Defining the elements of a simplified business model
Like many of you, I’ve been a firm owner for several years. Also like many of you, in the early years of growing my business, I worked what seemed like countless hours. I had started out by building a business that relied on me being at the center of everything — a business where I worked as a technician every day within an overly complicated business model. This all added up to long hours and a nagging feeling that there had to be a better way.
And then one Sunday, while at a local bookstore with my family, I visited the self-help section — browsing for my next influential read. I’ve always been a self-improvement junkie. That day, so many years ago, I found a book entitled “The E-Myth” (for “the Entrepreneurial Myth”) by Michael Gerber. The core message of the book resonated deeply with me — that there is this mistaken belief that most businesses are started by people with tangible business skills, when in fact most are started by technicians who know nothing about running a business. I devoured the entire book that same evening, and today continue to run my firm based on three fundamental E-Myth concepts:
- There’s a difference between being a technician and an entrepreneur — a business needs technicians, but it requires an entrepreneur to lead them.
- Build a business that can be independent of you as the owner.
- Build a clear business model that is easy for others to understand.
Over the past 30 years, I’ve stayed true to these concepts as I’ve built a business that supports the life I want. It’s not been an easy journey, but it’s been worthwhile as I look back to where I started and where I am today. Where I am today is running a firm built on a simplified business model — one that has driven us to serve more than 1,000 clients, is highly profitable, and is value-billing based. Simplifying operations has also allowed us to eliminate late evening and weekend work for 48 of the 52 weeks of the year!
It all starts with a little clarity
Transforming your firm is no small task; it took me several years to get to a more simplified business model. And then several more years dedicated to consistently refining all elements of my firm to keep it operating at peak efficiency. My biggest obstacle back then was figuring out where to start.
What I figured out is that it all starts with some clarity. I needed to gain clarity on what I wanted my practice to “be.” What services did I want to offer? Who did I want to serve? How did I want to deliver services (technologies and processes)? Getting clarity on these three areas is an excellent starting point for firm leaders dedicated to making their firms better.
Once you’ve truly defined what you want your practice to be, you can then start to identify all the parts that make up your business — what I call the “elements” of a firm. As you work through the elements, always keep in mind the three core concepts of What, Who and How — the foundation of your broad, simplified business model.
The elements of a modern firm
To date, I’ve identified 13 elements that I believe make up a sound, organized business model and fully support the foundational principles of What, Who and How. These elements include:
- Client accounting services model.
- Payroll model.
- Business tax model.
- Individual tax model.
- Business advisory services model.
- Firm culture.
- Onboarding (client and staff).
- Ideal clients.
- Practice management.
- Marketing and sales.
- Web and mobile.
As you review these 13 elements, you can see how each drives you back to defining What, Who and How — some are more straightforward than others, but all are interrelated. For example, the ideal clients element is just that: Who are your ideal clients — those that you are good at serving and want to serve?
Then, as you start to break down your service models, you’ll see that each allows you to further define your broad business model. Take business advisory services, for example; you will ask yourself: What services do I want to provide under this umbrella? Who do I want to provide these unique services to? And how do I want to deliver them? You will answer these same questions for client accounting, payroll, business and individual tax. Your other elements, such as web/mobile and security, for example, will also be defined based on core principles. So, if your ideal clients are those who want services delivered via mobile, who want to work collaboratively with you via the convenience of advanced cloud technologies, your web and mobile model will be defined to support your ideal clients.
Hopefully, you now see how firm elements and the What, Who and How principles interrelate and support a simplified, modern business model.
It’s also important to note that within each of the 13 elements are what I term element components, including:
- Best practices;
- Technologies; and,
Each element will have its own unique strategy and best practices assigned to it. Each will also be supported by the right technologies and processes to ensure proper service delivery. Take the client accounting model as an example: You will have a unique strategy for delivering monthly client accounting services, supported by best practices and a technology infrastructure that allows you to deliver services in a convenient, modern manner.
Finally, it’s also critical to understand that each element will consistently fall within a phase, including:
- Refine; and,
Improvement is a never-ending component of any successful business. As entrepreneurial leaders, you know that ongoing enhancement is key to success. And as such, each firm element will fall within a defined phase. For example, you may be considering launching payroll services to clients. You will first define the What, Who and How of the service. Next you would implement, and over time you will refine and evolve the service to best support your clients, as well as supporting a standardized delivery process for staff.
Spending the majority of my time working on my business … that is, leading as an entrepreneur and not working as a technician in my firm … has paid big dividends. As a result, I’ve built a business that is no longer dependent on me to be there every day, mired down in the day-to-day. Today, I can truly lead my staff and my firm to greater productivity and profitability because I took the time to simplify my business model.
To start this process requires clarity … and clarity begins with defining your business: what you offer, who you support, and how you deliver your services. From there, it becomes simpler to define the 13 elements of your broader business model and the components and phases of each.
My intent is that this article will serve as a general blueprint for building what I refer to as a Modern Firm — a firm that supports today’s mobile-driven clients, offering the services clients really need, and delivered in a modern way. Whether you are launching a new firm or in a phase of evolution, use this organized structure as your starting point for getting better every day.
For a deeper dive into the topics discussed in this column, listen to Darren Root’s “Better Every Day” podcat on iTunes or at rootworks.com/podcast.