If you are not the principal or owner of your firm, please pass this blog post to them.
At a recent conference, a keynote speaker, Leslie Shiner of The ShinerGroup, discussed an important question that every professional services firm should ask:
What’s at the End of Your Yellow Brick Road?
The question is really asking ‘What is your Oz?’ What overriding strategy defines what you want from your business when you exit?
- Are you running an Improvisation Business focused only on day-to-day business concerns with no consideration for the future?
- Are you running a Lifestyle Business based on your personality or individual skills in order to increase your personal wealth, but will end when you leave the business?
- Are you running a Continuation Business based on strong processes, that is scalable and saleable, and will provide income after you leave?
Each business strategy is completely valid. Not planning for the future and hoping for the best — Improvisation Business — is risky, but there is nothing wrong with it. What is most important about these strategies is the impact on how you run your business — the decisions and ongoing activities.
For example, if you desire to grow your personal wealth, then the decisions you make in your Lifestyle Business — people hired, services offered, clients accepted and so on — will ensure funds are available for regular 401K contributions and investments in stock, property, etc. Your goal is a Cash Cow business that ensures you a job for as long as you want it.
On the other hand, activities and decisions for a Continuation Business focus on ensuring long-term and continuous income. You reinvest most of your profits back in your business. You hire people who fit this strategy. You invest time and money in continuous education and mentoring. You make sure the services, people and other aspects of your operation are supported by the right technology. You follow a continuous improvement strategy which underlies everything. Your defined processes make sure the right things happen at the right time and in the right way to minimize cost, maximize revenue, and grow satisfied clients for the long-term.
The obvious reason for a continuation business is so the business can continue without you. You may sell the business to employees, a competitor, or someone else. Or you may want to pass it on to the next generation. Your lifestyle during retirement is not solely based on funding a 401K or other investments. In most situations you will receive an income stream from the business as the buyer pays out over time.
Conversations with a variety of firms indicate about 90% think of their operations as a Continuation Business. But, their actions show about 1/3 of them actually follow strategies for Improvisation and Lifestyle Businesses. No doubt these inconsistencies result from reactionary decisions involving old Standard Operating Procedures that no longer work as well. It also indicates that the new economic challenges are exposing the reality that many businesses were more Improvisation (head in the sand) than their leaders realized. When things are going well, many of us are too busy to think about our business.
Bottom Line: Leaders of professional services firms should regularly step back and think about what their strategy is. Make sure decisions and activities align with the Oz you want at the end of the Yellow Brick Road.