Episode 19: How Accounting Firms Can Track their Performance┃Best Approach to Measure KPIs
In this episode of The Wize Guys, Brenton Ward, Jamie Johns, and Ed Chan discuss how they track their own firms' KPIs over the years and why it's important for Accounting Practice Owners to track their numbers.
So, make sure to grab a pen and paper for another action-packed episode.
Timestamps:
0:34 - How to monitor your team’s KPIs
1:23 - How to start your own accounting firm
1:50 - The importance of stepping back
2:31 - ‘Why running companies is like raising kids’
3:02 - The analogy of driving a car
3:24 - The Wize Fab 5 Key Performace Indicators
3:56 - How to be in control without controlling
4:20 - That concept of being a ‘winner’
5:06 - How culture can affect your business
5:49 - Why Fab 5 is the best dashboard for every accounting practice
6:11 - Understanding the difference between running it as a practice and from business
7:01 - Why top-down management can’t scale a business
8:46 - Why bottom-up kind of management is better
9:33 - How to create a business that runs without you
10:39 - Timesheets: YES or NO?
11:17 - Extraordinary systems vs Extraordinary people
Quotations:
“I think the problem is that there is confusion between running it as a practice versus running it as a business. And if you run it as a practice, that means you're managing it from the top down… But the problem with that kind of management system from top-down is that you can't scale that business and you become a prison in that business because if I take you out of there, that's the end of the business... But if you want to grow and scale it, you need it to be managed from the bottom up, not from the top down.” - Ed Chan
USEFUL LINKS:
GET IN TOUCH!
Website: www.wizementoring.com
Facebook: https://www.facebook.com/wizementoring/
Twitter: https://twitter.com/wizementoring
Linkedin: https://www.linkedin.com/company/wizementoring/
Instagram: https://www.instagram.com/wize.guys/?hl=en
Email: support@wizementoring.com
Download the full transcript
________________
PS: Whenever you’re ready… here are the fastest 3 ways we can help you transform your accounting/bookkeeping practice:
1. Join 40,000+ subscribers to our transformation Friday tips – Every Friday, our Wize Mentor and Thought Leader of the Year, Ed Chan will send one actionable insight from his experience of building a $20 million accounting firm that still runs without him – Subscribe here
2. Download one of our famous Wize Accountants Growth Playbooks – Our FREE Playbooks on how to build and scale your firm are more valuable than most PAID business coaching programs! See for yourself – Download here
3. Join the waiting list for a free login to the world's best accounting business intelligence software for scaling your firm. Take a look at the app we use to build our own $10million firm in just 7-hours a week – Get a FREE login here
Brenton Ward: But talk to us a little bit about your view on how you monitored your KPIs or the driving KPIs of your business. Say over the last 10 years, since you started and started growing and then shifted into more of the CEO role and than the practitioner.
Jamie Johns: It's a great question, Brenton. To look at the journey because, in the early days, I didn't know what to track. I'd worked in five or six firms and I think all the firms I've worked in the child accounting firms and they all did timesheets. And I just filled in my timesheet and knew what my productivity was. That was about where it started, I started and stopped.
Then when I started my firm, I just followed what everyone else does. We did timesheets and the week we would go down and we'd bill it. That was a bad eight really and didn't have any good structure or rhyme or reason and sort of just stumbled along fumbled along. And then as I've got staff and added more staff and knew that I wanted to step back and sort of, and Kate growing are struggled with how to measure the team like that was, and that was like the biggest challenge was ‘How do I measure the team?’
But what the problem was, we might have good productivity, but then I'd find the team would lose some clients or we might have good responsiveness, but I couldn't build a whip. And so I had about five areas, which resulted in the Fab 5, and I always come back to what Verne Harnish, the founder of EO & Gazelles, a known global coaching group, said running companies is like raising kids. He's got this famous quote and he says, you only need about five rules. He says, half a dozen rules and you can manage it. In the process of coming up with a Fab 5, consulted Ed around, ‘Are we missing anything?’ It was always like, ‘What else do we need? But is it too much?’
It's like driving a car, you've got a dashboard, and the fewer gauges we have to look at to know that we're going okay, the better. And so Ed ran this boy Ed and ran it by yourself. And you've got a lot of experience in other coaching firms and businesses and yourself and understanding of canning fence. So we came up with the Fab 5 and I think from my experience in the sky, it covers every corner. When I say that is whether it's myself, as the CEO driving the firm for growth, or diverting, you could say partners or the managers, senior client managers performance back to the raw corner. It does that. And what it does, achieves this concept that Ed calls being in control without controlling. And so, what's interesting Brenton, and it is everyone watching is that when you take the time out to have your meetings and present these KPIs in front of them, there's something about it. It does affect actions. It's almost our human nature that we want to be winners. If we're measured against something we want to win. I think this is a concept Brenton stems from the day that we go to school, the day that we go to school as little kids, what do we get? Every six months we get a report card. And then when we go off to secondary school, the emphasis has ramped up more. We get a report card. And then when we go to university and most of us do. If you end up in professional services again, we get a report card and we want to pass your exams. And so if you're bringing this concept all the way through into business, it's no different. It's in our culture as well. In most countries, you go to the cricket. What's the thing that everyone looks at all day?
Brenton Ward: It's the school boarding school.
Jamie Johns: And so what aren't we, and I always asked for years, why don't we do that in our business? Why don't we have these like an awesome scoreboard that we can see how are we going? And everyone knows how are we going? So that's a bit about their journey and why I think the Fab 5 works. If firms can measure these KPIs and have meetings that hold them together, you can have an impact on your direction and reaching your goals.
Brenton Ward: Yeah. And I think, I mean, to be honest, I think what you've done with the, your Fab 5 dashboard that you run is probably the best I've seen in any firm that I've ever experienced working with.
So I'm excited to share that with everyone and sort of dive into that in a little bit more detail, but I wanted to touch on one of the points you made there and get Ed's feedback because it seems like a lot of firms, the assumption would be that we'd have this fairly well in hand given the nature of the business that we're in, but it seems that a lot of firm owners are driving down the highway without a speedometer or a dashboard of any nature. What do you think that is? Or where do we struggle with getting their heads around the concept of what KPIs monitoring in this business to make sure it's thriving?
Ed Chan: Yeah. I think the problem is that there is confusion between running it as a practice versus running it as a business. And if you run it as a practice, that means you're managing it from the top-down. And from top-down management, you've got your finger on everything. You've got control over everything. If you know exactly where everything is. So you there's, there's less requirement on, you know, systems and tools and measurements because you know where everything is. But the problem with that kind of management system from top-down is that you can't scale that business and you become a prison in that business because if I take you out of there, that's the end of the business.
If you're in another way of describing that is having a job. So you've got the job of keeping control of the business, but you can't scale it because you've only got so many hours in the day. And once you end up working 60-70 hours a week, your capacity, your bandwidth runs out and you can't scale it. That's the reason why we see firms hit about a million dollars per partner. And then I've got to bring other people in other partners in because the system is not running the business, they did it by brute force. And because they have a lack of systems, they've got to bring another partner up, introduce another partner to help control everything. So it's been controlled by partners and not controlled by the system. And I'm in an offer.
I hear people say, ‘Oh, you don't need timesheets anymore. Why do you need timesheets?’ Or if you're running a practice and you've only got it so, so large, and you've got your hands across everything and you've got controller, but then you may not need the timesheets. But if you want to grow and scale it, you need it to be managed from the bottom up, not from the top-down. And what I mean by bottom-up is you need to have all the systems in place and the processes and exactly what we've done wise, mentoring the foundation in place. And part of that foundation and the systems in place and management from bottom-up is it is your timesheets because you want everybody to be a big taking accountability for their own time and everything and productivity. After all, you're not there to look at them.
So, unlike a practice where you're there every day, and you've got your eye on everybody, and you've got your finger across your fingerprint fingerprints, across everything, you don't need the time sheets because you're watching everything. But if you want to create a business that works with the art, you like block, I've done. And Jamie started now and you need it to be managed from the bottom up. You got to have all these systems in place, and you've got to have the measurements in place. You've got to have the accountability in place so that you don't have to be controlling of everybody because nobody likes to be controlled, but you as the owner or the shareholder and the need to feel that, you know, those main KPIs going up or they're in an upward trend. Then, it's all about trend and momentum, not about perfection.
Often, if you don't have the systems in place, you can't manage it from the bottom up. So when someone says, we don't need timesheets, I'll bet you, my bottom dollar, they're running it like a practice and not like a business. And they can't scale.
Then they might be happy that you have a job of a certain size. And obviously, there's nothing wrong with that, but, but that's not what I wanted because I wanted the business to work without me, as an investment. He just gives me a passive income.
Brenton Ward: There's a lot of rhetoric in the, in the profession that. One of the goals of the firms should be to rid themselves of timesheets completely. I mean, we've touched on this a few times in other clinics, but can you just touch on this again? And what's your view on that?
Ed Chan: Well, I think that's ridiculous because it's a bit like saying I'm competent, I'm going to rid myself of having a hammer.
It's the tool to manage the business and to do. I've often said that if you have an extraordinary system, you can hire ordinary people. If you have an ordinary system, you've got a high, extraordinary people. And the problem with hiring extraordinary people is that they're really hard to find and they're expensive. If you've got a boutique firm and you're able to offer something unique that clients can't get from anywhere else, then you can get away with that model. But we all do the same things. We all do best as we all do compliance, we'd all be taxed. Well, we're all the same but the flip side of it is it's higher if you get the system to and build the system. So it's extraordinary, you can scale that in a big way. And so, you've got the trade between the two, but they don't, as I said on this, you've got something unique about what you offer or unfortunate, fortunately, or unfortunately, we all offer the same thing. While if you don't systematize it and you don't build extra honorary systems, then you're, you have to hire extraordinary people. Then you can't scale that model. And that's why you find firms hit a million dollars per partner. And they can't scale it anymore because the systems are ex ordinary and therefore they need to hire extraordinary people.
So they bring in another partner and that's the whole problem with not having timesheets and so forth because you've got to manage it from top-down. And that, that is unscalable. And, and, you know, you hit a million dollars, in the worst of all is you're a prisoner in your business. And that's the last thing you want.