I have a question for you, do you feel bloated? Do you know that some firms are bloated? They’re actually bloated with too much revenue. What I’m talking about, is capacity management, and this is a key to strategy when growing a service based company. Why?
A service based company is one that sells the knowledge of people in their brain. They sell the creative thoughts, and ideas, and the packaging of this clarity that they bring to clients and help them transform and understand their world better. When you do that, right, these aren’t products, or widgets, or even digital things, it’s sometimes it’s talking. What that means is, as a human you have only limited capacity and abilities to deliver that kind of information. You only have a limited amount of time to think about a client, think about so many clients, to have so many meetings, to review and lead so many team members questions, all of this is taxing to the mind. Your ability to output that creative thought is limited, and capacity management is a recognition that your ability to output this knowledge is limited. When you know that, you start proactively managing your capacity.
I mentioned this in my ebook, that you can get at dw.thriveal.com/guide. It’s the foundational principles to leading an advisory firm. It talks about capacity management in there. You need to manage your capacity because you only have so much.
Now what is this bloated thing? Well one thing firms do, or people that sell to firms, they’re always trying to get them more leads. I’ll get you more leads, I’ll get you more revenue, or they’re going to get a business development person, they’re going to get more revenue, and that’s like the fix to everything, is what they think. And it’s not.
If you don’t have a firm that’s structured internally with a team that’s all marching in the same direction, following the same core values or bang some rhythms and processes. When this business model is not greased up and moving knowledge through it rather quickly, it gets all glutted down and bloated. If you pump too much revenue or leads into a firm like that, you’re going to start producing wrong information, you’re going to provide poor service, and at that time that’s when a firm becomes bloated. They have too much revenue, they can’t produce the value quick enough to output this to people. One way to fix that is to just get rid of some clients. You don’t need that many clients. You need larger clients that can pay you more money so you can really focus on one client.
Also, capacity management is realizing that at certain times you can slow down clients coming into your firm, like right now it’s the fall, and we want to tell clients that we’re taking clients for next year. We’ve got another month and a half before they come in and we’re saying, hey, we can’t take any clients until next year. We’re recognizing a limitation to our human form, which is this ability to produce knowledge work in some capacity way. By acknowledging those things, we can actually serve the clients we do choose to bring in, we can serve them better because we can devote time, and energy, and meetings, and knowledge, and review and assessment, and judgements, and us reviewing our team’s work, and them asking questions.
All those things are needed for our client, and we want to devote that good stuff to them, but we can’t be bloated up with too much revenue where clients are just banging down our door going answer me, where’s my tax return? And you’re just trying to spit stuff out as fast as you can. That leads to low margins and commoditization of the services that you sale. Don’t be bloated, manage your capacity, recognize it’s limited, you can’t do all, you think you can do. Figure out what you can do safely, and where you can deliver high value, and that’s where you’re going to win. And you might want to get my ebook where it talks about that; dw.thriveal.com/guide. I hope that helps. We’ll see you.