What is a Firm? Part 2

In Part 1 of What is a Firm?, we discussed the truth about what leading a firm will actually require of a firm entrepreneur (sacrifice!). Now let’s dive into some journeys firm owners can choose to go through in very specific ways.

I believe there are possible trends in our changing profession right now that are actually disguises for deeper fears around firm owners not wanting to make this deep commitment to other humans and to a purpose greater than themselves. The fear could be that this sacrifice required to lead a firm may impede the life they want. I’m seeing trends and particular words being spoken that lead me to believe this. I’ve written about these possible fears, like scaling big to sell your firm, the Gig economy, productized firms, and the lifestyle firm. These examples can be good choices for some and yet confusing choices of firm models for others. The choices people make around these models can range from their inclination to have the firm serve their personal desires all the way up to being overwhelmed and crushed by large piles of revenue flying through a big firm. It’s a tricky balance. There can be selfish, sacrificial, real, and even hidden and unknown reasons why owners make the choices they do. My intention in this article is to convey observations and patterns over time to truthfully say things that can lead you to a better life and work, if the mindset we’re discussing registers with you and your firm.

What is that better life?

I’m glad you asked. The ‘better life’ is one that robots, bots, and AI can’t take away from us. It is the deep need humans have of committing to other people in their lives that will speak truths to them that transform them into more stable people. But if you are “seeking to not talk to clients, run your firm in 2 hours a week, and hire contractors that speak to your clients so you don’t have to because you’re lazy and don’t want to work as much” (a quote from a video I watched from someone the other day) then you are in the wrong business. We asked another group of entrepreneurial owners the other day what they want their next 2 years to look like: “to make a lot more money and work a lot less.” Well, I hate to tell you but even kids running lemonade stands understand that you make more money when you work for it. Work + money go together; you can’t magically divorce the two just because you read about a Lifestyle firm in someone’s blog post. I can say that with certainty. Moving away from humans and the work required to care for those humans will always be the wrong move for a professional services business owner. As mentioned, there can be admirable, as well as poor reasons, why firm owners make the choices they do in the type of firm they choose to lead.

Let me say what I think most humans want from their firms – they want to be in truthful relationships where they are loved and cared for, and where transformation happens. Maybe not all of them, but generally our profession is one of technical expertise that can be applied to help small business owners. That’s how we are viewed. This transformation can free our clients and teams from anxiety, fear, the unknown future of running their companies alone, and the need to have a smart person committed to them that they can ask ‘what do you think I should do now?’ When you have this in your life, you know it! Life is much richer because of it. But guess what? You’re gonna have to die to get it. You are going to have to make a commitment to the humans you serve in ways that will cost you something. Trust me (since I’m on the other side of this painful truth) when I say it is worth it. You become more stable, and can see the world from a truer perspective. And with a more accurate lens comes a healthier person. This is the work we get to do every day simply because we serve humans.

Here are some specific examples where my beliefs about a service firm run hard into the trends we are seeing in our profession today. I’ve already listed these examples above: scaling to sell, the Gig economy, the productized firm, and the lifestyle firm.

Scaling to sell. This is becoming more and more common. As firm owners hear of other firm owners who have sold their firms, they think this is an option for them too. Over 20 years ago when I started in this profession, selling and merging were possible but they didn’t dominate the landscape of early firm ownership like they seem to now. Now firm owners are selling their firms in the first 5 years of their careers, where firms in the past usually sold or merged as part of a retirement strategy. What do you do after you sell your firm after 5 years? I’ve seen firm entrepreneurs sell their firms, get bored, then start another firm. But they lost around 7 to 10 years of crucial career-building knowledge while firms around them kept walking that road day after day, earning the expertise they sell at a higher price to their client base. Selling is a way to focus on what you want to do personally, but may not be what you decided you want to become when you turn 50. It’s just a good place to ask yourself “do you want what selling your firm means?” What does it get you in the short term vs the long term?

Gig Economy. This is a fairly new model of operations where professionals can become contractors for professional work (like Upwork.com or Paro.io). They don’t have to lead a firm or be involved with a team. They just move from project to project and get to end relationships quickly – no mess, no fuss. But that comes with a cost (I think). It leaves you alone with the ability to see your struggles and grow in your room alone. Sure, we all need to be alone at times. But as humans, we were made to be with others (which is why this pandemic is messing with our heads). That’s how we see our faults, improve our strengths, and find joy in our work. Relationships in teams, with clients, and people are where we grow, and where we can influence others to grow as well. Families are an example. But the Gig Economy has the danger of making us all islands (if we’re not careful). Sure, people are annoying. But that’s you. You are annoying. So maybe you are the very person that helps others grow through the struggles you have. Consider what your role is in firms, teams, and groups of clients that you stay with for many years where you are allowed to challenge them and help them grow. Being with others is truly transformative. So ask yourself “do you want what working alone means?” What does it get you in the short term vs the long term?

Productized firm. Online packages and pricing for firms is another example of different models of firms we can run online. I’ve taught on fixed pricing before, but we can take this model to an extreme that begins to mirror a tech startup company more than a service-based company (these are two different models of businesses and they are not interchangeable). We talk to a lot of owners of software companies in the accounting profession, and they have to scale at small monthly prices online for global customers to make their model work profitably. They need volume. If they don’t stay focused on that task, they will get distracted and lose touch with the proper metrics and decisions that guide that model of a technology business. That is not an intimate professional services company. As professionals leading firms we are servants of humans– humans that need our counsel. The humans in our lives need our care, guidance, warnings, and encouragement to do their work to its fullest potential. And mass scaling of commodity prices where we don’t have to talk to our clients is not what we were made for as advisors. Quick mass scaling at small monthly prices is for the technology company. Hear me: this is not a case to stop pricing online, but a call to not let these models of business become imbalanced in a way that leads us down the road of applying inaccurate business models to our profession (like becoming  technology startups). You may productize, but ask yourself “do you want what boiling your services down to products means?” What does it get you in the short term vs. the long term?

Lifestyle firm. A lifestyle firm is about the owner’s lifestyle preferences, and minimizing work. I can’t say that is wrong for anyone because many run lifestyle companies with joy and happiness. But I can say that a services firm is decidedly not for a lifestyle situation (since I believe firm owners will always be moving towards human relationships, not away). Making products on Etsy IS for a lifestyle firm. Creating hand-crafted products that you sell online is for the lifestyle company owner. But I don’t believe service-based firms can sustain that model long term. Why? Because you as the owner get what you want – but I do not believe your client is getting what they need (read What is a Firm? Part 1). And even though some clients of lifestyle firms may not fully realize they are not getting all that they should in a committed relationship, I believe it’s still true that there is a lopsided care taking place (or at least, imbalanced). And I don’t believe the math works long term. If you want a lifestyle firm, that generally means living a life that is a bit more expensive than those working 40 to 60 hours per week and staying home. Lifestyle firm owners may travel, or be involved in hobbies. Travel and hobbies are expensive, so you need income to pay for this privilege. However, a lifestyle firm by definition is limiting the amount of time at work, thus creating a limit to their income. So the limited income eventually will fail to pay for the more expensive lifestyle over the long term. It’s important to ask yourself “do you want what limiting your income to focus on your lifestyle means?” What does it get you in the short term vs. the long term?

I love our profession solely because of its deep intimacy with other humans. There is nothing that has changed and shaped me more than the other humans in my life. Yes, it comes with a commitment of time, emotion, energy, and brain power. But what you get for what you give is life-changing – this is the stuff that leaves legacies. Trying not to talk to your clients, making them pick packages online, or pumping hundreds of people through a bland lifeless tax season is not the depth that those humans need in their lives and businesses. But your client won’t make the change because they aren’t building your business, you are. Humans are known for buying things they shouldn’t be buying – and many of our clients are buying stuff from our firms we have no business selling (or at least the way we are selling it). So you as the firm owner will have to make the change.

How many lives could we change if we dove deeper into the lives of our team and clients with commitment to them? We have the power to change our client’s customers, and their customer’s customers. We are so lucky to be in a profession where an intimate relationship can easily become the core of our firm’s service (I believe it must be). Our clients will pay us a lot more money to serve only a handful of people. This is not an article on firm profitability, but a call to you to build what only our profession can build – firms that invite humans into intimate relationships where people are being changed. The ripple effect of that change is huge.

Jason is the Founder of Thriveal and the Chief Innovative Officer of his CPA firm, Blumer & Associates. He is the co-host of the Thrivecast and The Businessology Show and speaks and writes frequently for CPAs and creatives, his firm’s chosen niche. Jason loves to watch documentaries on just about anything. He lives in Greenville, SC with his wife and their three children.

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