Dunn & Bradstreet report that there were 60,000-70,000 SME’s created each quarter in Australia. Not all however make it past the first 18 months. Indeed few make it. Survivors and thrivers need to have everything going for them – you need money, resources and customers to survive. If a business (including accounting and bookkeeping firms) runs out on any one of them, it’s over. “Thrivers” can then work hard to attain best practice. This is no pipe dream: it is accessible by any business.
Where do we look for best practice when it comes to business or professional service firms? Industry benchmarks are good as are comparisons to other professional groups (bookkeepers can look to accounting firms or even law firms). But to get to the ultimate in best practice, think sport. After all, best-in-the-world can be measured in milliseconds or in centimetres when it comes to a competition. Team sports are a great place to look: think of the 2016 and 2012 UK cycling team, Team GB.
Team GB stunned the world by taking seven out of 10 golds in 2012, the same as their performance in 2008 and then six at the 2016 Rio Olympics. How did they do it and is there an actionable lesson for an accounting or bookkeeping firm?
Aggregation of marginal gains
The ‘secret’ to Team GB was revealed by the team’s performance director, Dave Brailsford: it’s about improving a lot of things a little bit. He gambled that if the team broke down everything they could think of that goes into competing on a bike, and then improved each element by 1 percent, they would achieve a significant aggregated increase in performance.
The bottom line for Team GB was its stunning performance in two successive Olympics. Think of your firm and think about how that could look. Rather than looking for the ‘silver bullet’ solution, Dave Brailsford considered that by improving lots of ‘systems’ a little bit, the net benefit is significant. The scope of aggregated improvement is huge, in every business.
Micro steps
What your SMB client needs to achieve productivity gain is a good, cloud-based application and the ability for them to manage their business on the go from any device – like the plumbing contractor who can manage their invoicing, credit checks and debtor management from their iphone.
In a business case where invoicing is done after a job, month-end accounts still take anything up to two weeks to be available resulting in the business decision-maker having nothing but a rear-view of their business. These are fertile areas for micro gains.
Another area where micro steps can make a contribution to the ‘aggregate’ is discounting. Sales people – even business owners – are by their nature, focused on getting the sale, not maintaining the margin contribution to the business. Discounting can be a highly effective tool in securing a sale but excessive discounting can be deleterious to the bottom line when handled indiscriminatingly. Making a micro adjustment to a level of discounting can have a significant impact to the bottom line. Halving a 10 percent discount to 5 percent on $2m in sales will flow an additional $100,000 to the bottom line.
The list goes on; every business can achieve micro improvements in their performance. It won’t take too many to achieve a gold medal status in overall performance. That applies to your own bookkeeping firm.