There is an art to taking risks in any accounting business, which involves careful balance. The right kind of risks can create new differentiating opportunities other firms have failed to discover, while the wrong kind can send your firm off the rails.
By definition, they’re not for the faint of heart—a risk means trying something that may not work. But if you want to run a successful firm you can't afford not to take risks. Ron Baker, author of Implementing Value Pricing, says it best:
“There is no theory that measures the cost of not taking a risk. Yet it is precisely these losses that cost the firm the most.”
Baker is saying that some of your greatest losses are coming from the risks that you are failing to take. That's how important risks are to your firm.
I'll give an example of a risk my own firm, Blumer & Associates, CPAs, has taken. Our firm is fully virtual. Because we have no offices we get to hire the best accountants from anywhere in the country—accountants who couldn’t work in our firm without this model. They are incredibly gifted in their work and do not need to be managed.
Each client is assigned to a CPA who is responsible for leading that relationship. We call this CPA a Customer Ally. We feel this gives our firm a differentiating position and allows our team to focus on just a few clients at a time (each CPA can handle about 10 to 12 clients).
Our team has to be autonomous and super smart to be able to work like this—they’re effectively on the front line serving our clients. We take the risk making them the exclusive servers for our clients.
In mid-2014, we had to let one of our CPAs go, which caused big problems. Under our model, the unexpected departure of a CPA inevitably leaves clients without service. While most clients were understanding as we searched for a replacement for this team member, we lost a few good clients because of the fiasco.
But this risk also brings huge rewards. It allows me, the owner, to avoid doing any accounting, tax or payroll in our firm. I can focus on growing the firm and consulting with clients because of the great rewards of our strong team.
We still operate our firm under this model of Customer Ally service. "Are you crazy?!”, you might say. Yes, we've been burned and lost clients because of this heavy risk we bear. But, we had to look at the rewards we receive as a result of this business model.
We asked ourselves, are the rewards we are receiving are worth the risk we are bearing? In fact, this is a question all accounting entrepreneurs must be asking themselves.
As a firm, we are not looking to get everything right, we are looking to uncover new secrets that other firms do not yet know. In uncovering these secrets we will become stronger, differentiated, and able to attract and hire the best millennial accountants who thrive in fast-paced, experimental environments.
If you are looking to become an innovative firm, then you are seeking a model of safe risk-taking. There you go. This is your formula: learn to take risks that don't blow up your firm, and you'll learn how to foster innovation in your firm. Taking risks is the foundation to innovation.
Our world is changing, and firms need to change too if they want to remain successful and attractive to the next workforce. Millennials are keenly aware of what it takes to change and grow.
They won't understand a business model that has remained the same since the firm started in 1976. They may not know how to change it, or even be ready to lead that change, but they intuitively know the world is a changing place.
Displaying a culture that safely makes mistakes, experiments with new ideas, and asks what the team thinks, is an attractive place to a millennial. And these young accountants may be the future of your firm.
It's time to start taking risks—smart risks. These are decisions that will allow you to increase your price, work less, and really change the lives of those you serve. What risks are you failing to take?
If you’d like to learn how millennials are changing the face of the accounting industry, what this means for your firm, and how you can capitalize on it, download Accounting for the generational shift for free.