Jay P., Founder and CEO of a CPA firm, look puzzled when I asked him how he was reducing threats to his company. This was in the context of a LADRSM assessment we’d undertaken.
“Threats?” he asked. “We’re doing great. Revenue up year over year, clients happy, latest technology in place. I don’t think there are any threats.”
I love when firm owners have confidence in their firms. I am not eager to be a voice of gloom and doom. Yet, it is critical to long-term success to consider potential threats to your business; perhaps most critical when things are going well. Let’s take a look at each of the three success areas Jay ticked off.
1) Revenue up year-over-year
Threats can be hiding in the details of how your company generates revenue.
- Do you rely on a product or service that’s recently been commoditized?
- Do you rely on a product or service that is suddenly viewed as out-of-date or old fashioned (Kodak film anyone?)?
- Do you rely on clients or customers whose own needs could change unexpectedly due to pressures or stressors in their industry?
- Do you rely on products or services that increase costs to you, making them less desirable to sell?
2) Clients are happy
These threats may surprise you:
- Clients may suddenly be attracted to an alternative provider; you won’t know until they leave you.
- Client’s needs may change, and your offerings don’t serve those new needs
- Clients sell their businesses, move out of the area, or go out of business.
3) Latest technology in place
Technology is a tool, not a guarantee:
- If your firm relies on the latest technology, so does your competition.
- The more widespread the technology, the less of a differentiator it is.
- Technology tends to commoditize the things it changes. Commodities cause downward price pressure. This is the difference between computer generated tax returns and advisory services stemming from those returns.
Once Jay acknowledged these threats to his firm, he was able to plan responses to them and reduce risks to the firm.
Review the Fundamentals to Reduce Threats
It’s normal to want to move to quickly address the threats. The thinking is “we’ll knock those threats out and go back to business.”
If you’re serious about reducing threats, you have to understand that you will fundamentally change your business. Revenue, clients, and technology are constantly changing. You need a systems wide mindset.
This is Where LADRSM Proves Invaluable
The most effective response to true threats like those we’ve described is to dive into the Fundamentals. A review of the 7 fundamental elements of a successful business helps the owner and their team build up for the long term, not simply reduce immediate risks.
The 7 fundamentals are Strategy, Brand, Offerings, Marketing, Sales, Leverage. We call these the Assets that Drive Results and we look at them like this
LADRSM connects the dots between all the potential silos that prevent maximizing success.
Jay learned that his firm’s strategy needed to be updated, which in turn affected some elements of the Brand. His team reconsidered their offerings, getting away from some a reliance on commodity offerings and putting resources into developing non-commodity offerings. This naturally led to improvements in their marketing approach and their sales process. And they saw how these improvements could be leveraged to deliver exponential impacts and reduce threats.
It’s Your Turn
Firm Owners are continuously balancing between maintaining current momentum and securing the foundation for the future. If an Owner short-changes the foundation-building, the firm is ultimately subject to risks that will rob it of vitality and value.
As an Owner, how are you taking threats to your firm seriously? What steps will you take now to lay a solid foundation for the next two or three years?
We talk to several firm owners each week. They’re just like you, working on today and trying to build strength for the future. Simply text FUTURE to 703-801-0345, and we can set up time (complimentary) to talk about your threats and your future.