Virtually every one of my consulting engagements begins with the advisor/client asking if I’ve read The E-Myth. Then as I work with them, my clients are usually quick to point out when any of my recommendations stray even slightly from Michael Gerber’s treatise. I have to admit, it does get a little old. Don’t get me wrong, I’m a MichaelGerber fan. In fact, much of my consulting parallels the various elements of the business management strategy he details in his book and its sequels which all you MBA grads know as basic business management principles. Yet I do have one big problem with The E-Myth. It leaves the reader with the impression that they should undertake all the projects he suggests–write a big business plan, create an organizational manual, project an org chart, draft a hiring plan, set financial measures and goals–all at one time.
In my experience, this causes many advisors to severely slow the growth of their practices as their time and energy is channeled into what turns out to be a great deal of work, and away from attracting new clients. It also encourages a focus on margins, revenues, profits, and growth rates, which are more often the symptoms, not the problems. I find it’s more effective to build a practice on the four elements of a sound foundation, but only addressing each one when a firm needs, and can afford, to do so. Done right, the financials will take care of themselves. And by thinking about building their practice as a step by step process, my clients better understand why they’re taking each step, and can focus their resources to accelerate their growth, not slow it down.
Think of it as a pyramid with the most important block at the base. Starting from the bottom up, there’s Human Capital, Operations, Client Services, and Financial Management. Each has to be successfully developed before you can work on the next block, and you don’t start working on the next block until your firm has reached sufficient size and revenues to need and afford it. This way, the growth of your firm is driving its development so revenues can continue to grow and profits aren’t severely undermined by investment in the next level.
The base of this pyramid and of an advisory practice is human capital. At about $150,000 in annual revenue most practices should start thinking about hiring administrative help. Alone an independent advisor usually struggles to grow beyond $250,000 or so in revenues. If you want to grow beyond that, you’ll want to leverage yourself with administrative help before you reach that barrier. If you wait too long, your revenues will plateau while you recruit and train help. If you hire someone too soon, you’ll be paying for work you still have time to do yourself, and profitability will suffer.
When you get to revenues of about $150,000 start thinking about how admin help can leverage you to work with existing clients and to spend more time attracting new ones (where the growth of your firm will come from). Start the recruitment process and conduct interviews. And spend time figuring out what you can do to add the most value to your “firm” and what tasks and duties you can hand off.
Think about what tools–computers, phones, specific software, online resources, training, outsourcing–they’ll need to maximize their leveraging of you. Technology offers very cost-effective leverage, so don’t be stingy about cell phones, PDAs, additional software, networks, wireless connections, web-based tools, or laptops to work from home. Don’t waste money, but anything that will make your assistant more productive, which makes you more productive, is usually money well spent.
At this point, it’s essential to resist the temptation to start writing and working all those plans and documents that Michael Gerber writes about. You don’t need them yet, and you don’t have time to work on them anyway. Wait until after you’ve hired your admin assistant. Then your training of them on the tasks they’re taking off your desk will become the basis of your operations manual. But don’t write it yourself; have your assistant do it. Documenting your firm’s procedures and systems from your instructions is part of his education. Review what he writes and make suggestions, but he’ll learn much faster and more thoroughly if he actually has to write it all down. And there will be no question that you’re both on the same page.