When Brian and Janice started their CPA firm 20 years ago, they did everything: business development, tax returns and other services, and managing the back office tasks that keep a company running.
As the firm grew, they continued doing client work themselves, as well as BD and the back office. By year 20 their client list was up to 2300.
But… after all these years, their average annual revenue per client was only $437!
They were drowning in the demands of the day-to-day and they did no strategic thinking or innovation. The only modernizations were with accounting software and hardware.
Looking back with them, I observed that they had retained the roles of both co-CEO and services providers to clients.
They told me they felt obligated to do both executive management and service delivery because they are the owners.
Does Being Owner Require that You Be Both CEO and Service Provider?
Chief Executive Officer is a role that needs better understanding in small and midsize (SMB) privately held services companies.
The CEO of a large public company clearly does NOT do client work. This CEO thinks long term, focuses on business development on a broad scale, and leads the firm’s innovation and efforts to deliver new value.
The downfall of too many SMBs is that the owner believes he or she (or they) have to be CEO because they are the Owner.
What If You Shift Your Thinking?
As a start up it makes sense for the owner to be the CEO. But within the first year, the Owner best serves the company and clients by making a choice: continue as CEO and delegate all services delivery to staff or continue as a primary service provider and bring in someone else to fill the CEO role.
I’ve worked with some firms whose owner just loved, loved, loved, the client-facing work. They had terrific relationships with clients, and they were the biggest draw to new, higher value clients.
In these cases, the owners hired a part-time or fractional CEO to focus on the long term and day-to-day management the owner didn’t do so well.
The CEOs helped the firms grow revenue and profit, which the Owner benefits from. The Owners acknowledge that hiring a CEO was the best strategic decision they could have made.
CEO or Provider
Publicly traded companies have Chairmen and Boards of Directors. The CEO reports to the Chairman.
If you want to be the primary services provider, think of your role as Chairman. The CEO you hire will report to you, which ensures that your interests as the owner are attended to.
While the company is being managed effectively, you are devoting your efforts to the areas of your strengths: client retention, new client attraction, and innovation which is possible because of your close relationships with clients.
On the other hand, if long-term thinking, management, and innovation are your strengths, fill the CEO role yourself and hire outstanding providers to deliver value to your clients.
Curious?
This realization came to me fairly recently and it’s helped solve a puzzle firm owners were facing: firm owners were struggling to do both executive management and value delivery. It became that they don’t optimize the results of either role when they do them both.
Why not text me to talk about which role you’re better suited to? Hit reply or Text OWNER to 703-801-0345 and we’ll talk.
