re not delivering. Finally, you catch up. You breathe a huge sigh of relief and you thought, you need a well-earned break. But then you look around and you realize that your order books are empty. You haven’t done any marketing for weeks. The phones haven’t rung. And you panic. You start hustling again to bring in the bacon. True? In its simplest forms, it looks just like this diagram.
You do not have to run your business this way. The best way for me to show you how you can overcome this feast and famine cycle is by taking you through a case study. And what better way than to tell you about a business I know A LOT about – my former accounting practice. You see, even accountants are not immune from this! And for me, running a tax practice was never just about how much money I could extract from them. It was also about building a relationship with my clients and about helping them grow their business. I had occasions when a client has gone on the brink of bankruptcy and I ended up doing a lot of work for free. Some would say that was not being sensible – after all, I was not a charity and I had my own bills to pay!
The way forward is therefore to break that feast and famine cycle. Let me just quickly go into a bit of psychology. I’ve seen this presented by two different people but I’m not really sure where they came across this. It is a great visual representation of how our brain works and why we do what we do. It’s really quite important that you understand this. If we understand why it works the way it does, we can start to address the things that stops us succeeding.
Our brain is divided into the conscious mind and the subconscious mind. The conscious mind is where you CHOOSE your thoughts. This is where you get your ideas. This is your THINKING mind. But do you know that it’s really really slow. It processes only 2000 bits of information per second … and 90% of that is the same thoughts.
Whereas your subconscious mind processes 4 billion bits of information per second. But this part of our mind doesn’t THINK. It accepts whatever is there whether it’s real or imagined. It’s where you store your memories. This in turn influences our beliefs, values and attitudes. It changes the way we feel. Our feelings then causes certain actions and behaviours and causes us to have certain beliefs. And that belief drives our behaviour … which gives us certain results.
So, for example, how many of us are afraid of spiders? You know, those little tiny things that crawl on the wall. I am. I can remember a time when I was driving along the freeway going at about 100 km an hour with my two, then very young daughters in the back seat. I looked up and there was this HUGE spider on the INSIDE of the car crawling towards me. It was HUGE!!! Naturally, I screamed. Surprise, surprise. So did my two young girls!
I couldn’t get off the freeway fast enough, parked the car and all three of us jumped out the car!! I’m sure that was not helpful at all. To this day, both my daughters are afraid of spiders too! But when you look at it logically, wasn’t that incredibly stupid that three “giants” are afraid of this tiny perfectly harmless little insect. So, my feelings caused me to do certain things i.e. scream! That in turn caused my children to do the same. Our belief drives our behaviour.
Our current results actually just reflect our current awareness, not our potential. Our current results in turn shape our current thinking and around we go on the merry go round. That’s why sometimes we feel like we’re on this feast and famine cycle and we can’t get off. We are almost too afraid to try something else in case it makes our famine periods last even longer.
If you want to change the results you are getting in your business right now or if you haven’t yet started, you want to be able to influence the outcome of the results, then you have to start with looking at what we put into our conscious mind. Start from within.
The life you want and the family you want will all be made possible by the business you build. You want to build a business that is predictably profitable that actually fits your life, not the other way around. You don’t want to be like that little hamster running like crazy but not getting anywhere – perpetually feeding that feast and famine machine. Unless you do something to break the cycle, you will soon crash. Run, crash, run, burn is not a good way to run a business. Keep doing that and one day, after you crash, you won’t get up again.
I had exactly the same problem in my accounting practice. I had some employees who were always looking to me to supply them with work. If I didn’t give them work, they would sit around and say they have “nothing to do”. It’s like these little baby birds that constantly chirp at you “FEED ME, FEED ME, FEED ME”. I had to go out, network, bring work in. BUT then, once I pass them the work, I spent all my time supervising them, training them and just doing the work. Which meant I didn’t have time to go out to get the work. And of course, that meant that once the work was done, there was no work until I went out and got some more work in.
Often, clients would bring their work in at the last minute and fully expected us to deal with their work to make sure they didn’t end up being penalised by the Tax Office. And of course, it was always then OUR fault if we didn’t do it on time.
And then, we had to chase the customers to pay their bills. As one of my clients said to me, it was more a case of catching up, not getting ahead. As the boss, you get paid last and there were times when everyone else got paid and I didn’t. It’s a feast and famine cycle that was really difficult to break. And I was an accountant! What chances do the ordinary business guy stand when even a financial person struggle with this same thing.
Knowing how to break this feast and famine cycle is not really anything to do with your financial ability. It’s more to do with your having an entrepreneurial mindset. Think outside the box – how can I break this feast and famine cycle? I had to do something. I had to put something into place so that the work would come in automatically without me having to hustle for it and clients paid on time without me having to chase. It was all about a system. Would you like to know how I got off that feast and famine cycle?
First thing I did for my practice was to look at all my clients and divided them into A, B, C and D clients. This is basically your Pareto principle – 20% of the clients would generate 80% of my fees. The “A” clients were the people I loved working with. They fitted my ideal client profile for the accounting practice – decision makers, hardworking and not afraid to fail. They were going places and I wanted to help get them there. I had a close relationship with them, acting more as a mentor rather than just an accountant. I had them at the top of my mind when anything crossed my desk. They constantly refer new clients just like themselves. As the senior partner, I worked with these clients really closely. Often, I was hands-on with their work. I knew them really well and they weren’t just a number to me. As a matter of fact, many have remained close friends despite the fact that I no longer do their work.
The “B” clients were again, really nice people who weren’t quite an “A” client in terms of the work we did for them, but I could see the potential. Most of their work was handled by my Manager but I fronted all meetings. For example, I had a client who was penniless when he came to me, but he was ambitious. And I could see that. With mentoring, he went from being penniless to being able to buy his own home within 2 years. That was a most satisfying outcome.
The “C” clients were nice people, I liked working with them but they were never going anywhere. They weren’t ambitious. They were happy as long as they got their regular pay check and they were happy just moseying along doing the same thing day in day out. Their whole goal was often to pay as little tax as possible by not earning too much! Those were moved to my Senior Manager to look after. I would still make sure I kept in touch by popping into the meeting for 10-15 min when they came into the office. But I didn’t spend too much time with them.
Then we had the “D” clients. They were painful to say the least. They were always complaining. They never paid their fees on time. They continuously asked for their fees to be discounted because “it will only take you 5 minutes”. They forget, that for us to be able to provide that particular advice in 5 minutes, we had to spend YEARS learning what we learnt! They took up a lot of our time. In fact, one of them was so obnoxious, he made one of our junior accountant cry. So, I decided it was time to bite the bullet and sack them. That is an incredibly difficult thing to do. FEAR comes in and you start questioning yourself. Are you doing the right thing? What if you can’t get new clients to replace them? That would make the feast and famine cycle even worse! What if, what if, what if … You know what I’m talking about.
But sack them I did. In hindsight, I should have done it earlier! Work became fun again. And the best part was that as an office we created so much more time to service those customers we did like. They ended up sending us more referrals – people who were just like them! We broke the cycle by changing our thinking and challenging our fears. We went from “we can’t sack our clients, not even the obnoxious ones” to “they are not the type of clients we want. We don’t want their referrals”. We faced the FEAR of the unknown – what would happen if we sack them? We realised that FEAR was really just False Evidence Appearing Real and we had allowed it to control HOW we did business.
Next, we systemised our practice – from client referral to client billings and collections, from the way we managed our workflow to the way we answered the phone. We brainstormed with all our staff and some of our clients and worked out our bucket list for what we could do and started implementing straightaway. We started with the things we could do immediately and worked our way through the list. We pushed as much work down into the back-office staff as we could because by systemising everything, we no longer needed highly expensive qualified accountants to do the work. That released lots more time. And as we know, time is money.
We stopped relying on wishful thinking and we got proactive about it. We offered discounts for paying early. We offered a quick turnaround of work for clients who brought their work in early. Every letter we wrote projected the same image of the firm that we wanted to project. Even the way we wrote changed. We got rid of all the “accounting speak” – you’ve read them before … please find enclosed herewith … Who talks like that these days?
This didn’t happen overnight. It was a slow process which took nearly 12 months to implement. We started educating our clients by sending out regular newsletters – that was in the days before email so everything had to be mailed out by snail mail!
You just wouldn’t believe what those simple little things did. We started getting clients who would ring us to apologise if they were going to be late with paying their bill by a day! We found that we didn’t spend as much time chasing money from unpaid accounts as we did before. That released so much time that we were able to keep our receivables under control. It was great! We started to see the effect on OUR feast and famine cycle.
You see, the transformation from Good to Great described by Jim Collins requires steady dedication to the development of effective business systems. Systems are the essential building blocks of every successful business. The systems that worked for the accounting practice might not work for you. That’s the thing with systems; it should be individualised. Every business is different. It’s not a one size fits all as some accountants or consultants try to tell you. You see, an inexperienced consultant only has his bag of tricks and he can not deviate from it. Often, they then try to force a fit of the square peg into a round hole. And that’s when I hear people say “systemising doesn’t work. It only made us MORE work”.
We formalised our referral system. Do you know that the biggest reason people do not refer you work is because you don’t ASK!?! We actually ASKED clients for referrals at every appropriate opportunity. For us, the ideal time was when we completed their year-end tax work. We would send them a bill for the work and at the same time, thanked them for paying on time (even though they hadn’t yet paid) AND then asked for a referral if they had been happy with our work.
We sent out surveys at appropriate times. We held what we called Client Advisory Boards where we got our “A” clients in and actually asked them what THEY wanted from us and then made sure we gave them what they wanted.
Do you think we ended up with extremely happy clients who continuously sent us more clients? Of course we did. They became our advocates. We built a tribe of raving fans.
As much as was possible, depending on the size of the client, we got our clients to bring their work in monthly or quarterly to stop the mad year end rush. If we hadn’t done that, the feast usually happened over a short 4-5 month period and we were left with trying to find alternative work during the famine months. Tax work, like a lot of businesses, was seasonal. By moving my clients to a monthly or quarterly cycle, it evened out our workflow AND our cashflow. With up to date figures, I was also able to be proactive in working with my clients to help them develop their business.
And not surprisingly, many of our clients preferred it. They know how much they will be paying each month or quarter. There are no hidden surprises. And it helped our clients to budget well.
Overall, it was a much better way to do business because:
- We got better cash flow management.
- We experienced greater business consistency.
- We ended up achieving a higher customer retention rate.
- We didn’t receive any more “discount” requests.
- Running the business became so much more simple as the back-office functions took care of itself.
Can your business do that?
Before you say, definitely NOT, just stop and think about it. What about changing your clients to a subscription model like a lot of businesses do. For example, a lot of services and software you use are now on a subscription basis – photoshop, Microsoft office, Netflix … the list goes on and on. Moving customers on to a subscription basis will remove the need to perpetually chase the new sale, improve your cash flow and save on your back office costs. If you ask most accountants, they would say they cannot use the subscription model for accounting practice. And if they did, there would be so many “subject to” clauses it’s not worth the paper it is written on. The key is not to say, “it cannot be done”. The key is to ask HOW can it be done.
Can you productise or package your business? Think how other companies do it. For my accounting practice, looked at all the services we offered. Then we reviewed each client to see if we could bundle up the work. Therefore, instead of being reactive and waiting for our clients to ask us for help, we looked at what we could do for them, then wrapped it all up into an annual package fee which they then paid on a monthly subscription.
Get creative. Look at your services or products and see how you can bundle it. But remember, productising your services does not mean losing that focus on customer service. That must never be sacrificed in the name of efficiency and productivity.
We worked on developing our client’s business. Zig Ziglar said, “You will get all you want in life, if you help enough other people get what they want.”
We organised Mastermind groups for our clients. We did training sessions on marketing and the use of the internet and on systems and how to improve the efficiency of their back office. For some we had to first work on the culture of the organisation. We did whatever we thought would benefit our clients and help them grow their business.
Zig Ziglar was right. As our clients businesses grew, so did my own practice. And as my clients cashflow improved, so did my own practice cashflow. None of this happened overnight. Some businesses saw improvements after 6 months, others took longer. It really all depended on the business itself. How much training did the staff need? How open were the staff to what we were teaching? It’s a lot harder to implement if your own people are fighting you all the way.
So, you see, it wasn’t a case of the environment or the tax system or anything like that. Yes, some business environment can be challenging. Yes, some tax systems are oppressive. The fact is there are a lot of myths about business – but that’s for another blog.
Next week, I’ll get into Challenge, Frustration and Stress #4 – The People Challenge.
About the Author:
Patsy Lim’s business and financial background (having qualified as a Chartered Accountant in 1980), together with her entrepreneurial spirit enables her to apply a potent blend of strong financial and accounting expertise, deep practical business experience, and entrepreneurial flair and creativity to complex business problems. As an entrepreneur, she understands the issues that an entrepreneur faces. So, unlike some accountants who only know the theory of business, Patsy has had hands-on experience of what it means to be IN business, to start a business, to grow a business, and most of all, to manage a business when times inevitably get tough!